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Updated December 20, 2018
Defense Primer: Procurement
Background
single fiscal year, even though related work may span many
While the common use of the word procurement implies
years. In a handful of cases, programs are procured using
the process of obtaining goods or services, uses of the word
incremental funding. Under incremental funding, a system’s
procurement by national security experts and practitioners
cost is divided into two or more annual portions, or
generally refers to a specific title within the annual National
increments, that can reflect the need to make annual
Defense Authorization Act (NDAA) and defense
progress payments to the contractor as the system is built. It
appropriations legislation.
has principally been used to procure certain ships and
submarines.
Appropriations for Procurement
The Department of Defense (DOD) procurement
Table 1. DOD Procurement Base Appropriation
appropriations title provides funds for non-construction-
Subtitles, by Enacted Amounts, FY2019
related investment costs, or the costs to acquire capital
assets, such as an F-35 Joint Strike Fighter or a Virginia-
U.S. $
class submarine. Investment costs are distinguished from
Procurement Subtitle
(billions)
expenses, which are consumed in the operation of the DOD.
Dept. of the Navy – Shipbuilding and
$24.1
DOD uses procurement appropriations to obtain various
Conversion
categories of materiel, such as:
Dept. of the Air Force – Other
$21.0
new military hardware, such as aircraft, ships, armored
Dept. of the Navy – Aircraft
$20.1
vehicles, and other major equipment (e.g., radios and
satellites);
Dept. of the Air Force – Aircraft
$17.1
upgrades to existing equipment, including extending
Dept. of the Navy – Other
$9.1
service life or remanufacturing existing systems;
Dept. of the Army – Other
$7.8
weapons and ammunition, ranging from air-to-air
missiles to rounds for individual rifles; and
Defense-wide – Procurement
$6.8
spare parts, particularly those that are centrally
Dept. of the Army – Weapons and Tracked
$4.5
managed.
Combat Vehicles
Dept. of the Army – Aircraft
$4.3
Procurement funding authorized in a given fiscal year can
usually be obligated over a period of three years. The most
Dept. of the Navy – Weapons
$3.7
prominent exception is U.S. Navy Shipbuilding and
Dept. of the Army – Missiles
$3.1
Conversion funding, which is available for five years.
Dept. of the Navy – Marine Corps Procurement
$2.7
In FY2019, DOD received $135.4 billion in base budget
Dept. of the Air Force – Missiles
$2.6
procurement funding (see Table 1), as well as $12.6 billion
in procurement funding designated for DOD overseas
Dept. of the Army – Ammunition
$2.3
contingency operations (OCO).
Dept. of the Air Force – Space
$2.3
Dept. of the Air Force – Ammunition
$1.5
NDAA and Defense Appropriations
National Guard and Reserve Equipment
$1.3
For more information, see CRS In Focus IF10515, Defense
Primer: The NDAA Process, by Valerie Heitshusen and
Dept. of the Navy – Navy and Marine Corps
$1.0
Brendan W. McGarry and CRS In Focus IF10514, Defense
Ammunition
Primer: Defense Appropriations Process, by James V. Saturno
Defense Production Act Purchases
$0.05
and Brendan W. McGarry.
Joint Urgent Operational Needs Fund
$0.0
How is DOD Procurement Funded?
TOTAL
$135.4
In general, Congress appropriates money for defense
Source: CRS analysis of H.Rept. 115-952, conference report to
procurement under a policy of full funding, which requires
accompany H.R. 6157, 115th Cong., 2nd sess., September 13, 2018.
Congress to fund the entire procurement cost of end items
(such as Sidewinder missiles or KC-46A tankers) in one
Note: Numbers may not add due to rounding
fiscal year. In other words, the total funding necessary to
acquire a useable end item is approved by Congress in a
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Defense Primer: Procurement
Figure 1. Defense Acquisition Milestones
Source: CRS graphic based on DOD Instruction 5000.02, “Operation of the Defense Acquisition System,” August 10, 2017, p.6.
tracked at the level of obligations. Obligation is the term
Multiyear Procurement
used when agencies enter into contracts, employ personnel,
Congress sometimes authorizes multiyear procurement
or otherwise commit to spending money.
(MYP) for programs. MYP (authorized by 10 U.S.C.
§2306b) can achieve savings by committing to buy items
over multiple years from a contractor for a reduced price
Relevant Statutes
per unit. Qualifying for MYP requires a program to meet
several criteria, including significant savings, stable funding
Title 10, U.S. Code, Part IV—Service, Supply, and
and design, and other standards. Recent examples include
Procurement.
Virginia-class submarines, DDG-51 destroyers, UH-60
Blackhawk helicopters, MV-22 tilt-rotor Ospreys, and C-
CRS Products
130J cargo aircraft.
For information on the Defense Acquisition System, see CRS
Report RL34026, Defense Acquisitions: How DOD Acquires
More commonly, programs receive advance procurement
Weapon Systems and Recent Efforts to Reform the Process, by
funds for components of a unit that need to be purchased
Moshe Schwartz.
long before the unit itself is purchased. For programs using
For information on the ful funding policy in DOD
MYP, advance procurement may also be used to achieve
procurement, see CRS Report RL31404, Defense Procurement:
economic order quantity, which is defined as buying
Full Funding Policy—Background, Issues, and Options for Congress,
enough of an item to minimize the total cost.
by Ronald O'Rourke and Stephen Daggett.
When Does a Program Enter
For information on special cases of procurement, see CRS
Procurement?
Report R41909, Multiyear Procurement (MYP) and Block Buy
Programs officially enter procurement after they receive
Contracting in Defense Acquisition: Background and Issues for
Milestone C approval in the Defense Acquisition System.
Congress, by Ronald O'Rourke and Moshe Schwartz.
Prior to moving to procurement, programs are considered to
For information on RDT&E funding see CRS In Focus IF10553,
be in development and are generally funded through the
Defense Primer: RDT&E, by John F. Sargent Jr.
Research, Development, Test and Evaluation (RDT&E)
For general information on defense procurement and contract
appropriation title. Some programs will receive
acquisition, see CRS In Focus IF10600, Defense Primer:
procurement funds before a formal Milestone C approval.
Department of Defense Contractors, by Heidi M. Peters and
Moshe Schwartz and CRS Report R44010, Defense Acquisitions:
See Figure 1 for a high-level overview of milestones within
How and Where DOD Spends Its Contracting Dollars, by Moshe
the Defense Acquisition System.
Schwartz, John F. Sargent Jr., and Christopher T. Mann
How Else Does DOD Purchase Goods
and Services? How Does DOD
Other Resources
Procurement Relate to Defense
Department of Defense Comptrol er, Defense Budget
Contracting?
Materials, http://comptrol er.defense.gov/Budget-Materials.
DOD is authorized and appropriated procurement funding
DOD 7000.14R, “Financial Management Regulation,” Budget
for non-construction investments. DOD uses funding other
Formulation and Presentation: Procurement Appropriations, vol. 2B,
than procurement to purchase services (e.g., research,
ch. 4, November 2017, at https://comptrol er.defense.gov/
architectural design, or cleaning services) and smaller
Portals/45/documents/fmr/Volume_02b.pdf.
goods (e.g., gauze or light bulbs) because such purchases
are considered to be expenses rather than investments and
are funded in other parts of DOD’s budget.
Heidi M. Peters, Analyst in U.S. Defense Acquisition
Goods and services from the private sector are purchased
Policy
through contracts and are accounted for as contract
Brendan W. McGarry, Analyst in US Defense Budget
obligations. These individual activities – most of which are
too granular to be captured in appropriations data – are
IF10599
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Defense Primer: Procurement
Disclaimer
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