Welcome back to Holland & Knight's monthly defense news update. We are pleased to bring you the latest in defense policy, regulatory updates and other significant developments. If you would like additional information on anything in this report, please reach out to the authors or members of Holland & Knight's National Security, Defense and Intelligence Team.
LEGISLATIVE UPDATES
NDAA Update
As covered in the December 2023 Holland & Knight Defense Situation Report, Congress passed the National Defense Authorization Act (NDAA) for fiscal year (FY) 2024, the 63rd consecutive NDAA passage. The Senate and House passed the compromise measure on a bipartisan basis, and President Joe Biden signed the bill into law on Dec. 22, 2023. The FY 2024 NDAA included a topline funding level of $886 billion, which matched the Biden Administration's budget request to Congress that was sent in March 2023. This also matches the topline funding level that appropriators set, though House Speaker Mike Johnson (R-La.) and Senate Majority Leader Chuck Schumer (D-N.Y.) have yet to announce if topline spending levels for defense appropriations will change. The topline funding level in the FY 2024 NDAA represents a $28 billion increase over levels in the FY23 NDAA. View the full text of the FY 2024 NDAA conference report.
Though it's always a feat to pass the annual NDAA, members of congress have turned their attention toward the FY 2025 NDAA. The House Armed Services Committee (HASC) accepted requests from HASC committee members from Feb. 1 to March 1, 2024. As such, HASC members solicited requests from stakeholders who want to influence the FY 2025 bill, having only a few weeks to submit requests to the committee before the internal deadline.
Should you or your organization have any questions on the FY 2025 NDAA process, please do not hesitate to reach out to the authors.
Defense Appropriations
The Republican-controlled House approved its version of the FY 2024 Department of Defense Appropriations Act ( H.R. 4365) on Sept. 28, 2023, by a narrow margin of 218-210. The bill was agreed to after weeks of negotiations among House Republicans that saw the defense appropriations legislation get derailed twice. The draft that passed also included some hotly debated social policy provisions. A measure to provide $300 million in aid for arming and training the Ukrainian military was also removed from the bill to make way for its passage. The House approved the aid to Ukraine separately by a vote of 311-117. Nonetheless, because FY 2023 was set to end on Sept. 30, 2023, Congress passed a continuing resolution (CR) minutes before a shutdown that extended the funding for federal agencies until Nov. 17, 2023. Similarly, the fate of security assistance to Ukraine and other countries has also stalled.
Despite Speaker Johnson indicating that he would not support additional stopgap spending measures, Congress has passed three additional CRs. The most recent CR kept the government funded in laddered steps, with six of the 12 appropriations bills – including the Military Construction, Veterans Affairs, and Related Agencies Appropriations Act – expiring on March 8, 2024, and the other six, including the Defense bill, set to expire on March 22, 2024.
With a topline funding agreement in place by Speaker Johnson and Majority Leader Schumer, the next obstacle for appropriations is to find a topline spending level for each of the 12 appropriations bills, sometimes called "302(b) allocations," referring to the provision in the Budget Act governing subcommittee funding allocations. After much negotiating, reports indicated that House Appropriations Committee Chair Kay Granger (R-Texas) and Senate Appropriations Committee Chair Patty Murray (D-Wash.) finally made a breakthrough at the end of January.
Though the exact 302(b) levels have not been reported publicly, the agreement allows for the subcommittees in each chamber's appropriations committee to begin writing the 12 appropriations bills and lawmakers to negotiate the specific funding for agencies, programming and policy provisions of the entire federal government's $1.7 trillion budget.
The defense appropriations bill faces many of the same obstacles in the Senate that the NDAA faced. In the Democrat-controlled Senate, the House's version of the defense appropriations bill is facing steep opposition for its inclusion of contentious social issues and the pared-down efforts to send aid to Ukraine. Further, President Biden has vowed to veto legislation that cuts down on or defunds the Pentagon's diversity programs or rescinds Pentagon policies that provide support for servicemembers seeking gender-affirming care, abortions or other reproductive healthcare.
As reported in the December 2023 Holland & Knight Defense Situation Report, U.S. Secretary of Defense Lloyd Austin warned in a Dec. 12, 2023, letter that a long-term CR would "misalign billions of dollars" and that thousands of U.S. Department of Defense (DOD) programs would be negatively affected. This would include the ability to counter the People's Republic of China (PRC), which is a priority identified in the DOD's National Defense Strategy, and impediments to the country's ability to react to emergent events. Similar letters detailing the harm of a full-year CR for the DOD were sent to Congress by the Chairman of the Joint Chiefs of Staff and secretaries of the U.S. Army, Navy and Air Force.
Letter from Congress on Defense Industrial Base M&A
On Feb. 23, 2024, Sen. Elizabeth Warren (D-Mass.) and Rep. John Garamendi (D-Calif.) sent a letter to the DOD urging it to conduct a more thorough review on defense industrial base mergers and acquisitions (M&A). The letter states that "current major conflicts around the globe are exposing supply chain gaps and the Department must fulfill its obligation to ensure our defense industrial base remains resilient." The letter also comes after the Government Accountability Office found that the DOD's discernment of M&A are inadequate, which was first covered in the October 2023 Holland & Knight Defense Situation Report. For more information, we recommend the Holland & Knight Government Contracts Blog, " DOD Contemplating Increased Scrutiny of Defense M&A Transactions," (Feb. 12, 2024).
Congressional Hearings Coverage
On Feb. 27, 2024, the Senate Committee on Homeland Security & Governmental Affairs held a hearing titled "The U.S. Technology Fueling Russia's War in Ukraine: How and Why." One of the main takeaways was that a large majority of components found in Russian weapons come from the U.S. or allied countries. Despite Russia's imports of battlefield goods halving since the start of the war in Ukraine, witnesses testified that more effective export controls require buy-in from corporations, which could bolster corporate responsibility by incentivizing them to enforce controls. Witnesses also emphasized the need for more effective enforcement, increased corporate responsibility and improved multilateral cooperation to resolve issues of U.S. or allied technologies being used in Russian weapon systems.
On Feb. 28, the Senate Armed Services Committee (SASC) held a hearing to receive testimony on evolving workforce dynamics and the challenges for defense acquisition and defense industrial base personnel. Senators heard testimony from witnesses representing association groups, think tanks and academia. Members of the committee and witnesses agreed that Congress must create a better regulatory atmosphere to foster a resilient defense industrial base workforce. Witnesses also emphasized the importance of investing in training and education, with a focus on science, technology, engineering and math (STEM) education, apprenticeships and reskilling programs to create future generations of skilled workers. Witnesses also highlighted the importance of improving the public image of working for the DOD and defense industry and to increase awareness of the opportunities available for varying demographics of workers.
The following day, the SASC held its first posture hearing of 2024, receiving testimony from Air Force Gen. Anthony Cotton, Commander of the U.S. Strategic Command, and Space Force Gen. Stephen Whiting, Commander of the U.S. Space Command. Despite Congress not yet passing FY 2024 appropriations bills and the budget process for FY 2025 uncertain, the hearing came at an opportune time. Senators asked questions about Russia's emerging anti-satellite weapon, which was brought to public awareness after House Permanent Select Committee on Intelligence Chairman Mike Turner (R-Ohio) worked with the Biden Administration to fully inform Congress of this new national security threat. The hearing also coincided with an incident in which the North American Aerospace Defense Command scrambled a fighter jet to intercept a hobbyist's balloon that traversed parts of U.S. airspace.
HASC Members Send Letter to President Biden on Prioritizing Quality of Life
U.S. Reps. Mike Rogers (R-Ala.) and Adam Smith (D-Wash.), chairman and ranking member of the HASC, along with Reps. Don Bacon (R-Neb.) and Chrissy Houlahan (D-Pa.), chairman and ranking member of the Quality of Life Panel, sent a letter calling on President Biden to support improving the quality of life for servicemembers and military families in his Fiscal Year 2025 DOD budget request. In the letter, the members wrote, "Our service members represent the best our nation has to offer and are central to our national security. The All-Volunteer Force has been the foundation of America's national defense for the last five decades. Yet the committee's quality of life inquiry thus far has revealed an alarming erosion of military quality of life that, if not addressed quickly, will soon place the All-Volunteer Force at risk. Reversing this decline will require a national commitment of resources to address quality of life concerns for service members and their families." One of the major areas committee members asked President Biden to focus on was the quality of housing and barracks for service members. Read the full letter.
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