WASHINGTON - The U.S. Army's FY17 budget request reduces modernization spending in order to focus on near-term readiness, with aircraft programs taking the brunt of the cuts. The service is requesting $125.1 billion in base spending, plus $23 billion for Overseas Contingency Operations, for a total of $148.1 billion. It should be noted that the OCO account actually includes $2 billion for base budget priorities, as authorized by the Bipartisan Budget Act of 2015. The budget act used the off-budget OCO account to increase defense funding beyond mandatory spending caps. The base budget is $1.4 billion lower than FY16 enacted levels, with the gap narrowing to $500 million when including the OCO account.

The service's OCO budget increased in FY17 thanks to a boost for the European Reassurance Initiative. The Department of Defense requested $3.4 billion for the ERI in FY17, compared to $789 million in FY16. Of the $3.4 billion, the Army receives $2.8 billion. Approximately $1 billion will help keep an armored brigade combat team in Europe on a rotational basis - currently an ABCT is only in Europe for a couple months out of the year. ERI funding will also allow the Army to bolster prepositioned stocks, including an entire ABCT static set of equipment. In fact, the Army is already working on a reprogramming request within the ERI that would shift $245 million from operation and maintenance to procurement to support a Tank Company of M1A2 Abrams SEPv3 tanks and one Mechanized Infantry Company of M2A4 Bradley vehicles as prepositioned stocks in Europe.

The Army's procurement account takes a big hit in FY17, falling from $16.4 billion enacted in FY16 to $14.8 billion, a drop of $1.6 billion. The OCO account includes another $2.8 billion for procurement, which actually includes $312 million for base budget priorities. The Army's FY16 spending plan projected a relatively flat procurement budget in FY17, but the FY17 base request provides $1.7 billion less than originally planned, with the Army losing $919 million for aircraft and $690 million from the Other Procurement account. Aircraft coffers were already set to decrease under the original FY16 plan, so the FY17 request only exacerbates the drop.

The request also includes $7.5 billion for research, development, test, and evaluation (RDT&E) in FY17. That figure is down slightly from $7.6 billion enacted in FY16, but is actually $582 million higher than the service was originally planning to spend in FY17. The Army says it remains committed to the Improved Turbine Engine program, and is seeking $126.1 million for development in FY17. A total of $1.2 billion is programmed through FY21. The Army is also seeking $184.2 million for Armored Multi-Purpose Vehicle (AMPV) development, $252.8 million for Army Integrated Air and Missile Defense (AIAMD), and $177.2 million for the High Performance Computer Modernization program.

Cuts to the aircraft procurement account have resulted in the loss of nine AH-64 Apaches and 24 UH-60 Black Hawks. The FY17 request includes $803.1 million for 48 Apaches, down from 57 planned, but the OCO account buys another four helicopters to replace OH-58 Kiowa Warrior combat losses. The Army requests $755.1 million for 36 UH-60 Black Hawks, a steep cut from the 60 aircraft planned. Black Hawk procurement rates have fluctuated significantly in recent years, serving as a prime mechanism for adjusting to the precarious budget situation. Congress has made a habit of adding funding for Black Hawks in recent years, primarily for the National Guard, so the final procurement figure for FY17 will likely be a few airframes higher. FY17 represents the start of five-year contracts for Apache and Black Hawk helicopters. The Army currently plans to spend $5.5 billion on 275 Apaches and $5.5 billion on 268 Black Hawks through FY21. The Army is also requesting $556.3 million for 22 CH-47F Chinook helicopters in FY17, marking the end of the current five-year contract with Boeing. The budget also seeks $714 million for aircraft modifications.

The Army's FY17 missile account actually exceeds planned spending by $47 million. The service wants a total of $1.5 billion for missiles, including $423.2 million for 85 Patriot Missile Segment Enhancement (MSE) missiles; $497.8 million for 4,210 HELLFIRE missiles, funded primarily with OCO funds; $64.8 million for 324 Joint Air-to-Ground Missiles (JAGMs); $89.1 million for 392 Javelin missiles; $145.6 million for 1,410 TOW missiles; and $248.1 million for 1,766 Guided Multiple-Launch Rocket System (GMLRS) rockets.

The $2.4 billion requested for weapons and combat vehicles in FY17 is flat compared to FY16 enacted levels, and only $70 million less than the service originally planned to spend. The service requests $590.6 million for the Stryker program, which will support fielding a third brigade set of double-V hull vehicles and procure 123 of the fourth DVH brigade set that incorporates Engineering Change Proposal (ECP) 1 upgrades. ECP 1 provides power generation, suspension, and network improvements. The budget includes $594.5 million for 48 Paladin self-propelled howitzers, $480.2 million for M1 Abrams tank modifications, $276.4 million for Bradley modifications, and $92 million for 22 M88A2 Hercules recovery vehicles (two less than planned). The request bolsters funding for tactical vehicles in FY17 and beyond. The Army wants $587.5 million for 1,828 Joint Light Tactical Vehicles (JLTVs), up from 824 vehicles as originally planned. JLTV procurement is increased throughout the Future Years Defense Program, with a total of 12,698 vehicles planned through FY21, about twice as many as under the FY16 FYDP.

The Army is also buying more than twice as many Family of Medium Tactical Vehicles in FY17 as originally planned, requesting $352.8 million for 1,100 FMTVs (funded mostly through the OCO budget). Another $45.7 million is set aside for 481 FHTVs (Family of Heavy Tactical Vehicles). The service wants to buy 774 FHTVs between FY17 and FY19, compared to 445 under an FY16 plan that also ended procurement a year earlier. The Army also funds two new- start light vehicle programs: the Ground Mobility Vehicle program and the Mobile Protected Firepower program. A third light vehicle, known as the Light Reconnaissance Vehicle, does not receive any funding in the new budget. The Army wants $437.2 million for its Warfighter Information Network-Tactical (WIN-T) program, a sharp drop from the intended amount of $700.8 million. The Army wants funding to pick back up - to $705 million - in FY18. The request also includes $273.6 million for manpack radios and $275.5 million for the Distributed Common Ground System-Army (DCGS-A).

It should be noted that the FY17 request was completed before the National Commission on the Future of the Army released its recommendations on the future of the service's force structure. The Army is studying the results of the commission's findings, but in its FY17 unfunded priorities list the service is already seeking an additional $1.2 billion to begin implementing some of the recommendations, including the purchase of additional Apaches, Black Hawks, Lakotas, and Chinooks.

Source: Forecast International - International Military Markets
Associated URL: http://www.forecastinternational.com
Author: S. McDougall, Defense Analyst