This past Tuesday, President Donald Trump released his first budget proposal for fiscal 2018 and the blueprint suggests many opportunities for government contractors, particularly those in the defense industry.
At $3.6 trillion dollars, the “New Foundation for American Greatness,” proposes $640 billion in discretionary spending for the Department of Defense and $560 billion in non-defense discretionary spending.
This year's budget proposal calls for a significant increase in defense spending, adding almost half a trillion dollars, while cutting $1.5 trillion from non-defense spending and $1.4 trillion in Medicaid over the course of a decade.
The $52 billion increase in defense spending will enable the military to fulfill many of President Trump's promises and accomplish long-term military goals, like centralization and modernization of infrastructure. Government officials have told Bloomberg that the proposed defense budget would appropriate funds for the construction of nine warships, with one of them being a DDG-51 Flight III guided missile destroyer ship built by Huntington Ingalls Industries and General Dynamics. All requisite munitions for the destroyer and eight other warships are included, with enough Raytheon-built Tomahawk cruise missiles to “keep the company’s Tucson, Arizona plant in operation.”
President Donald Trump’s budget also asks for $95.7 billion to update Federal information technology, a huge opportunity for that sector. Here's 4 charts that explain where he's asking for that money to be spent. The budget asks for investments in four key functions: mission delivery; administrative services and support systems; IT infrastructure and security; and IT management; and grants. The administration document requests agencies to “identify and budget for the modernization of specific high-risk legacy IT systems, with a particular focus on transitioning these systems to cloud and shared services.”
The budget proposal also seeks $7.75 billion for military space programs in 2018, a $1.3 billion increase from 2017. The $7.75 billion would be parceled out into $4.33 billion for R&D, testing and evaluation, and $3.42 billion for procurement. Although most defense space operations fall under the purview of the Air Force, the proposal includes outlays for other agencies such as the National Reconnaissance Office.
The increase in defense spending will also greatly assist efforts to rebuild the U.S. armed forces and transform it into, in the words of John Roth, a “bigger, more lethal force” by FY2019. Roth also called for a reversal of defense sequestration to assist in advancing the DoD’s strategy to re-establish military readiness.
The administration's budget depends on tax reform to fund its spending and keep the budget revenue-neutral; and promises to balance the budget within the next decade. The “New Foundation” would also work to reduce the debt-to-GDP ratio to 60 percent and shrink the federal workforce.
The fiscal 2018 budget proposal indicates that the Trump administration will continue its focus on defense and IT spending, meaning that the government contracting industry will likely be replete with opportunities surrounding these two key areas.
Expect to see RFIs, RFPs and contracts related to defense, such as recruitment, training, equipment, munitions, vehicles, unmanned systems and more. There will also likely be an uptick in IT and cyber related RFIs and contracts as the federal government pursues IT modernization initiatives, continuous diagnostics and mitigation efforts, improvements to data analytics and, perhaps most importantly, cybersecurity.
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