Highlights: Congress is on recess this week. Last week the FY19 NDAA passed on the House floor and made progress in the Senate. The FY19 defense appropriations process also continued in both chambers.

NDAA Progress in the House and Senate

The House version of the National Defense Appropriations Act (NDAA), H.R. 5515, passed with a 351-66 vote last Thursday the 24th. That same day, the NDAA also made progress in the Senate, when it was advanced through the Senate Armed Services Committee (SASC) and ordered to be reported, making it possible to be introduced to the whole Senate. Both versions attempt to address issues of oversight and management, accidents caused by military equipment, proper alignment of resources to meet priorities and demands, and a degrading state of capabilities, reflected in years of continuous war operations and what has been considered a lack of adequate funding.

Funding breakdown in the Senate:

• $639.2 billion for base DOD and DOE national security programs, $617.6 billion and $21.6 billion respectively
• $68.5 billion for Overseas Contingency Operations (OCO)
• $8.2 billion for defense related activities outside NDAA jurisdiction
• Total for FY19 national defense spending $716 billion

Funding breakdown of NDAA in the House:

• $616.7 billion for base DOD and $22.1 billion for DOE for a total of $638.8 billion
• $69 billion for OCO and $8.9 billion for mandatory spending
• Total for FY19 national defense spending $717 billion

Similarities:

• Aviation: The House and Senate both authorized the purchase of 24 Boeing F/A-18 E/F Super Hornet aircraft.
• Missile Defense: Both the House and Senate NDAA include provisions for procuring Standard Missile-3 Block IB missiles, effectively awarding a five-year contract worth roughly $1.9 billion to Raytheon for up to 204 of the missile interceptors. The Missile Defense Agency certified that the contract would save $212 million over annual purchases.
• Nuclear Warheads: In keeping with President Trump’s Nuclear Posture Review, both the House and Senate versions authorize development of low-yield nuclear warheads to be carried on submarine-launched ballistic missiles. Previously prohibited by the fiscal 2004 NDAA, development and production is being backed by $65 million in the Senate version.
• Tough on China: Both chambers increased pressure on President Trump not to weaken prohibitions on ZTE Corp., a Chinese telecommunications equipment maker accused of violating trade-sanction agreements and considered a threat to U.S. national security. The legislation includes bans on the use of ZTE-made technology by government agencies and prohibits the DOD from renewing contracts with vendors that work with ZTE Corp.

Differences:

• Aviation: The House NDAA authorized the purchase of 77 Lockheed Martin F-35 Joint Strike Fighters, which is two more than requested by the SASC. The House also approved the purchase of 12 Boeing Co. KC-46A tanker aircraft, three fewer than requested, while the Senate authorizes 14, only one fewer than requested. Both moves were made “to restore program accountability,” amidst delays that Boeing is experiencing in delivering the tankers.
• Sea Power: The House NDAA has paved the way for the construction of an additional Ford-class aircraft carrier, CVN-81, to be made by Huntington Ingalls Industries Inc., while the Senate version does not back the purchase. The two versions also differ in requests for Littoral Combat Ships. The Senate NDAA authorizes one ship, the same as the Pentagon’s request, while the House authorized three ships, made in two versions by Lockheed Martin and Austal USA.
• Cyber: While both versions include provisions that provide funding for cyberspace activities and increasing cybersecurity capabilities, the Senate version addresses Russian cyber attacks, whereas the House version only makes mention of Chinese “malicious cyber activities.” The Senate NDAA specifically authorizes the White House and Secretary of Defense “to direct U.S. Cyber Command to take appropriate and proportional action through cyberspace to disrupt, defeat, and deter systematic and ongoing attacks by Russia in cyberspace.”

The Bottom Line: For all the differences between the two versions, both chambers address aircraft and ship procurement needs as enumerated by the Pentagon, and provide funding to help bolster U.S. capabilities in areas like missile defense and cyber. The breakdown of allocations is only slightly different in both versions, and any discrepancies will eventually be worked out when the bill goes to conference committee as early as late summer.

Appropriations Progress and 302(b) Allocations – How the Funding Breaks Down

The Senate Appropriations Committee (SAC) Chairman Richard Shelby (R-AL.) and Vice Chairman Patrick Leahy (D-VT) announced 302(b) Subcommittee allocations for FY19 last Thursday after the first full committee markup. All 12 subcommittee allocations must adhere to the $1.244 trillion discretionary spending cap set earlier this year by the Bipartisan Budget Act of 2018, which includes $647 billion for defense funding, $597 billion for non-defense funding, and $77 billion in funding for OCO. In the Senate, a markup of the Defense Appropriations Act for FY19 is expected the week of June 25-29.

302(b) allocations in the Senate: $607 billion for defense funding, $67.9 billion for OCO. $21.9 billion is also allocated for DOE defense related activities as part of the Energy subcommittee.

The House Appropriations Committee (HAC) also approved their 302(b) allocations in adherence with the Bipartisan Budget Act of 2018, submitting their report on Wednesday of last week. The 302(b) allocations in the House are $607 billion total.