US defence spending reaches record levels

The U.S. Department of Defense (DoD) spending for 2008 is projected to be the highest it has been since World War II. For 2008, the Army has programmed $23.8 billion for procurement and the supplemental funding required to recapitalize worn out equipment appears likely.

New analysis from Frost & Sullivan, U.S. DoD 2008 Budget Analysis, expects that DoD’s equipment procurement will rise, especially for the ground forces, until 2013.

Defense companies that understand the operational needs of units and provide interoperable as well as reliable products will stand out in the DoD market. In particular, market participants should focus on meeting specific end-user requirements.

“The short-term trend to get armored vehicles to the war zones and give troops protection against improvised explosive devices (IEDs) has evolved into a concerted plan to upgrade vehicles,” says Frost & Sullivan Senior Industry Analyst Brad Curran. “The DoD plans to spend about $12.0 billion for vehicles such as tactical trucks, Bradley sustainment, Strykers, and Abrams modifications.”

Air transport, tanker, fighter aircraft, and some classes of ships nearing the end of their life cycles will also likely require investments. Overall, the expansion of the Army and Marine Corps will necessitate a greater budget allocation for equipment procurement.

“The 2006 Quadrennial Defense Review (QDR) called for the creation of 117 regular Army, 106 National Guard, and 58 Reserve modular brigades,” notes Curran. “This would require an Army end strength of 482,400 active and 533,000 reserve troops in 2011, while the addition of Marine Corps Special Operations Command will ensure that the Marine Corps increases to 175,000 active and 39,000 reserve.”

With the 2008 Presidential election looming large, the major candidates vie to take strong stands on defense. Notably, the frontrunners appear committed to replenishing the ground forces and armored vehicle assets. However, the biggest point of debate will focus on the siphoning of funds from naval and air assets to the ground forces.

“Though air and naval weapons systems usually enjoy bipartisan support due to the large number of jobs generated, the need to keep the Army and Marines well equipped has deferred new air and naval weapons programs,” observes Curran. “However, the government will continue to focus on anti-terrorism operations with an emphasis on Command and Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) and special operations capabilities.”

Source: Frost & Sullivan

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