By Marina Malenic
Boeing [BA] executives said yesterday that they hope to grow their international military sales as Pentagon spending is set to slow dramatically in the coming years.
“We see a definite counterbalance in the international market,” Jim O’Neill, the company’s vice president for integrated logistics, told reporters at a briefing in Arlington, Va.
He added, however, “the preponderance of the [Defense Department’s] insourcing right now is in the acquisition corps, which doesn’t affect logistics that much.”
“I’d say the jury is still out on how much of an impact all this will have on our business,” he said, referring to the logistics and other after-market services that have made up a growing portion of the U.S. aerospace giant’s military sales.
In general, Boeing aims to increase its revenue from international sales from 16 percent in 2009 to 25 percent in future years in a “major repositioning,” according to company spokesman Dan Beck.
Defense Department officials last week unveiled their plan to find more than $100 billion in savings within the Pentagon’s arms-purchasing budget. Defense Secretary Robert Gates has previously warned that the “gusher” of wartime defense spending is slowing and that the department is “reforming the way it does business” with an eye toward greater efficiency.
Defense officials said earlier this month that the military services will each have to identify $2 billion in annual overhead and “lower-priority” programs in their five-year spending blueprints. The department is ultimately looking to divert $100 billion to current forces and modernization priorities. The armed services, Pentagon agencies and combatant commands are expected to submit cut proposals by July 31 (Defense Daily, June 7).
Top Pentagon arms buyer Ashton Carter, who met with industry officials last week to discuss the new initiative, said he and other defense acquisition officials are seeking to identify inefficiencies in contracting. He has initiated a review of Pentagon acquisition and contracting. The review is expected to wrap up at the end of the summer and will culminate with new guidance from Carter on purchasing practices (Defense Daily, June 29).
The Obama administration has requested $548.9 billion for the Pentagon’s fiscal 2011 spending, a number that does not include costs for the wars in Iraq and Afghanistan. The top line is a 1.8 percent over the current year’s budget. Approximately $400 billion out of the $700 billion overall budget, which includes war costs, is spent on weapons and services from contractors.