The House Appropriations Committee released their FY25 Defense Appropriations Bill. It aligned with the Fiscal Responsibility Act (aka Sequestration 2.0) to provide $833B in FY25 - a 1% increase over FY24. Check out the FY25 Defense Budget Analysis we conducted to refresh on the major DoD objectives.
With a 3.4% inflation rate over the last year, this equates to: 2.4% in lost buying power for defense - essentially a $19.3B topline cut. Another continuing resolution will also result in projected tens of billions in additional lost buying power
Our Take: We are happy to see the House propose a 4.5% raise for all military and ~30% for junior enlisted (+15% to requested amount). This will help to address the recruiting and retention issues and reward our service members for all they do.
Yet at a time when our aircraft, ships, and munitions inventories are at historic lows, while the CCP churn out massive quantities of new systems, this is the worst time to cut procurement budgets. This does not enable production at scale. This does not incentivize new entrants into the industrial base to compete for production contracts.
There is also little movement on providing DoD additional budget flexibility per the Congressionally established PPBE Reform Commission. Below Threshold Reprogramming thresholds are still set at $15M for RDT&E, O&M and Procurement. The larger acquisition enterprise needs to be able to move funds, initiate efforts and end programs to ensure that military warfighters are getting the maximum value with limited defense dollars.
Procurement Winners and Losers
Overall, HAC-D took significant marks against what was requested in the President’s Budget. The clear winner was Aircraft. The clear losers were Missiles & Ships.
Our Take: Aircraft are undoubtedly important assets but at a time when munitions are acknowledged as being in critically short supply, the cuts to those accounts are not encouraging. We sympathize with HAC-D that there is carryover funding on multiple munition accounts but given DoD’s past inconsistent history with surging and then withdrawing munition funding - we need to see steady funding here.
We would like to see HAC-D treat munitions the same way it treats F-35s. The F-35 is currently experiencing major delays and the government has stopped accepting jets until critical upgrades are complete. This has resulted in aircraft stacking up on the flight line in Fort Worth. Yet, HAC-D has proposed adding eight additional aircraft to the President’s Budget request despite this situation. Let’s give munitions the same benefit of the doubt to keep the pipeline flowing and contractors motivated.
Defense Innovation
HAC-D demonstrated significant support for the various innovation initiatives that have been initiated across DoD even coining a new term “Defense Innovation Community of Entities (DICE).” HAC-D definitely has the right vision.
The Committee's prioritization of innovation aims to deliver acquisition solutions faster to rapidly field capabilities to the warfighter. Through increasing competition, as proven throughout history, technological advancement will accelerate, and costs will decrease.
Defense Innovation Acceleration
HAC-D supported the $166M request and added $8M for autonomous hybrid VTOL for contested logistics.
Rapid Prototyping Program
HAC-D supported the $160M request.
Added funds for multiple efforts:
Agile aviation flight demo for c-UAS (+$10M)
Autonomous unmanned surface vessels for loitering and targeting (+$7.5M)
Group 3 ultra-long endurance UAS tech transition (+$10M)
Joint fires network (+$123M)
Undersea kinetic multi-payload capable USV (+$5M)
Solar-powered, long-endurance UAS (+$12M)
RDER
HAC-D supported the major RDER funding requests.
HAC-D increases DIU budget substantially.
HAC-D minimizes reporting requirements - conducting “oversight through insight” based on regular access to information.
HAC-D provides $240M to encourage Service demand for technologies of interest that are not yet programmed (does require Service commitment to budget for project NLT second outyear).
National Security Innovation Network (NSIN)
HAC-D supported the $21M request to support its various portfolios: Talent, Venture and Transition Cells.
HAC-D supported $125.9M for OSC to better leverage private capital.
This included a directed $2M for Defense Ventures Fellowship.
Roughly $90M is transferred to DoD’s Credit Program.
HAC-D supported $732.1M to accelerate digital transformation.
Accelerate the Procurement and Fielding of Innovative Technologies (APFIT)
HAC-D added $300M to DoD’s $101M request.
Our Take: Very thankful to HAC-D Chairman Ken Calvert’s leadership to continue to champion funding for DIU and APFIT. The >$800M added funding in FY24 enabled DIU to scale, align closer to combatant commands like INDOPACOM, and rapidly acquire innovative technologies from non-traditional defense contractors.
AFPIT continues to enable DoD to spend $10-22M to accelerate and/or scale procurement of priority capabilities from companies with <$500M in DoD contracts. HAC-D initiated APFIT with $100M in FY22, $150M in FY23, and $300M in FY24. To date, $497M has been awarded to 38 APFIT projects. These include novel autonomous systems, comm systems, space capabilities, munitions, and software solutions. Scaling to $400M in FY25 is welcomed.
For Paid Subscribers, Enjoy Synopsis of Key Report Language and Analysis of Specific Budget Line-Item Adjustments