The FY19 NDAA: National Defense Priorities and Opportunities for Non-Traditional Defense Companies
For the past 56 consecutive years, Congress has passed, and the president has signed, the National Defense Authorization Act (NDAA). Drafted each year by the House and Senate Armed Services Committees, the NDAA identifies the federal agencies responsible for carrying out defense policy, sets funding levels to direct defense appropriations, and advances defense policy reforms. Because Congress feels obliged to provide for members of the armed forces, it is almost certain the Fiscal Year (FY) 2019 NDAA will be signed into law by the end of this year.
Introduction to the Process
Although it seems the FY18 NDAA cycle just came to an end, with Donald President Trump signing the bill into law on December 12th, the lengthy process of setting defense policy for FY19 is already underway. Typically, personal offices for members who serve on the Armed Services Committees begin soliciting NDAA requests in February. These requests are then considered and prioritized as the committees hold hearings following the release of the president’s budget request, which is now expected on February 12th.
While the House Armed Services Committee tends to move legislation first, both the House and Senate committees are likely to markup their individual bills sometime around Memorial Day. The House Armed Services Committee has long embraced on open markup, which has given way to the Washington parlor game of guessing at what early morning hour the committee will dispense with amendments and report its bill. On the other hand, the Senate Armed Services Committee has voted in recent years to close some subcommittee markups and to conduct its full committee NDAA markup entirely in a closed session, arguably for expediency. When each committee reports its bill, it will also issue a committee report, which provides insights into the congressional intent behind the legislative language and, in some cases, outlines specific instructions for the execution of the bill’s policy provisions.
This year, there will be some heightened urgency for the full House and Senate to pass their bills before Congress leaves town for the August recess and campaigning for the midterm elections becomes a focus for members up for reelection. Because the NDAA has come to be viewed as one of few “must pass” pieces of legislation, it attracts hundreds of amendments and consumes significant floor time. In the House, the Rules Committee groups amendments that are bipartisan into en bloc packages. Controversial amendments are considered on an individual basis and support is measured by a recorded vote. In the Senate, the overarching legislative agenda may require negotiations between majority and minority leadership to identify which amendments receive a vote before final passage.
Under normal order, once both the House and Senate pass their individual NDAAs, a conference committee is formed to reconcile differences between the two bills. Most often, NDAA conference negotiations result in a conference report that, in recent years, passes the House and Senate and is sent to the president’s desk in either late November or early December. While the president is likely to issue a statement of administration policy (SAP) highlighting where the executive branch and the legislative branch diverge on policy, it is nearly guaranteed the NDAA is signed into law.
National Defense Priorities
Following trends in recent years, topline defense spending will continue to be a major topic in this year’s NDAA cycle. While appropriators are still working to finalize FY18 spending levels, which defense stakeholders hope will entail a deal to lift the Budget Control Act (BCA) spending caps, President Trump continues to tout higher defense spending as a signature part of his agenda. Nothing is ever final until in writing, but it is rumored the president’s FY19 budget request could include as much as $716 billion in defense spending. If true, this could demonstrate that Secretary of Defense Jim Mattis has the president’s ear over other advisors who are more perceived as deficit hawks. Even before assuming his current position, Secretary Mattis has long been a proponent for higher spending levels to restore military readiness. A significant increase in defense spending could achieve this objective if used to expand the size of the force, grow weapons systems procurement, and accelerate modernization.
In addition to the president’s FY19 budget request, this year’s NDAA process will also be guided by strategy documents recently released by the new administration. For example, President Trump is likely to urge defense authorizers to use the NDAA to bolster the four pillars of his National Security Strategy: (1) Protect the homeland; (2) Promote American prosperity; (3) Preserve peace through strength; and (4) Advance American influence.
Furthermore, the House and Senate Armed Services Committees have already received testimony on the National Defense Strategy, which was announced on January 19th. The National Defense Strategy identifies near peer competition with China and Russia, the North Korean and Iranian nuclear programs, and terrorism as the primary threats facing the U.S. Additionally, it calls for new emphasis on modernizing the force and building and strengthening alliances. Many of these issues could be addressed as part of the FY19 NDAA’s foreign policy title.
On Friday, the Trump Administration released its long-awaited Nuclear Posture Review (NPR). The NPR included some controversial policy shifts, including a call for low-yield nuclear weapons for ballistic and cruise missiles to bolster the U.S. nuclear deterrent. Additionally, the NPR seems to suggest broadening the circumstances under which the U.S. may use a nuclear weapon, including in response to certain kinds of non-nuclear attacks. Expect these issues to be heavily debated during the FY19 NDAA process.
Beyond these guidance documents, a new strategy for Army air and missile operations is also anticipated this summer and could also influence substantive reforms included as part of this year’s NDAA.
The Armed Services Committees are also likely to use the FY19 NDAA process to continue their oversight of policy changes included in recent years’ NDAAs. For example the Pentagon is now initiating a major reorganization effort that will split the office of the Under Secretary of Defense for Acquisition, Technology, and Logistics (AT&L) into two new offices: the Office of the Under Secretary for Acquisition and Sustainment (A&S) and the Office of the Under Secretary for Research and Engineering (R&E). In light of these changes, the defense committees may make additional changes to the defense acquisition reform process as part of this year’s NDAA cycle.
Recent NDAAs have also seen a growing emphasis on shoring up U.S. capabilities in multi-domain command and control, especially in the space and cyber domains. During the FY18 NDAA process, House authorizers sought to move space from the Air Force’s area of responsibility and place it under the jurisdiction of a new military branch to be known as the Space Corps. This proposal was fiercely opposed by the Trump Administration and Senate authorizers. In the spirit of compromise, the FY18 NDAA directed a study on creating a space military branch, which could shape this year’s debate. Similarly, in light of U.S. Cyber Command (CYBERCOM) transitioning into a unified combatant command last year, the FY19 NDAA could authorize resources that continue to elevate the cybersecurity mission and set U.S. policy for the conduct of warfare in cyberspace.
Of course, since the NDAA runs the full gamut of defense policy, all of the issues under the Armed Services Committees’ jurisdiction are generally on the table. This means the defense committees may use the FY19 NDAA process to continue the conversations on everything from addressing sexual assault in the military, to pursuing another round of base realignment and closures (BRAC), to improving recruitment, retention, and training of military personnel, to updating to the 2001 and 2002 authorizations for the use of military force (AUMFs).
Opportunities for Non-Traditional Defense Companies
Aside from traditional defense issues, in recent years, Congress has used the NDAA to bolster Department of Defense (DoD) initiatives, such as the Defense Innovation Unit – Experimental (DIUx) and the Strategic Capabilities Office (SCO), to create business opportunities for non-traditional defense companies and to encourage the department to leverage private sector best practices. This is just one reason companies outside of the defense industry, and in particular those with innovative, commercial technologies that may have secondary battlefield applications, should monitor the NDAA. In recent years, the NDAA has also been used as the vehicle to reauthorize programs like the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR), which allow small businesses a piece of the DoD action.
Many companies operating outside of the traditional defense space are also unaware that the NDAA includes an entire title on health policy. While this section of the bill inevitably addresses TRICARE and health benefits for uniformed personnel and their dependents, transitioning service members, and veterans, this title has typically included a subtitle that serves as an umbrella for miscellaneous health care provisions that may present an opportunity for some health care companies. In the past, this section has been used to direct studies, pilot projects, and demonstration programs on a variety of issues ranging from the development of therapies for battlefield trauma, chemical/radiation exposure, and traumatic brain injury (TBI); treatment of post-traumatic stress disorder (PTSD) and other psychological conditions; and new approaches to providing care, including via telemedicine.
While most companies operating in Washington are aware the Armed Services Committees have jurisdiction over Department of Energy (DOE) national security programs, it’s not as obvious that the NDAA address energy issues that are much broader than nuclear weapons. Because the services maintain a large installations footprint, the title of the NDAA focused on operations and maintenance devotes a whole subtitle to energy and environmental provisions, for example, pertaining to the construction of energy projects with proximity to military bases, setting and achieving energy performance goals, and mitigating the adverse environmental impacts that military base operations have on local communities. Further, the FY18 NDAA title on military construction contained enough policy pertaining to contracts, management, and cost efficiencies to justify dedicating an entire subtitle to energy resiliency. These subtitles should be viewed as opportunities for the energy industry to improve its working relationship with DoD in the FY19 and future NDAAs.
Finally, although not housed under a dedicated title within the annual defense bill, information technology (IT) and communications issues have increasingly found a way into the NDAA discussion. For example, the FY18 NDAA included the Modernizing Government Technology (MGT) Act, and past NDAAs have sought to improve Pentagon collaboration with Silicon Valley. As cybersecurity, artificial intelligence (AI), quantum computing, and cloud services evolve into key components of DoD function and research and development (R&D) efforts, the NDAA also represents a potential pathway for partnership between the Pentagon and this segment of industry.