Gates plan raises questions for firms, military

WASHINGTON (Reuters) - Defense Secretary Robert Gates’ ambitious plan to overhaul Pentagon weapons programs has raised a wide range of thorny questions for industry executives, congressional aides and the military services.

At weapons plants around the country, in the halls of Congress, and in the corridors of the Pentagon, company, military and government officials struggled on Tuesday to understand the sweeping delays, cancellations and funding increases that Gates is recommending.

Army, Navy, Air Force and Marine Corps officials were reluctant to go into specifics on their respective programs, noting the fiscal 2010 budget plan must still be approved by the White House before it goes to Congress in early May.

“It is important that public discussion not get out in front of the important work that still has to be done at the service level,” said Army spokesman Lieutenant Colonel Christopher Garver.

He said the Army was trying to understand the impact of Gates’ recommendation to cancel the ground vehicles portion of Future Combat Systems modernization program, which is valued at $87 billon.

Industry officials were also tight-lipped, saying they needed more details about the proposed changes before they could assess the impact on orders, balance sheets, manufacturing facilities or workforce levels.

Lawmakers fired back at Gates on Monday and Tuesday, criticizing his proposed cuts to missile defense, the Lockheed Martin Corp F-22 fighter jet program, and Boeing Co’s Airborne Laser, a modified 747 jumbo jet designed to destroy enemy missiles shortly after they are launched.

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Rep. John Murtha, who heads the House Appropriations Subcommittee on Defense, applauded Gates’ comprehensive review and called the proposals “an important first step in balancing the Department’s wants with our nation’s needs.”

But his committee, which has already held dozens of hearings about weapons programs, plans more in coming months, said his spokesman.

Until the White House submits a detailed budget for fiscal year 2010, congressional aides say they will mostly rely on closed-door meetings with military officials to flesh out the Gates plan.

Military officials are also facing a barrage of questions from industry executives.

JP Morgan analyst Joseph Nadol said Gates’ recommendations were “far from a done deal,” noting that several past defense secretaries, including Dick Cheney and Donald Rumsfeld, had seen their plans to cut weapons programs defeated by Congress.

Key questions include:

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* Will companies be entitled to termination fees for programs that are canceled?

* Will lawmakers want to and be able to overturn some of Gates’s recommendations?

* How soon will the military services be able to formulate their requirements for new weapons systems, and get them approved by the Pentagon’s Joint Requirements Oversight Council? This will have a big impact on future competitions for rescue helicopters, satellite programs, a new long-range bomber and other programs canceled by Gates on Monday.

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“That’s the big question,” said one three-star Army general who asked not to be named.

* Will program cancellations lead to job cuts, or will additional spending recommended by Gates for intelligence, reconnaissance and surveillance programs, unmanned aerial systems and other weapons help keep workforce numbers intact?

* Will the decision to cancel several big programs such as the $15 billion combat search and rescue helicopter after years of investments in bids dissuade companies from bidding for future projects?

“We’re just trying to make sense of it all at this point,” said one industry executive, who asked not to be named.

Reporting by Andrea Shalal-Esa; Editing by Gary Hill