NOC Northrop Grumman Corp Holding Co

By Doug Cameron, Andrew Tangel and Paul Sonne 

Donald Trump's battle to curb overspending on defense by publicly shaming specific companies and projects could prove tougher for him if he turns attention to one of the fastest-growing areas of the military budget -- classified programs.

Those are often the riskiest and most complex projects pursued by the Pentagon because of their use of cutting-edge technology that makes them more prone to delays and cost overruns. They also are the most-difficult to discuss publicly.

The incoming commander-in-chief will be privy to the progress of secret programs ranging from new nuclear missiles to spy satellites and cyberdefenses, so he would have the ammunition to call out problematic or wasteful programs publicly. That would contrast with previous presidents who have kept any such problems firmly under wraps.

Even before his inauguration next month, Mr. Trump has taken the defense establishment to task. This week he fired a public salvo at cost overruns and delays afflicting the F-35 combat jet, the Pentagon's costliest program by far and the subject of years of criticism from lawmakers and budget watchdogs.

But Mr. Trump doesn't have the same latitude in disclosing details regarding classified program costs. "It's virtually impossible to have any kind of public debate," said Todd Harrison, a defense budget expert at the Center for Strategic & International Studies.

A spokesman for Mr. Trump didn't respond to a request for comment.

Classified programs are estimated to consume $62.2 billion, or 11%, of the 2017 Pentagon budget. That compares with 9% of the budget five years ago. And such programs' share of the military spending is expected to continue rising. Indeed, Mr. Trump's push against the Islamic State extremist group is expected to boost funding for the intelligence agencies, and he has supported a revamp of U.S. nuclear forces set to start soon at an estimated cost of $500 billion. Large parts of both fall squarely into classified budgets.

For now, most of the Pentagon's efforts to replace the nuclear triad of submarines, land-based missiles and the B-21 bomber over the next decade will remain under wraps, beyond its announcement of contract awards.

Yet those and other classified projects undergo far less scrutiny from lawmakers over the cost and performance than regular weapons. That situation isn't expected to change under Mr. Trump and the Republican-controlled Congress.

Mr. Trump could opt to break with convention and highlight what he sees as problematic secret programs by declassifying them. "As a general matter, the president has the unilateral power to declassify classified materials and to read anyone he chooses into a classified program," a former White House official said. That view is shared by other legal experts.

But doing so could reveal top military secrets to U.S. adversaries, Mr. Harrison said: "There would be severe national security implications in some cases."

When it comes to classified projects, the outside world would be largely reliant on whistleblowers, leaks or Mr. Trump for an inkling of what is going on. Doug Berenson, at defense consultant Avascent, said the relative value for money of classified projects can only be guessed at by outsiders.

Lawmakers and budget watchdogs have long wrestled with oversight of a parade of programs, including the new Air Force bomber known as the B-21 Raider being developed by Northrop Grumman Corp.

The lack of disclosure around the B-21 already has attracted congressional criticism. Sen. John McCain (R., Ariz.), Chairman of the Senate Armed Services Committee and a longtime critic of some big Pentagon programs has warned that the $100 billion bomber program could become the next F-35 with regard to cost overruns.

The B-21, for example, doesn't appear in the annual assessment of big weapons programs published by the Government Accountability Office, a congressional watchdog.

The Air Force has pledged to release more information, but hasn't disclosed how much it is paying Northrop for the B-21s in total, just the development cost and an average price of $511 million for each across the life of the program. And that amount would change depending on how many the government buys.

And defense contractors provide scant detail of their classified work in their announcements or in public filings, making it tougher for investors in such companies to assess profitability or whether programs are going awry.

B-21 maker Northrop Grumman, which like others relies heavily on defense contracts, gives only annual updates on its order backlog rather than quarterly briefings. Pratt & Whitney, the United Technologies Corp. unit providing the bomber's engines, won't say where it would make them. Other subcontractors such as Rockwell Collins Inc. have acknowledged they are working on the B-21, but stop there.

The defense contractors declined to comment, though executives have said classified programs generally don't attract higher margins than other work, though there are greater barriers to entry.

Some experts said Mr. Trump's offensive against defense companies could help the Pentagon's own efforts to improve efficiency, even if he were to keep details spare on classified programs. "I can see a President Trump providing top cover...to hold contractors' feet to the fire," Avascent's Mr. Berensen said.

Write to Doug Cameron at doug.cameron@wsj.com, Andrew Tangel at Andrew.Tangel@wsj.com and Paul Sonne at paul.sonne@wsj.com

(END) Dow Jones Newswires

December 14, 2016 14:54 ET (19:54 GMT)

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