Rising wages and fuel expenses are exacerbating defense companies’ challenge of controlling costs for weapons and systems to fit the Pentagon’s budget.
The U.S. fiscal 2022 defense budget request of $715 billion assumed inflation of 2.2% when it was made last year. Actual prices have run well ahead of that projection, however. Fuel was forecast to rise 10% during the fiscal year, but crude oil prices are up about 55% over the past 12 months.
Escalating costs for materials, transportation and labor are bringing the pressures of inflation to defense companies. They have historically been protected from some price increases via so-called cost-plus deals that pass much of the burden to the Pentagon, the U.S. defense sector’s biggest customer.
Protection this time has been diluted by delays in approving a budget for fiscal 2022 and in announcing one for the following…
