Defense budgets for service and support to rise

Defense Department operations and maintenance budgets will continue to grow at a rate of 6 percent per year through fiscal 2009, said an industry trade group.

The Government Electronics and Information Technology Association reported today that outsourcing and conversion, plus upgrades to training, logistics and supply chain management systems, will help increase opportunities for electronics and professional services contractors.

GEIA segments operations and maintenance into seven services and support categories: logistics, maintenance, and depots; information services; training; military operations; base operations; health care; and administration.

"O&M budgets have grown steadily over the years, averaging 3 percent real annual growth per soldier over the last forty years," said George Shaw, GEIA forecast team co-chair. "This is likely to make them relatively resistant to cutting in the event of a future defense downturn."

Randy Fette, co-chair of the GEIA forecast team said, "DOD has budgeted about $140 billion for O&M in fiscal 2005, not counting a potential supplemental. Areas that grew in the new budget include security and combat communications accounts, as well as combat support, flight and other training. Segments that decreased include depot maintenance and service-wide transportation as well as base operations."

GEIA identified several aspects of defense transformation that impact services and support, including logistics and supply chain management, training, base realignment and closure, and a network of rapid pre-positioning bases worldwide. In addition, GEIA said it expects conversion of up to 320,000 military personnel to contractors or civil servants and significant changes in how the Defense Department manages its business functions to have an effect on services and support opportunities.

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