Big changes coming in Defense spending
Yesterday, Defense Secretary Robert Gates released information about an overhaul of weapons priorities. According to today's Wall Street Journal, Gates said his proposed budget would "profoundly reform" military spending. Almost every big defense contractor is going to be affected.
Of course, Gates' strategy makes sense, and the priorities of the Bush administration have long needed overhauling. But, there are going to be political battles. Defense spending it seems, is often more about politics than it is about actually defending anything, and there are plenty of pet projects on the chopping block that will cause Congressmen, Labor, and contractors to begin endless nattering about how nothing should ever be cut.
That's not to say that the Defense budget is actually being reduced--nobody in Washington ever reduces anything in real numbers. A reduction in spending usually means a reduction in the increase in spending--a concept a little difficult to wrap my head around, since it still means an increase. The 2010 proposed Defense budget is $534 billion, and is still up four percent over last year.
Nonetheless, VARs and other contractors targeting Defense will see some big changes. The procurement process will be overhauled. In the past, Gates and others have said the procurement process is too weighted towards the biggest and most powerful contractors--so smaller players may get some good opportunities out of this overhaul.