🔷 Budget Activities

Budget Activities

WARNO: This week’s topic is like broccoli—a bit bland, but it's intellectual nutrition that you need.

Last month, we unpacked the colors of money that Congress uses for the Pentagon. As promised, here is the Budget Activity sequel, with a focus on one of those colors: Research, Development, Test, and Evaluation (RDT&E).

The 101

The FY26 RDT&E enacted appropriation was $147B, the largest RDT&E budget in history (in dollars).

It may be 1 color, but it’s not one pot of money. In execution, it’s subdivided into 8 buckets called Budget Activities (BA) labeled 6.1 through 6.8, which are lumped together into these 5 groups (stay with us):

• Research: aka Science and Technology (S&T), comprises 3 BAs (6.1/6.2/6.3) and is the seed corn to build a pool of knowledge for the future. This is the ‘R’ in R&D and the funding source for organizations like DARPA. 

• Development: This is the ‘D’ in R&D and comprises 2 BAs (6.4/6.5); this effort applies research to advance technical maturity, prototyping, and demonstration.

• Support: The third group (6.6) covers all RDT&E management and support, including test ranges, labs, and facilities required for specific projects in any of the other BAs in RDT&E 

• Operational Support: The fourth group (6.7) supports development, test, & evaluation (DT&E) (and some OT&E) for items going into Low-Rate Initial Production (LRIP) or upgrades to currently fielded systems

• Software: This group (6.8) was created in 2021 as a flexible means to resource software development without worrying about where it fits among the other BAs

Here’s what it all looks like:

Now here is what the RDT&E Budget Activity spending profile looks like over time, courtesy of our friends at Przym:

More Geekery

This chart has a few important things going on.

While the Pentagon lauds a $147B RDT&E budget, the federal government doesn’t see it that way.

The Office of Management and Budget (OMB), aka the key budget coordinator for the executive branch, does not count BA 6.6, 6.7, and 6.8 in its federal R&D calculations because it doesn’t jive with the definition of R&D defined by the National Science Foundation.

So What

In practical terms, this means the $147B RDT&E budget is closer to $87B in R&D.

The biggest thing driving that $60B difference is BA 6.7, and the biggest thing in that: $30B a year for Air Force test support.

At first glance, this looks like less than half of the tech-centric Air Force’s $52B RDT&E budget is actually R&D…but not so fast.

A closer look reveals that the Air Force lumps all classified RDT&E into 1 line item, and that line item sits in BA 6.7…which is outside the definition of R&D.

A whopping $22B of the $30B Air Force’s BA 6.7 money is classified, and some/all/none could actually be R&D. So, nobody outside those in the 5-sided puzzle palace really knows.

Army Leading the Way

We already told you that BA 6.8 was created to cover the entire software RDT&E process and is often referred to as ‘colorless money.’

If you squint very carefully at the chart above, that tiny red line at the top of the chart is for software.

The Army is about to blow that thing up.

In the coming weeks, they will issue a new policy on software funding that appears to be a dramatic expansion of BA 6.8 to cover all software funding—not just RDT&E or select programs.

Because it will fall under RDT&E, all software funding would become 2-year money, which should standardize flexibility across fiscal years.

This is huge because software is never done, and in defense, that means it must be developed, procured, assured, deployed, and continuously improved faster than our adversaries.

We’ll get corrected know more once the Army policy is released, so stay tuned.

And now you know enough about Budget Activities to be dangerous.

In That Number

X-68A

General Atomics’ DARPA LongShot drone was designated the X-68A. First test flights should occur at the end of the year.

The military also granted military designations for 3 low-cost, air-launched cruise missiles:

— AGM-188A Rusty Dagger (Zone 5)
— AGM-189A Barracuda-500 (Anduril)
— AGM-190A Black Arrow (Leidos)

TRIVIA

On this day in 1946, George Kennan, the American chargé d'affaires in Moscow, sent a telegram to the U.S. State Department that would become one of the most influential foundations of America’s Cold War containment policy. How many words were sent in this telegram?

A) 8 
B) 80 
C) 800 
D) 8,000

On the Radar

MOP Up. The Air Force awarded Boeing a $100M sole-source contract for more massive bunker-busting GBU-57 Massive Ordnance Penetrator (MOP) bombs. 14 of the 20 or so of these 30,000-lb weapons were dropped on the Iranian nuclear facilities last year by B-2 bombers.

• The Merge’s Take: The GBU-57 was developed as a rapid-production gap-filler in 2009, when the U.S. began tracking Iran’s nuclear progress. The mainstay program is the Next Generation Penetrator (NGP), which started in 2010 but never got beyond PowerPoint due to GWOT commitments in Afghanistan and Iraq. Applied Research Associates (ARA) was awarded a contract last year to develop an NGP prototype, but more MOPs are needed (again) as a gap-filler. That’s a 15-year program pause for something that sure sounds important and late-to-need.

FCAS Death Spiral. Negotiations for Future Combat Air System (FCAS) have stalled, with the French, German, and Spanish project to build a European 6th-gen fighter locked in a dispute between Airbus and Dassault over industrial leadership and workshare.

• The Merge’s Take: Airbus is pitching a 2-fighter solution but Belgium, an observer who is was interested in joining the program, said it best: “There will be no sixth-generation French-German-Spanish fighter jet.” The divergence over sovereignty and sharing sensitive technology (and 2040s timeline) was always the biggest threat to the program, but things seem to be going much better for the rival (2030s timeline) UK-Italy-Japan Global Combat Air Program (GCAP), which has already solidified its industrial structure and workshare plan.

They Said It

“You’ve got Twitter feeds of randos that are just studying where our airplanes go and publishing it”

— Maj. Claire Randolph, AFCENT Chief of Weapons and Tactics, on the challenges of maintaining OPSEC for Operation Midnight Hammer

Knowledge Bombs

• Integrate raised a $17M Series A funding round for its classified project management software

• Seasats raised a $20M Series A funding round to scale autonomous surface vehicles

• Skyryse raised a $300M Series C funding round to automate flight systems

• India is buying another 114 Rafale fighters for its fleet

• The Marine Corps is looking for a new medium-range tactical drone

• Australia ordered 7 Boeing MQ-28 Ghost Bat drones in a $534M deal, including the first Block 3 variant

• The Air Force approved $145M contract to develop air-to-air drone-countering weapons

• Vantor & Google partnered to deploy Google Earth AI models onto classified air-gapped government environments

• SpaceX unveiled Stargaze, a space situational awareness tool that uses existing Starlink satellites to monitor space traffic with it’s 30,000+ sensors in orbit

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ANSWER D. Known as the “Long Telegram”, George Kennan’s 8,000-word diplomatic cable argued the Soviet Union was driven by an “instinctive Russian sense of insecurity” and would not accept peaceful coexistence. He urged the U.S. to counter Soviet expansion with “the logic of force,” laying the intellectual foundation for the Truman Doctrine and the policy of containment through the Cold War.