House Lawmakers Close Pentagon Budget Hearing to Taxpayers
April 26, 2018
Caroline Houck / Defense One & Mike Stone and Rachit Vats / Reuters
For the first time in at least eight years, House appropriators will grill the Pentagon's top civilian and uniformed leader about their $686.1 billion 2019 budget request not in a public hearing but -- behind closed doors. Meanwhile, the Pentagon has stopped accepting deliveries of Lockheed's controversial F-35 over a dispute about who will cover the $119 million costs for fixing a production error involving the costly, over-due, over-budget, under-performing aircraft.
House Lawmakers Close
Pentagon Budget Hearing to the Public
Caroline Houck / Defense One
WASHINGTON (April 23, 2018) -- For the first time in at least eight years, House appropriators will grill the Pentagon's top civilian and uniformed leader about their budget request behind closed doors, not in an open hearing.
Defense Secretary Jim Mattis and Chairman of the Joint Chiefs of Staff Gen. Joe Dunford will sit before the defense subcommittee on Wednesday to talk over the military's $686.1 billion request for 2019. It's not the largest defense budget ever, but the $80 billion bump over legislated spending caps and the bipartisan budget deal that delivered that figure both represent a massive victory for Pentagon leaders and Congressional defense hawks.
Where those dollars will go, however, will be discussed in a session closed to the public.
Committee aides said the closed hearing allows members to discuss classified information and make the best possible funding decisions. And Mattis and Dunford have already testified in an open hearing with the House Armed Services Committee this year; they'll do so again with its Senate counterpart on Thursday.
But the appropriations committee's decision to keep their public oversight private comes at a time when the Pentagon has been clamping down on media engagement and becoming less transparent with data and information. Mattis and service leaders have repeatedly told their people to be more circumspect in their public communications.
"What I don't want is pre-decisional information, or classified information or any information about upcoming military movements or operations, which is the normal loose lips sink ships kind of restriction," the defense secretary said when asked about it in the HASC hearing earlier this month. "Otherwise I want more engagement with the military and I don't want to see an increased opaqueness about what we are doing."
That guidance, and similar statements last year, have chilled communications between the military and the public, whether leaders meant it to or not. When questioned, Pentagon leaders have repeatedly said that they are willing to be candid with lawmakers -- and the American public should trust in their representatives and military even if all the details don't make it into the open.
"We've been very clear with the Congress, behind closed doors, about what we need," Pentagon spokesperson Dana White said in January. "And we will continue to be very candid with them. But the American people need to be confident that we're ready to fight tonight."
The message seems to have started to resonate with overseers on the Hill. As far back as the House Appropriations Committee provides data, they held public hearings with the defense secretary and the joint chiefs chairman, saving the closed sessions to grill geographic combatant commanders, the intelligence chiefs, and a few others. But readiness itself has become a sensitive matter of discussion.
"I suspect it may have a lot to do with questions about readiness shortfalls, which Mattis has said he does not want to discuss publicly," said Todd Harrison, who directs defense budget analysis at the Center for Strategic and International Studies. "I think many members of Congress are eager to hear how the budget increase DOD received this year is going to help improve military readiness -- and if not, they'll want to know why."
Caroline Houck is a staff correspondent at Defense One. She previously was an Atlantic Media fellow.
Lockheed Martin Shares Fall
As Cash Glow Outlook Disappoints
Mike Stone and Rachit Vats / Reuters
(April 24, 2018) -- Lockheed Martin Corp (LMT.N), the Pentagon's No. 1 weapons supplier, did not raise its 2018 cash flow projections on Tuesday even as the US government spends more on defense, disappointing investors and pushing its shares lower.
Lockheed reported a better-than-expected quarterly profit and raised its full-year forecast, helped in part by higher sales of its stealthy F-35 combat jets.
The company's shares, however, fell 6.1 percent to $336.49 on the cash flow predictions amid a broader market sell-off. Its chief financial officer told Wall Street analysts on a conference call that pension contributions could cause "negative cash from operations in the second quarter."
The outlook for annual cash flow was the only major financial category that Lockheed did not revise higher.
"There could be some modest disappointment that the cash guidance has not been raised, but it is early in the year and cash is trickier to predict," analyst Robert Stallard of Vertical Research said in a note.
Revenue from the company's aeronautics business, which makes the F-35 jet, rose 6.7 percent to $4.4 billion. The business accounted for about 38 percent of total revenue in the quarter. The F-35 jet is central to the company's growth and already delivers about a quarter of its sales.
The program has been in the news recently after Reuters reported this month that the US Department of Defense stopped accepting most deliveries of the F-35 over a dispute about who will cover costs for fixing a production error.
The dispute centers around whether Lockheed or its customer should pay what a source said was $119 million to fix a corrosion issue discovered last year. The source spoke on condition of anonymity.
Lockheed confirmed on April 11 that the Pentagon had halted deliveries of the jet over a contractual issue, but did not give further details.
"It's just a temporary suspension that they have on accepting some aircraft until we reach agreement on a contractual issue," Chief Executive Marillyn Hewson told analysts. Lockheed's finance chief said the hold encompassed less than 10 jets as of Tuesday.
"This was a good operating quarter from Lockheed, with an operations/tax boost to the earnings per share," Stallard said in his note.
Looking forward, Hewson said Lockheed and the US government were "exploring options that we could bring forward to" Japan for a future jet fighter. Last week, Reuters reported Lockheed planned to offer Japan a stealth fighter design based on its export-banned F-22 Raptor and advanced F-35 Lightning II aircraft. [nL3N1RX2AF}
Following the US tax law change passed last year, Lockheed reported its effective tax rate was 14.9 percent, compared with 23.8 percent for the year-ago quarter. The rate was helped in part by a $1.5 billion contribution to the company's pension plan this quarter.
Profits were up at Lockheed's Missiles and Fire Control business unit, as well as its Rotary and Mission Systems business unit, which makes Sikorsky helicopters. The Space unit's profits fell modestly from 12 percent to 11.3 percent in part because of lower sales of a space-based infrared sensor system.
The Bethesda, Maryland-based company raised its 2018 net sales forecast to a range of $50.35 billion to $51.85 billion from a range of $50 billion to $51.50 billion.
Full-year profit is expected to rise between $15.80 and $16.10 per share, compared with its earlier estimate of $15.20 to $15.50 per share.
Net income rose to $1.16 billion, or $4.02 per share, in the first quarter ended March 25 from $789 million, or $2.69 per share, a year earlier.
Net sales rose to $11.64 billion from $11.21 billion. Analysts were expecting an adjusted profit of $3.40 per shares and revenue of $11.6 billion, according to Thomson Reuters I/B/E/S.
Up to Monday's close, Lockheed's shares had risen 31.3 percent in the past 12 months, compared with a 13.7 percent rise in the S&P 500 index .SPX.
Reporting by Mike Stone in Washington and Rachit Vats in Bengaluru.
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