Air Force shakeup may spur spending shifts

By Jim Wolf - Analysis

WASHINGTON (Reuters) - The ouster of the Air Force's top two officials may spur even more Pentagon spending on equipment for current wars and end production of pricey F-22 jets designed for potential conflicts with countries such as China.

Defense Secretary Robert Gates forced the resignations of Air Force Secretary Michael Wynne and Chief of Staff Gen. Michael Moseley on Thursday after gaffes involving nuclear and missile security.

The Air Force's accidental shipping of ballistic-missile fuses to Taiwan may have been the last straw amid strains over acquisition priorities, remotely piloted vehicles and other friction about post-Iraq needs, experts on the military said.

Starting months ago, Gates had singled out the Air Force's top-of-the-line Lockheed Martin Corp F-22 Raptor fighter jet as a prime example of what he deemed misplaced military priorities.

"The reality is we are fighting two wars, in Iraq and Afghanistan, and the F-22 has not performed a single mission in either theater," Gates told a Senate committee in February. He later urged all the services to send more remotely piloted planes, such as General Atomics' Predator, to the battlefield, a step that feeds surveillance video to troops in real time.

Under Wynne and Moseley, the Air Force had sought to buy 381 radar-evading F-22s -- more than twice as many as the 183 budgeted by the Defense Department. The F-22 costs more than $132 million apiece.

Dov Zakheim, who retired as the Pentagon's chief financial officer in 2004, said the Air Force shake-up would prompt the Army, Navy and Marine Corps to rethink their big-ticket acquisition plans as well to make sure they met Gates' goals.

"What just happened underscores the secretary's concern that the (Defense) department pursue programs that are most relevant to the kinds of wars that he expects the United States to continue to fight," Zakheim said in a telephone interview.

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The wars in Iraq and Afghanistan already have begun to reshape Pentagon procurement in favor of such things as armored trucks and other land systems, a trend likely to grow as the Army and Marine Corps continue to add troops.

In fiscal 2007, for instance, Britain's BAE Systems Plc, a producer of armored vehicles among other advanced hardware, became the Pentagon's sixth-biggest supplier, up from No. 8 in 2006. One year ago, BAE bought Armor Holdings Inc, a maker of Mine-Resistant Ambush Protected trucks.

BAE's prime contracts shot up more than 87 percent during this period, to $9.8 billion from $4.7 billion, the biggest percentage increase of any of the Pentagon's top 10 suppliers.

Gains for the top three contractors were much smaller, according to William Hartung of the New America Foundation, a New York research group.

Lockheed Martin's Pentagon prime contracts rose 4.5 percent from $26.6 billion to $27.9 billion while Boeing Co awards grew 11.3 percent from $20.3 billion to $22.5 billion. Northrop Grumman Corp's contracts climbed 4.2 percent, from $16.6 billion to $16.8 billion, Hartung found.

Spurred by Gates' emphasis on equipping for today's wars, Hartung predicted multibillion-dollar programs like Lockheed Martin's F-35 Joint Strike Fighter and the Army's Future Combat Systems, co-managed by Boeing and SAIC Corp, would be cut back or stretched out.