EXPECT A SHOWDOWN OVER DEFENSE SPENDING THIS FALL

As we reported earlier, the Senate left Washington at the start of August by passing its version of the FY’25 defense appropriations bill with a significant increase in funding over what the administration had asked for in its original budget request and from what their House counterparts had been considering.  This sets up a potential conflict with House deficit hawks when Congress returns in September.  Similarly, a review of the different defense authorization measures being worked on in each chamber shows that spending conflict could very well spread.  The Senate bill calls for more funding in many areas than its House counterpart, including in areas such as operations and maintenance and research and development.  One of the few places where the House proposes more money is in spending on military personnel.  These differences, coupled with election year time constraints, cast some doubt on when the FY’25 NDAA will be passed as well as on what final appropriations levels will be.  House Republicans seeking to keep spending under control may very well balk at Senate proposals to increase spending, even on defense measures where party support has traditionally been strong.  The “tough on spending” approach may be seen as a good election year position to take.  Election results could also impact timing, with a clear consensus for one party or the other increasing the likelihood that both DOD authorization and appropriations decisions could be kicked into calendar year 2025.  This all comes at a precarious time for national security generally.  Contractors may want to ensure that their elected officials hear their views on these issues and the importance of acting in a timely manner, regardless of the political calendar.  No contractor should take anything for granted in this year’s authorization and appropriations cycle.