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Contractor-Compensation-DA---DDW - Compensation DA...

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Compensation DA Dartmouth ‘10 1 CONTRACTOR COMPENSATION DISADVANTAGES 1 Last printed 09/04/2009 7:00:00 PM
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Compensation DA Dartmouth ‘10 2 Defense spending now – and it’s mostly for foreign troops – represents investment in simpler arms for contracts. Withdrawal would shift budget toward future weapons, and industry lobbyist are compensated with contracts. New York Times 9 ( Christopher Drew, Covers military contracting and Pentagon spending for The New York Times. He is also the co-author of “Blind Man’s Bluff,” a best-selling book about submarine spying during the Cold War. 2/27/09“Military Contractors Await Details of Obama’s Budget”. http://www.nytimes.com/2009/02/28/business/28defense.html) The good news for big military contractors from President Obama’s budget this week was his proposal to increase the basic Pentagon budget by 4 percent, to $534 billion. But now the companies are contending with a new question: what will the priorities of the new administration — which has made clear it wants to shift spending from futuristic weapons systems to simpler arms that troops can use now — mean for the industry?The big contractors “are sitting on the edge of their seats ,” said Gordon Adams, a professor at American University in Washington and an expert on the defense budget. The defense secretary, Robert M. Gates, said this week that he would probably not decide the fate of some marquee weapons systems — including the Air Force’s supersonic F-22 jet fighter and the Navy’s plans for a new high-tech destroyer — until April. In an effort to blunt some of the inevitable lobbying, he has taken the extraordinary step of requiring members of the Joint Chiefs of Staff to sign documents promising not to leak any details of the deliberations. In addition to the basic budget, the Obama administration expects to spend at least $130 billion to cover the cost of the wars in Iraq and Afghanistan, bringing the total defense budget to $664 billion in fiscal 2010 , which begins Oct. 1. That is slightly higher than the $654 billion the government has set aside in the current fiscal year — the most it has spent, in inflation-adjusted terms, since World War II. Some military executives acknowledge that the spending proposal for next year remains generous given the government’s spiraling budget deficits. “It’s a good number in this economic climate,” said Kendell Pease, a spokesman for General Dynamics, the giant military contractor. But, he said, “There are so many contentious issues to decide, and nobody is going to do anything in Congress until they see the line- item decisions.” Investors also seem unnerved by the uncertainty; the stocks of the leading military companies fell even harder than the general market averages Friday. Investors were also concerned that with the plans to gradually withdraw forces from Iraq, the level of supplemental war funding will drop sharply in the future . Ronald Epstein, an analyst at Merrill Lynch, said in a research note that this
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