The U.S. Capitol Building on July 23, 2021.

The U.S. Capitol Building on July 23, 2021. Getty Images / Kevin Dietsch

Defense Business Brief: JSASC recommends extra $25B for Pentagon; Securing defense supply chains; Electric passenger planes; and more.

On Thursday, the Senate Armed Services Committee voted 23-3 to recommend adding $25 billion to the Biden administration’s $715 billion Pentagon budget proposal in its markup of the 2022 National Defense Authorization Act. But just because the committee passed the defense policy bill with such a large, bipartisan majority in the Democrat-controlled Senate doesn’t mean it’ll have the same results in the House. 

“While this may be a sentiment positive for defense, the SASC mark-up sets up a battle with the House which won’t likely be resolved until late 2021—at the earliest,” Capital Alpha Partners’ Byron Callan wrote in a Thursday evening note to clients. “The mark-up could be seen as a ceiling, but it could also signal a protracted stand-off that will involve the rest of the FY22 federal budget request and thereby create uncertainty over appropriations well into 2022.”

Cowen & Company’s Roman Schweizer points out that Congress is likely to strike a two-year spending deal that covers fiscal years 2022 and 2023. “We presume that Republicans will continue to push hard for +3%-5% real growth, so it's possible the two-year deal could reflect [low single digit] growth also in FY23,” he wrote in a Thursday note to investors. “We still think it's still early for a budget deal to come together with the legislative logjam currently in Congress, so we might not see signs until mid-fall.”

Of note, the SASC adopted an NDAA amendment from Sen. Elizabeth Warren, D-Mass., that—if approved by Congress—would prohibit Pentagon officials from participating in “matters that affect the financial interests of their former employer, former clients, or former direct competitors for four years.” Warren placed a hold on Frank Kendall, President Biden’s Air Force secretary nominee, until he pledged to recuse himself from working for industry for four years.

(Heritage’s Thomas Spoehr hates the idea.)

Meanwhile, a bipartisan House task force has made a series of recommendations to rid American weapons of Chinese-made parts. “The COVID-19 pandemic likewise taught the United States and our allies that adversaries, particularly China, are capable of weaponizing supply chain vulnerabilities to threaten our national security, should they choose to,” the group chaired by Reps. Elissa Slotkin, D-Mich., and Mike Gallagher, R-Wis., wrote. “The COVID-19 crisis tested the United States, but our response gave us valuable insights and underscored the imperative to act on them. It is now incumbent on the U.S. Government, in concert with industry and allied nations, to mitigate critical defense supply chain risks, increase surge capacity, and enhance resilience by increasing the diversity of sources. The task force’s six recommendations—designed to give the Pentagon better insight into its supply chains—are expected to be included in the House Armed Services Committee NDAA markup.

Speaking of supply chains, the Global Business Alliance, a trade association that represents 200 companies across a variety of business sectors (its aerospace and defense members include Airbus, BAE Systems, Dassault, Rolls-Royce, Safran, and Thales) has created a subsidiary called GBA Sentinel to address supply chain vulnerabilities. The organization has partnered with Fortress Information Security. “We believe that Fortress had the right bona fides, not just on cyber, but on supply chain risk management, that we believe could be a game changer for our companies in protecting their critical supply chains,” said Nancy McLernon, president and CEO of GBA. 

The group will help its members comply with U.S. cybersecurity regulations. “The biggest challenge these days—and we saw this with the Colonial [Pipeline] hack—is actually not so much securing everything inside of the firewall, but actually making sure that the company's supply chain and vendors are actually secure as well,” said Peter Kassabov, co-founder and executive chairman of Fortress. “For these companies, the challenge is different than probably many U.S. companies because their supply chains are global.”

United Airlines will invest in Swedish electric planemaker Heart Aerospace. United plans to buy 100 of the 19-seat planes, which are expected to hit the market in 2026. It’s the second interesting recent deal for the airline, which announced its intention to buy Boom supersonic airliners.

Making Moves

Raytheon Technologies hired Jeff Shockey to lead its government relations division. He succeeds Timothy McBride, who plans to leave the company later this year. Shockey leaves Boeing, where he was head of global sales and marketing for the company’s Defense, Space & Security and Global Services' Government Services businesses.

President Biden has nominated Jonathan Kanter, a big tech critic, to lead the Justice Department’s antitrust division. Kanter’s nomination comes as the Biden administration reviews Lockheed Martin’s planned acquisition of Aerojet Rocketdyne.

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