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2022 U.S. Defense Budget: New Opportunities For Federal Contractors

2022 U.S. Defense Budget: New Opportunities For Federal Contractors

The cooperation between the U.S. government and the federal contractors is indispensable, especially during these tumultuous times when new evolving threats loom.

On top of battling the devastating effects of the COVID-19 pandemic, the federal government is setting its sights on how the nation can defend itself against threats. And thus, these gnawing concerns fueled President Biden’s Budget Request of $6.011 trillion.

Breakdown of the 2022 U.S. Budget

The federal budget is divided into three categories: mandatory spending, required net interest spending on the national debt, and discretionary spending.

 

Mandatory spending always gets the federal budget’s lion’s share in allocations. Of the $6.011 trillion federal budget, an estimated $3.7 trillion is earmarked for it. Entitlement programs such as Social Security, Medicare, and Medicaid are included in the mandatory spending budget. On top of that, this budget is also dispensed to

The required net interest spending on federal debt refers to the federal government’s obligation to pay the net interest of the nation’s growing debt. As of May 2022, the U.S. debt soars at $30.4 trillion.

And lastly, the discretionary spending, which amounts to roughly $1.67 trillion this 2022, funds the defense and domestic expenditures of the state. The defense agencies received the biggest cut of the cake, with an estimated $756 billion earmarked. As for the rest of the budget, the remaining dollars will be doled out to civilian agencies, such as the Health and Human Services, Education, and Housing and Urban Development.

What is the DoD budget for 2022?

In President Biden’s proposed Budget to Congress, $759 billion will be allocated to the nation’s defense agencies. $715 billion will be dedicated to the Department of Defense (DoD), including the budget for Overseas Contingency Operations (OCO). This figure is a 1.6% increase from the previous fiscal year’s $703.7 billion military budget.

In a statement by Defense Secretary Lloyd J. Austin III,  the priority of this fiscal year’s national defense budget is to end the “forever wars” that threaten national and global security. Aside from the rising military challenges they face from China and Russia, the defense budget is also allocated for innovative solutions regarding the worsening climate crisis and COVID-19 pandemic.

2022 Defense Budget Breakdown by Military Departments and Appropriations

Despite its recent military withdrawal from Afghanistan, the Biden Administration has noticeably increased its military spending this fiscal year. According to the government, the increased federal budget request for the defense department is to address the administration’s key goals for this fiscal year.

Source: FY2022 Defense Budget - https://comptroller.defense.gov/

What are the spending priorities of the DoD?

In line with President Biden’s Interim National Security Strategic Guidance or Interim Guidance, the defense department budget will be invested in these critical areas: national security, human resources, and strategic alliances.

  1. National Security 

To defend the nation, the federal government recognizes the evolving threats that may endanger the livelihood and welfare of the people.

Outpace the rising pacific powers

The Department of Defense considers the People’s Republic of China a pacing threat. China’s undeniable economic, diplomatic, and technological power, coupled with its intense modernization efforts toward its military, placed it in the top spot on DoD’s priority list.

Prepare against imminent and persistent threats

Despite the DoD prioritizing the imminent threat from the Pacific, the federal government will not lose its sights on deterring nation-state threats. The Russian aggression and the national security threats posed by other countries such as North Korea and Iran are being closely monitored by the state. Additionally, this initiative also includes disrupting the international activities of violent extremist organizations.

Upgrade warfighting capabilities

It is undeniable how the seismic change in the defense landscape has given rise to new threats. In the face of this dramatic change, the DoD is allocating a considerable portion of its budget to modernizing warfighting and defense equipment, upgrading strategies, and divesting technologies that are deemed outdated in the present climate.

Mitigate and prevent COVID-19

The Pentagon is dedicated to helping the nation defend and defeat the deadly global pandemic. The DoD is working hand in hand with its international and national partners to support the federal government’s efforts to mitigate the disease.

Address the worsening climate change

The issue of climate change is a matter of national security. Without substantial planning to mitigate it, the devastating effects will be felt not only by the American people but the whole world. And so, the department’s 2022 budget will include initiatives, policies, strategies, and engagements to tackle this environmental crisis.

  1. Human Resources

The cornerstone of the Department of Defense is its people. They are the ones who see things through and ensure that the country is well defended across all spheres—may it be in the land, sea, airs, and even cyberspace.

 

In addition to a 2.7% pay raise for civilian and defense personnel, the federal agency will invest in infrastructures and facilities that support the people serving the agency, including their families.

  1. Strategic Alliances

One of the best ways any country can fortify its defenses is unity in diversity. By strengthening the federal agency’s partnerships with the nation and its existing allies, it ensures that the country’s defenses extend well beyond its coasts.

2022 Forecast of DoD Contract Spending

Government contractors are always on the lookout for the latest announcements of the U.S. Budget to see which industries will get the most attention for the fiscal year. The higher the allocated budget for a specific industry, the more contracting opportunities available for government contractors.

And so, based on the spending priorities of the Department of Defense, it comes as no surprise that the market forecast for this fiscal year is closely tied with the requested budget.

  • Aircraft – $72.7 billion
  • Construction Related Services – $40.5 billion
  • Ships and Submarines – $39.3 billion
  • Systems Development – $32 billion
  • Guided Missiles – $31.9 billion
  • Facility Related Services – $28.6 billion
  • Engines, Components & Spt Eq – $27.9 billion
  • Technical and Engineering Services (non-IT) – $24.3 billion
  • Management Advisory Services – $21.1 billion
  • IT Applications – $20.2 billion

The United States spends hundred billion dollars every year on government contracts, and most of this contracting dollars are spent for defense contracts.

Noteworthy defense contracts this 2022

With the department receiving more funding than in 2021, the defense spending for federal contracts looks more promising this year. Here are some of the most significant defense contracts for this fiscal year:

  1. $9B Joint Warfighter Cloud Capability (JWWC) Contract

According to the Chief Information Officer And Acting Chief Digital And Artificial Intelligence Officer of DoD John Sherman, the Department of Defense is eyeing to award cloud infrastructure services contracts this coming December.

The five-year Joint Warfighter Cloud Capability (JWWC) is a huge technological leap for the U.S. military. Under this program, the Pentagon will rely on multiple cloud service providers instead of just one. With this multi-vendor federal contract, DoD will finally have the means to upgrade its warfighting systems and technology.

  1. $967M Anti-Drone Defense Contract

In January, Anduril Industries, a tech startup business that primarily sells intelligence-based defense technologies, bested 11 other bidders and won the counter-unmanned system prototyping project of the U.S. Special Operations Command.

Through this nearly $1 billion contract by SOCOM, Anduril Industries will deliver counter-drone capabilities through its Lattice AI platform. The company’s advanced AI technology is designed to identify and classify threats autonomously. It is expected that this project will be deployed locally and internationally.

  1. $784M Mission System Support Contract for Air Combat Command

The Air Combat Command has selected six companies to design, maintain, and upgrade the Command’s mission systems. The chosen companies for this multiple-award contract came from competitive bidding between 17 small businesses through the Small Business and 8(a) Set Aside competitive acquisitions.

  1. $632M F-35 Software Development Contract

Lockheed Martin, one of America’s biggest federal defense contractors, won $632.1 for the Naval Air Systems Command.

Through the company’s aeronautics arm, they will provide engineering, maintenance, and logistics support to continue producing software builds. Additionally, the defense contractor will also conduct developmental flight tests for the F-35 program.

  1. $532M Contract for AF Base Facility Construction Services

As part of the military spending dedicated to improving the defense personnel and its facilities, the U.S. Army Corps of Engineers has awarded a potential $532 million contract to Hensel Phelps to construct flightline area facilities at Tyndall Air Force Base in Florida.

 

This defense contract also includes integrating detection and protection features, site improvements, and security enhancements to the 11 facilities that the company is contracted to build.

Where can you view available defense contract opportunities?

Federal agencies, including the Department of Defense, publish all their notices on the System for Award Management website or SAM.gov. Although the solicitation notices for these federal contracts are available to the public, you have to be a fully registered government contractor first.

How to become a defense contractor?

To become a successful defense contractor, you have to learn how to navigate the complicated government contracting system. And for starters, you can begin by registering at the right places.

  1. Identify your NAICS Codes

Your NAICS Code is a vital requirement that you will need throughout your entire career as a federal contractor. Contracting officers use your NAICS Code to identify which industry your firm belongs to quickly.

 

Fortunately, identifying your NAICS Code is an easy and free federal government service. From this website, choose among the NAICS Codes that fit your business best. If you offer a diverse range of products and services, you can select more than one NAICS Code.

  1. Register at SAM.gov

SAM.gov is the one-stop portal for government contractors. Aside from being the platform where federal agencies publish open contracting opportunities, it is also the place where aspiring contractors have to register their business to become qualified to bid for government contracts.

You have to prepare several documents before you register your business at SAM.gov. To give you the gist, here is an overview of the things you will need:

  • Unique Entity ID (UEI)

Effective April 2022, the federal government moves away from DUNS Number to UEI. Check out this short video to see how you can request your UEI.

  • Core Data

You have to supply your key business information to SAM.gov to complete your registration, such as

  • General Business Information (Organization Name, Physical Address, etc.)
  • CAGE / NCAGE Code
  • IRS Consent Form
  • Financial Information
  • Ownership Details (Is your business controlled by another entity?)
  • Predecessor Details (Is your entity a successor to a predecessor entity that held a federal contract or grant within the last three years?)
  • Executive Compensation

In addition, you have to answer questions about your organization in accordance with the FAR.

  • Assertions

Included in this category of requirements are your NAICS Codes and Size Metrics.

  • Representations and Certifications

  • Points of Contact

  • SBA Profile

After you have completed your SAM.gov registration, you will be given a special link to accomplish your SBA profile. This will only be applicable if your business belongs to any recognized small business NAICS Codes.

 

For more information, read the Entity Registration Checklist by SAM.gov here.

How to increase your chances of winning a defense contract?

  1. Conduct market research

If you are reading this as part of your research, you are now one step closer to your goal. The market research gives you an idea of the current and incoming spending trends, and this valuable information helps you position your business more effectively.

 

As a supplemental reading, you can also review this defense spending projection by the Congressional Budget Office.

  1. Assess your business size

Depending on the size of your organization, you can avail of exclusive federal contracting assistance programs that are reserved for small businesses. To know whether you are qualified, you can refer to this table of Size Standards by the U.S. Small Business Administration.

  1. See if you are qualified for government contracting assistance programs

If your business is considered a small business, you can apply for a number of federal contracting assistance programs designed for small disadvantaged businesses.

Once qualified, you will be eligible to bid for set-aside contracts. This type of federal contract is exclusive to small businesses, so they too can have a chance of winning federal contracts. Learn more about set-asides here.

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