Driven by a volatile international security environment and combating the Covid-19 pandemic, the Department of Defense increased contract spending to $445.5 billion in fiscal 2020, an increase of nearly 10% from $404.5 billion disbursed in fiscal 2019, according to Bloomberg Government data.
The Pentagon represents the majority of overall federal contract spending totaling about $445.5 billion of the $681 billion spending in fiscal 2020. Since fiscal 2016, contract spending at the Department of Defense has increased by 45%.
Agency Spending: Navy and Army Up, Air Force Flat
The Navy disbursed the most funds of the military services with $154.7 billion in fiscal 2020. An increase of about 21% from the $127.5 billion in fiscal 2019. The Navy’s largest contract in fiscal 2020 was $23.9 billion for Lot 12 of the F-35 Lightning fighter jet made by Lockheed Martin Corp., followed by $9 billion for two Virginia-class submarines developed by General Dynamics Corp.
The Army spent $115.8 billion in fiscal 2020, an increase of about 9% from $106.4 billion in fiscal 2019. The Army’s top contract in fiscal 2020 was a $7.1 billion deal for Covid-19-related work under an Other Transaction Agreement (OTA) to the Medical Chemical Biological Radiological Nuclear (CBRN) Defense Consortium, managed by Analytic Services Inc.
The Air Force spent $83.2 billion in fiscal 2020, almost the same amount as the $83.5 billion it spent in fiscal 2019. That service’s largest single contract expenditure was $3 billion for C-130J aircraft made by Lockheed Martin. The new Space Force’s contract spending, paid for as part of the overall Air Force budget, was $10.2 billion in fiscal 2020, the same as in fiscal 2019.
Company Spending: ‘Big Five’ Remain on Top
The so-called “Big Five” defense contractors, which inlcudes Lockheed Martin, Raytheon Technologies Corp., General Dynamics, Boeing Co. and Northrop Grumman Corp., led the contract spending by DOD in fiscal 2020. Lockheed remained the overwhelming leader with $72.3 billion. Raytheon was second with $27.2 billion in spending obligations. Collectively, the five companies totaled $156.4 billion, or about 35%, of the $445.5 billion total Pentagon spending in fiscal 2020.
The ranking for Analytic Services Inc. (ASI) at number six with $10.6 billion may come as a surprise. The ASI ranking is a result of the Army’s $7.1 billion Covid-19 expenditure as well as other work for various consortia it manages. The figure for ASI is a bit misleading. In reality, most of this money flows through the consortia it manages to various companies that actually perform the work with ASI taking only a small percentage management fee.
The Pentagon’s$445.5 billion for fiscal 2020 may be difficult to surpass in the coming years. For fiscal 2021, DOD is authorized $704.1 billion, down from fiscal 2020’s $713 billion. The current Future Years Defense Program shows no real growth through fiscal 2025, so defense contracting obligations will likely flatten as well. It’s possible that the incoming administration could increase planned expenditures for defense, but that appears unlikely at this point given competing priorities, the size of deficits, and prospects for a slow economic recovery.
DOD-reported spending is delayed 90 days for security purposes. Data for fiscal 2020, which ended Sept. 30, is likely now complete.
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