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Pentagon allocates billions amid uncertainty about Trump budget

February 9, 2017 Robert Levinson

This analysis was first available to Bloomberg Government subscribers. 

Despite inaction by Congress on appropriations as it awaits guidance from President Donald Trump on his priorities, the Pentagon’s Defense Logistics Agency continues to award billions of dollars in government contracts.

The Trump administration may forgo submitting a bare-bones budget outline to Congress this month, postponing the fiscal blueprint until as late as May, Bloomberg Government reported. For fiscal 2017 appropriations, Congress is still awaiting a pending supplemental request that may include more money for the military as well as possible funding for a border wall with Mexico.

The DLA, which provides goods and services necessary for day-to-day U.S. military operations, can’t wait. It awarded eight major contracts worth as much as $13.4 billion over the last three months, BGOV data show.

The largest of these is a multiple-award contract known as J6 Enterprise Technology Services Contract, or JETS, which will allow 144 approved vendors to compete for information technology services task orders at DLA. The eight-year contract, which has a ceiling value of $6 billion, will include the first centrally managed IT contracts at the DLA, according to the solicitation. The other major DLA awards in the last 90 days are:

  • A $570 million award to Carestream Health Inc. on Dec. 16 for radiology systems and training;
  • A $403 million award to Harris Corp. on Jan. 5 for tactical radio systems spare parts; — A $98 million award to General Electric Co. on Jan. 17 for F110 engines;
  • A $2 billion award to CFM International Inc. on Jan. 30 for F108 Engine Replenishment Spare Parts;

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  • Two awards totaling about $2.4 billion to Cardinal Health Inc. and Owens & Minor Distribution Inc. on Feb. 2 for the Medical Surgical Prime Vendor Generation V program;
  • An $827 million award to Toshiba America Medical Systems Inc. on Feb. 3 for radiology systems; and
  • A $2 billion award on Feb. 6 to 14 companies for fuel.

Steady Customer

DLA has spent $25 billion-$31 billion on contracts annually since fiscal 2013, averaging about 10 percent of all U.S. Department of Defense unclassified obligations, BGOV data shows.

In fiscal 2016 the largest product service code of DLA contracting was drugs and biologicals at $5 billion, followed by fuel at $4.5 billion and airframe structural components at $1.2 billion. The top contractors in fiscal 2015 were McKesson Corp. and AmerisourceBergen Corp., both pharmaceutical companies.

Because of its mission to sustain the military, DLA is less susceptible to budget volatility than other DOD agencies.

In recent years, legislators have frequently been unable to agree on appropriations by the beginning of the government’s fiscal year on Oct. 1, choosing to rely on stop-gap funding in continuing resolutions, or CRs.

Under a CR, the Pentagon may continue to spend money at the previous fiscal year’s rate. Unless specifically exempted, no new work can start and no increases over the previous year’s quantities are allowed.

While DLA may seek increases for some of its contracts, order levels are generally consistent from year to year. Vendors may find DLA awards more predictable than those of other agencies. The current CR is set to expire April 28, though Congress may seek to approve appropriations for fiscal 2017 before then.

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