A Look Behind the Dais

Upon release of the bill, we caught up with a friend and longtime top aide on the Hill, including as a senior defense advisor. Below (italicized and in quotations) is their analysis and we are happy to share it with you.

Nuts and Bolts

• This bill is baked. It was pre-negotiated between the House and Senate Armed Services Committees, as well as Congressional leadership and the White House. There will be little to no room for further negotiations.

• In terms of details, this is it. Don’t expect any further report language from Congress specifying recipients or how the money should be spent.

• Typically reconciliation funding is obligated to be spent over ten years. But in this case, Chairmen Mike Rogers (R-AL) and Roger Wicker (R-MS) have required the funding to be out the door within this presidential term, meaning spent by FY ’29.

The How

While Congress has outlined broad areas for investment in the 43 page bill (the section by section can also be found here), there is a lot of spending discretion for the Administration.

• “The admin wanted maximum flexibility in terms of the accounts that were in the bill.”

   

• “My guess is the admin will take this money, say, for hypersonics and go find companies they like or companies will pitch them. That is what DOD is going to have to do right now.”

BUT, Congress is making sure some of their top priorities are addressed. Chief among them, funding for a forensic audit of the Pentagon: 

• “The audit is a big deal for fiscal conservatives. So there is a lot of money for AI systems and technology to come in and track this stuff.”

The Players

Assuming passage — and we do presume this bill will become law — we asked who the most important people would be to implement this language.

• “It’s different for each service and depending on who gets what money. But, a lot of the acquisition people, program mangers, PEOs (Program Executive Officer) … those are the people who are going to make these decisions. But politicals will as well — secretaries of each department and the undersecretaries are going to be pushing for a lot. There’s going to be a mix of politicals and careers that are going to be making big decisions on lots of dollars.”

The Big Question

Will this rebuild and rearm our defense industrial complex?

• “I think this solves a couple problems and doesn’t solve a couple problems. For these smaller, tech-focused companies that are doing AI for the department, that are building drones, and are the small manufacturers who have new ways of doing business that can scale quickly … I think those are the ones are going to be most successful out of this bill. The bigger companies, the shipbuilding stuff, I think that’s a lot of money that looks good on paper but isn’t necessarily a silver bullet.” (more on that below).

Shipbuilding

The largest line item of the bill, at $33.7 billion, is a significant attempt to pull America’s industrial base forward. But as indicated above, money alone won’t do the trick.

• “The shipbuilding number is really big. But the problem is we are lacking the needed workforce. We don't have the technology to replace human welding right now. If you visit these companies, the new technologies are really sophisticated and awesome. But you still need hands on labor. If you talk to these shipbuilding companies, they used to employ people for 30, 40 years at a time. Now, they are sticking around for 2 or 3 years, so that’s the challenge. How do you get these workers to stay? The idea of this is great, but you still need skilled workers.”

Critical Minerals and the Financial Arsenal Behind Our Industrial Renaissance

A true game-changer within this bill lies beneath the surface: $2.5 billion in direct spending for critical minerals purchasing and production through the National Defense Stockpile.

It also goes further, appropriating $500 million to the Department of Defense Credit Program Account that manages $100 billion in loans and increased guarantee capacity specifically for critical minerals development. This is the beginning of a strategic financial architecture for American industrial renewal.

• “It’s a big effort in the last couple years — you need these minerals and the things that boom — the energetics and propellants. So if China cuts us off down the road, this is a stockpile to have critical minerals that we need for defense munitions. Some of this stuff is tied up in state land and state law which could slow the domestic production down, so filling this stockpile is the itch this is scratching.”

A Win for Startups

Speaking of financing facilities, the section “Enhancement of Department of Defense Resources for Scaling Low-Cost Weapons into Production” provides $13.5 billion to support new technologies and new entrants into the defense ecosystem. Here’s why they are important.

• “These incubators were created because getting into the DOD ecosystem and POM (Program Objective Memorandum) cycle, the FYDP (Future Years Defense Program), and the budgeting cycle is hard and complicated. These DIUs (Defense Innovation Units) were created so we would get these smaller companies involved. Let’s say Anduril is built up, we can figure out if these products work, and then can invest faster and they don’t have to go through the FYDP process to get government funding.”

• “And it’s actually proven to work. You can get these companies into the system, their products can be validated and tested and into the warfighter’s hands. You can ramp the money up and they can ramp up production. You’re not going through the five year cycle it normally takes to get the money. I think investing in these things is good because you have all these small companies that want to be part of DOD but typically it’s really hard to break in.”