By Avascent Analytics team
The signing of the Bipartisan Budget Act of 2018 last month ended nearly a decade of fiscal austerity, with the aerospace and defense sectors now expecting a run-up in defense outlays during the coming years. Defense hawks as well as Democrats now have a new baseline for budgeting during this new phase, which will likely prompt further increases in 2020 and 2021 . Yet austerity politics always seem to return, and they almost assuredly will again, as defense spending remains enduringly cyclical. August Cole interviews Matt Vallone, Director of Research & Analysis at Avascent Analytics, to discuss the state of play in the wake of the Bipartisan Budget Act of 2018, and to get some historical insight into how long this present cycle might last. Click here to listen to the podcast.
A quick look at the biggest stories of the week
India • Norway • Philippines • United Kingdom • Poland
On March 22, India released a draft version of its “Defense Procurement Policy 2018 (DPP 2018).” The document emphasizes self-sufficiency in defense production and job creation. The last defense procurement policy was released in 2016. New elements of the policy include establishing clear—and strikingly ambitious—benchmarks over the next decade; by 2025, India aims to achieve self-reliance in the manufacture of fighter aircraft, create three million new jobs, and export $5 billion worth of defense items. India also proposes raising foreign defense investment caps from 49 to 74 percent for defense firms manufacturing certain, unspecified technologies. Conversely, the document makes no mention of existing competitions for fighter aircraft, rotorcraft, and maritime systems, nor does it explain how the new policy will impact future requirements. Avascent believes the timing of the new policy, and its emphasis on economic growth, is tied to the politics of the 2019 national elections.
Two of Norway’s largest defense procurements, the F-35 and new submarines, are continuing as planned with no delays anticipated, according to the country’s Minister of Defense Frank Bakke-Jensen. The defense minister provided an update on the programs on March 26. The Royal Norwegian Air Force is currently replacing its aging fleet of F-16s with 52 F-35s, while the Royal Norwegian Navy will be replacing its Ula-class submarines with four Type 212s. Norway signed a contract to acquire the F-35s in 2013, with the first four aircraft delivered by 2016 and the remaining 48 delivered at a rate of six per year beginning in 2017. The estimated contract value for the F-35s is $9.5 billion. Norway’s submarine program was awarded to ThyssenKrupp in 2017 for $5 billion, outbidding France’s DCNS (now Naval Group). The delivery of the first Type 212 submarine is expected in the mid-2020s. Combined, these two programs will dominate defense spending in Norway throughout the 2020s, accounting for more than 40% of the country’s defense investment until 2028.
Philippine Secretary of Defense Delfin Lorenzana stated that the Philippines is not interested in acquiring additional frigates after it receives two frigates from South Korean shipbuilder Hyundai. The $340 million acquisition represents over half of the annual procurement budget of the Philippines’ Department of Defense. With warming relations with China, and continued threats from insurgent and terrorist groups, the Philippines is likely to focus any naval related spending towards platforms like patrol vessels, fast attack craft, and logistics vessels. Despite President Rodrigo Duterte’s efforts to improve relations with China, there are others within the military that want to increase the Philippines’ capability to conduct patrol missions within its EEZ and distant islands. A potential acquisition of at least six offshore patrol vessels may be able to address both counterinsurgency operations within territorial waters, and long-range patrol mission. Despite the operational need for such a vessel, and the very outdated vessels that currently attempt to serve these missions, the six offshore patrol vessels will still be competing with other priorities for limited budget space. Each offshore patrol vessel could cost anywhere from $60 to $100 million.
The UK Ministry of Defence awarded a $564 million contract to MDBA for extensive capability increases for the Brimstone missile. The Brimstone 2 Capability Sustainment Program will see the Brimstone equipped with an upgraded seeker, rocket motor, guidance system, and warhead by 2022. The contract also includes substantial funding for integration of Brimstone 2 onto the Royal Air Force’s (RAF) Typhoon jets, which are set to take over the Tornado’s role as the RAF’s primary ground attack aircraft in 2019. The Brimstone’s future is likely to remain bright in Britain, where both its capability and its industrial footprint make it an extremely likely candidate for integration onto Britain’s AH-64E attack helicopters and future Protector UAS.
On March 27, the Polish Ministry of Defense and Leonardo signed a contract for four more M-346 trainer aircraft. The contract is valued at $143 million and contains an option which would allow Poland to purchase an additional set of four aircraft as well. This acquisition follows a previous procurement of eight M-346s, with deliveries expected to be completed by 2020. The acquisitions are part of a larger Polish effort to ensure that it is independently capable of training pilots for its F-16 fleet, which Poland sees as a necessary aspect of securing its airspace.
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