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Early forecasts of reduced DoD spending may have been exaggerated

In a recent article, Dr. Loren B. Thompson of the Lexington Institute brought the idea of a drop in DoD spending into question.

When the Obama Administration first took office, it appeared to many in the government contracting community that the government spending spree would be coming to a halt. Recently, President Obama said “the days of giving defense contractors a blank check are over.” However, given recent events, these fears may prove to be exaggerated, as the Obama Administration looks set to significantly increase the Department of Defense’s budget for 2011.

According to Jason Sherman of insidedefense.com, the White House will increase the defense budget (not including overseas operations) by as much as $14 billion more than was originally slated for the 2011 budget, up to $556 billion. In an effort to cover personnel and modernization costs, the total increases to the defense budget will be $100 billion, according to Vago Muradian of Defense News.

All of these figures go significantly against previous statements by the administration and historical studies of funding for defense programs. In April of this year, Secretary of Defense Robert Gates approved plans to insource a number of jobs and discussed decreasing major weapons programs. By May, President Obama signed a bill known as the Weapon Systems Acquisition Reform Act of 2009, which imposes harsh standards on weapons development programs.

And the weight of history also seemed to indicate that the spending spree was set to decrease. According to a Merrill Lynch study of spending by the Pentagon in the past 50 years, the best indicator of changes in spending on weapons was which political party was in power.

However, despite these early spending indicators, significant opportunities for contractors will be available for the present. The total defense funding requested will be above $700 billion for the first time in history. As the US seeks to deploy an additional 30, 000 combat troops to Afghanistan, the opportunities for government contractors will only continue to grow, particularly in added weapons development and providing support.

Government contractors can take heart that “reports about [their] death have been greatly exaggerated.”

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