Unmanned/ISR Implications of the Rebuilding the U.S. Armed Forces Presidential Memo

Following the release of President Trump’s Presidential Memorandum entitled “Rebuilding the U.S. Armed Forces,” Defense Secretary Mattis issued implementation guidance on January 31, 2017 that addressed the budgetary impact of the Memorandum. The president’s memo requires Secretary Mattis to conduct a 30-day readiness review that focuses on 3 key areas: improving warfighting readiness, achieving program balance by addressing pressing shortfalls, and building a larger, more capable, and more lethal force. Following his review, the Secretary will propose a supplement to the Department of Defense’s budget for fiscal year 2017 and identify requirements to refine the FY 2018 budget request that the DoD is currently developing.

This post examines the potential impact of Secretary Mattis’ review on funding for unmanned and intelligence, surveillance, and reconnaissance (ISR) systems based on figures provided in the previously submitted FY 2017 Defense Procurement and Research, Development, Test, and Evaluation Budgets.

The portion of Mattis’ guidance that potentially affects unmanned/ISR systems falls under “Phase 2: Achieving Program Balance – The FY 2018 President’s Budget Request.” Specifically, the “Building Programs for Promising Advanced Capability Demonstrations” section promises to have an impact on addressable R&D spending, which has been increasing over the past 2 years, from $48.5B in FY 2015 to $53.4B in FY 2016. The Obama administration requested $55.1B for FY 2017, with $15.8B potentially set aside for advanced technology development. In addition, Secretary Mattis’ guidance states that “critical enablers” of U.S. defense capability will be a focal point of funding for the DoD in FY 2018.

Putting numbers around unmanned/ISR systems as “critical enablers” yields the following view.

DoD’s spending related to unmanned/ISR systems has hovered between $5 billion and $6 billion since FY 2015, so industry can probably expect $5 billion to be the baseline scenario in FY 2018. My own belief is that DoD’s total request will total at least $6 billion, with the potential to be as high as $8 billion. Unmanned/ISR systems are precisely the kind of “critical enablers” that a former field commander like Secretary Mattis would fund because they provide the integration and dissemination of data that is necessary in modern warfare.

What types of systems could DoD invest in? If the FY 2017 request is any indication, these are the systems that will attract the highest funding.

Why these systems? The MQ-9, MQ-4, RQ-4, and Multi-Sensor Airborne Reconnaissance System are the leading unmanned platforms in use today, which is why the DoD requested the most FY 2017 funding for them. Army’s WIN-T is an important tactical system for battlefield ISR, as well as for command and control, and the DCGS instances in Army and Air Force are central pieces of the new “combat cloud” that DoD is building.

Lastly, how might funding be distributed across the Military Departments and Defense Agencies? The FY 2017 Procurement and RDT&E request provides the following perspective.

The three large Military Departments will garner the highest bumps in funding, but U.S. Special Operations Command, which relies heavily on unmanned/ISR systems, will undoubtedly see an increase. The outlier is the Missile Defense Agency, which did not request much in funding related to unmanned/ISR systems. This said, President Trump has referred several times to modernizing U.S. nuclear deterrence capabilities, so assuming that Secretary Mattis adopts some of the president’s priorities as his own, we could reasonably expect to see significant growth in spending related to unmanned/ISR systems at the MDA as well. We’ll know for sure by May 1, 2017 when the DoD’s FY 2018 budget request is submitted.

For additional analysis on the potential market impact of Secretary Mattis' presidential memo implementation guidance, please see:

• Budget Implications of the Rebuilding the U.S. Armed Forces Presidential Memo
• Workforce Implications of the Rebuilding the U.S. Armed Forces Presidential Memo
• Cybersecurity Implications of the Rebuilding the U.S. Armed Forces Presidential Memo
• Big Data Implications of the Rebuilding the U.S. Armed Forces Presidential Memo