Interpreting the U.S. Navy's FY 2025 Budget

The U.S. Department of the Navy recently announced its proposed $257 billion budget for FY 2025. This is roughly a six percent increase from the FY 2024 budget. Let’s look at how the funds will be allocated.

To put these allocations into perspective, we’ll review historical spending by the Navy. The Navy’s budget has experienced significant changes over the past 10 years. Most recently with the budget doubling between FY 2024 and FY 2025.

Over the last three years, the Naval Air Systems Command (NAVAIR) and the Naval Sea Systems Command (NAVSEA) accounted for nearly 76% of the Department of the Navy’s total spending. During the first half of FY 2024, however, it saw a 30% decrease in spending between these organizations. The NAVAIR and NAVSEA were at roughly $70 billion during this exact same time in 2023. This may be cause for concern with the appropriate sub-agencies as a shift in procurement strategies may be looming.

One of the Navy’s most consistent goals—targeting small businesses for government contracting—will remain the same. Roughly $20 billion, up from $500 million in FY 2023, has been prioritized to small business set asides in the past three years, with priority going to service-disabled veterans, women owned businesses, and HUBZone businesses. This has shown to be beneficial to the Navy, as it has successfully surpassed its diversity goal by almost three percent in just one year.

The Navy has also established preferred contract vehicles. Among the top General Services Administration (GSA) schedules they are targeting multiple award schedules (MAS). Between FY 2021 and FY 2023 the Navy released the following contract vehicles:

• Seaport NxG
• SeaPort-e
• One Acquisition Solution for Integrated Services (OASIS)
• DTIC Information Analysis Centers Multiple Award Contract (IAC MAC)

Among those large-value contracts, we expect to see opportunities to add to our clients’ watch lists. These large valued contracts are anticipated to cast a wide net of capabilities that will challenge government contractors to broaden their scope of work and seek teaming strategies to effectively compete.

About FY 2025

With $257 billion budget for FY 2025, the Navy intends to focus on five primary categories:

• Operations & Maintenance (O&M)
• Procurement
• MIPLERS
• Research, Development, Testing, and Evaluation (RDT&E)
• MILCON

The plan is to use the majority of contracting in O&M, procurement, and MILPERS to improve the productivity of ship building, base operations advancement, and technological support. This includes:

• $60 billion in allocated funds toward aircraft manufacturing and ship building/repair
• $155 billion towards fixing wing product services on aircrafts

Along with aircraft modifications, the Navy also announced that the budget will include forefront spending on IT modernizations and artificial intelligence.

• $11 billion will manage IT capabilities
• $2 billion is project to go towards cyberspace, cloud computing, cybersecurity, AI, etc.

Procurement has increased by nearly $2 billion, while RDT&E shows a decrease of one percent. Although the Navy has decided to shift funding in research and development, they have managed to only adjust the dollar amount and not the priority to future projects.

The Department of the Navy plans to continue its adaptation and modernization of various equipment, technologies, and programs to best suit the needs of the world’s evolving issues. It intends to combat these challenges using the methodologies listed below:

• Increasing the quality and efficiency of contract performance
• Maintaining growth in IT modernization priorities
• Reaching Small Business acquisition goals
• Rolling out numerous high value contract vehicles

To wrap up our evaluation of the Department of the Navy FY 2025 budget, we point back to a few major benefits:

• The Navy continues its favorable upward trend of Federal government funding. With many uncertainties within legislative and congressional affairs, it is promising that the Navy upholds their direct mission and goals for the future
• The Navy routinely will target small business contracting, balancing out the competition pool between restricted and unrestricted awarding

As we continue to closely monitor the activity of the Federal Government, it is important that we watch for each multiple award schedule as more details are released. Should you need assistance tackling these upcoming opportunities to work with the Navy, contact JetCo Solutions for all your research, business development, and proposal management needs.