What you rarely see in those emails is news of a contract being torn up. I mean really rarely — you can blame it on Teh Google, but I can’t find a single reference in my inbox, where these emails have gone for two and a half years, to such a cancellation. (There was a separate email on June 1 announcing the Navy cancellation of the VH-71 presidential helicopter.) But today is a new day. Today’s the day that Defense Secretary Bob Gates’ 2010 defense budget took money away from defense contractors.

The Air Force is terminating for convenience the Transformational Satellite Communications System Mission Operations System contract with Lockheed Martin Information Systems and Global Services of San Jose, Calif., for $2,020,430,440. The contract termination is a result of the Department of Defense cancelling the TSAT Program in accordance with the priorities of the FY10 President’s Budget.

The Air Force is terminating for convenience the Transformational Satellite Communications Systems Engineering and Integration contract with Booz Allen Hamilton, Inc., of McLean, Va., for $20,802,224. The contract termination is a result of the Department of Defense cancelling the TSAT Program in accordance with the priorities of the FY10 President’s Budget (FA8802-04-F-7044).

Gates announced that he was junking the Air Force’s so-called TSAT program in April, but it just doesn’t feel real until you see it in your inbox. The program, which is to be replaced by a different satellite program, is expected to cost $11 billion and has Boeing as an additional contractor. That means there’s going to be another round of emails announcing more cancellations. And I’m stone sober.

Gates hangs back in contrast, advising, lurking — and laying the groundwork for change with Russia, China, even perhaps Iran.

Gates has momentarily come out of the shadows and made two key statements that are particularly important and show him to be a steadying influence and stabilizer on the Obama team.

The statements Steve references are Gates’ pushback against a greater U.S. troop deployment to Afghanistan and his public rebuke to new Israeli PM Benjamin Netanyahu on attacking Iran. He also briefly touches on some of Gates’ bureaucratic moves concerning the intelligence community and support to the State Department’s budget.

To which I’d add: if you think that’s a record of quiet activism, the next big data point is going to be the imminently unveiled Pentagon budget. Gates keeps talking about how it will represent “hard choices” on bloated weapons systems beloved by the services but is remaining publicly vague. He’s assembled a team, led by Assistant Secretary of Defense Michael Vickers, to scrub the budget’s detailed funding requests; that’s probably going to the White House next week. I’ll have more on what Gates is up to a little later, but Steve is really picking up on something. There’s are reasons why President Obama kept Gates on, and why Gates is constantly described as a quiet but lethally effective bureaucratic presence.

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SAIC’s executive vice president for government affairs, Arnold Punaro, is rumored to be the next Army Secretary. It is my understanding that Punaro is a great American, but frankly, I do not see how his potential nomination overcomes this conflict of interests.

My understanding is the Obama administration still hasn’t found an Army secretary, but who knows — maybe that’s because they’re just taking time to vet Punaro. I won’t pretend to have any great insight into the process. (Punaro is also a retired Marine general, making him an unlikely pick for the job.) But if it’s true, how could the administration hire another top defense-industry lobbyist on top of Deputy Defense Secretary Bill Lynn and still expect to be taken seriously when it comes to reforming the defense budget?

DOD officials intend to cut procurement in the FY-10 budget by 2 percent or 3 percent, according to Kevin Scheid, the Pentagon’s deputy comptroller. However, more substantial programmatic cuts or adds will be influenced by the Quadrennial Defense Review and implemented beginning with the FY-11 request, due to Congress in February 2010.

“The administration will make . . . a partial statement with the FY-10 [budget's] details, but the full statement will be really communicated in the FY-11” budget, Scheid said today during a presentation at an Aviation Week-sponsored conference in Washington.

The procurement budget last year was about $104 billion. Three percent of that is around $3 billion. Change we can believe in!

Snark aside, the challenge now shifts over to the Quadrennial Defense Review. To recall Tony Cordesman’s plea for coordination between budgets and strategy, it makes sense to defer major budgetary choices until a major strategy review is completed. But it’s fair to say that ever since it was established in the 1990s, the QDR process represents hedged bets about what the future of the U.S. defense posture looks like — meaning they contain something for everyone (tech-heavy weaponry; irregular warfare; sea-based threats, etc) and rarely if ever recommend sharp cuts in favored programs. Could this one really be any different? Scheid:

The FY-11 budget will contain “major muscle movements” both “positive and negative” and influenced by the QDR, he said. At the same time, the FY-10 budget request — which is expected to be unveiled the week of April 20 — will not include outyear numbers because QDR work is just beginning. Gates has accelerated the Pentagon’s QDR build.

This would seem to give the defense lobby time to regroup, though.

But Obama might have actually taken a significant step today to take on that entrenched apparatus.

Obama today issued a memorandum to the heads of all the executive departments agencies directing them to restrict no-bid contracts; to rein in outsourcing of “inherently governmental activities”; and to, if necessary, cancel wasteful contracts outright. The crucial paragraph, even if it’s written in bureaucratese, particularly calls out the Defense Department:

I hereby direct the Director of the Office of Management and Budget (OMB), in collaboration with the Secretary of Defense, the Administrator of the National Aeronautics and Space Administration, the Administrator of General Services, the Director of the Office of Personnel Management, and the heads of such other agencies as the Director of OMB determines to be appropriate, and with the participation of appropriate management councils and program management officials, to develop and issue by July 1, 2009, Government-wide guidance to assist agencies in reviewing, and creating processes for ongoing review of, existing contracts in order to identify contracts that are wasteful, inefficient, or not otherwise likely to meet the agency’s needs, and to formulate appropriate corrective action in a timely manner.  Such corrective action may include modifying or canceling such contracts in a manner and to the extent consistent with applicable laws, regulations, and policy. [My emphasis]

Clearly, this has applications far beyond the Pentagon. But the list of big-ticket defense items that have experienced huge cost overruns is a long one. Future Combat Systems in the Army; the Littoral Combat Ship in the Navy; the Joint Strike Fighter in the Air Force — all of these programs, near and dear to the services, have run massively over budget. If I was a lobbyist for Lockheed or Boeing, I’d be dialing my contacts in the Pentagon and the Hill to figure out what the prospective damage to my company was. And then I’d come up with a strategy to fight this forthcoming Office of Management and Budget review.

Obama went further in remarks at the White House, calling it a “false choice” to say that protecting the country requires acquiescence to Pentagon waste. “In this time of great challenges,” he said, “I recognize the real choice between investments that are designed to keep the American people safe and those that are designed to make a defense contractor rich.” He also lent support to Sens. Carl Levin (D-Mich.) and former presidential rival John McCain’s (R-Ariz.) legislation to create new procurement oversight positions at the Pentagon. “The days of giving defense contractors a blank check are over,” Obama said.

This effort hardly seems perfect. One of the people Obama specifically tasked to work with OMB for procurement reform is Bill Lynn, the deputy secretary of defense whose last job was lobbying for defense giant Raytheon. Perhaps Lynn is here because he knows how defense lobbyists work, and can come up with strategies to beat them at their own game. Or perhaps Lynn will find it difficult to overcome his background — and the sure-fire job waiting for him in the defense-lobby sector when he leaves government. And, of course, the defense lobby is one of the most powerful in Washington.

But Obama has now placed defense-contracting reform at the center of his efforts at cutting wasteful spending, and he’s put cutting wasteful spending at the core of his deficit-reduction approach; and both the press and the Republican Party will watch that deficit-reduction approach as a test of his presidency. That line from his YouTube address on Saturday about being ready for a fight with lobbyists over his budget? He might mean it.

Obama’s budget outline today doesn’t really include the defense budget. What it includes is the top-line principles for the defense budget — the big big number of $663.7 billion — but the details are still subject to Defense Secretary Bob Gates’ budget review, which will be completed in April. Imagine a car with the exterior frame finished before the engine is installed.

So even though there’s not much under the hood right now, let’s take a look anyway.

First, all that stuff about Obama and Gates agreeing to a $537 billion cap in “base budget” spending — that is, Pentagon expenditures that don’t include operations in the two wars? That’s there. In fact, the base-budget figure is slightly under, at $533.7 billion, which is still four percent over the Pentagon budget from last year. (Again: the idea that this is a cut is either ignorant or disingenuous.) So why the $663.7 figure?

Because this year the Obama administration is ending the Bush administration’s practice of seeking “supplemental” funding for the wars. You’ve been paying this much for defense anyway. It’s just that the Bush people wanted you to see two numbers — one for Pentagon base-budget spending that was around $500 billion and one for war funding that was under $100 billion — because they wanted to make their deficit numbers look smaller by excluding the war costs. That bit of accounting fraudulence is over, and the price of it is a measure of sticker shock.

Obama’s administration does not have time on its side should it want to install its own people and make substantial changes to Pentagon spending. If you look at the calendar, things are mighty tight. The 2010 budget has been largely finished for months. While the administration may be making important long-term choices about a few big programs with little immediate military impact such as Future Combat System for the 2010 budget, the fact is few substantial changes can be made to the military budget this late in the game.

That leaves the administration with the 2011 budget, already in the early stages of being built. This budget can be changed substantially, but it is the services who drive the budget, for better or for worse. And the services don’t look likely to get new secretaries for another three to six months. With actings and deputies reluctant to move on anything controversial, the leaves the services playing serious catch-up should Obama decide to substantially remake the 2011 budget.

I don’t know. For one thing, a Pentagon official told me recently that the services have been largely shut out of Gates’ fiscal 2010 budget review, precisely for this reason. Everyone knows where the services stand on procurement priorities already. That’s not to say they have no input, just that they have less input than is typical. Gates keeps on talking about hard procurement choices, and it’s hard to understand why he’d do that if he just intends to cave to the services. With the caveat that any reform of a huge institution takes time, let’s see the budget before, at least, declaring things hopeless.

On the other hand, it sends a huge business-as-usual message to have a former chief Raytheon lobbyist as deputy secretary. Even if Bill Lynn is the world’s greatest manager, for an administration so rhetorically bent on good-government cleanliness and transparency to put a defense lobbyist in such a senior position must have been a huge sigh of relief to defense contractors. Attention now turns to prospective Pentagon acquisitions chief Ashton Carter, who has significantly fewer ties to defense contractors than is typical for an acquisitions chief, but that pick appears, at least in part, like a way of mitigating the damage that Lynn caused to the Obama luster.

Counting Spratt — whom The Washington Times calls House Speaker Nancy Pelosi’s “centrist counterweight” — and the think tank of the Democratic Leadership Council as “progressives” is like discovering a hotbed of conservativism at an Arlen Specter speech to the Concord Coalition, but I digress.

Goldfarb’s bit of ideological invective would have more bite if some longtime Republican senator hadn’t introduced a bill today designed to rein in weapons procurement costs. Or if certain Bush administration-holdover defense secretaries didn’t publicly recognize that “this department faces difficult choices among competing priorities and programs.” Commentary like this makes it really hard to understand why Sen. John McCain lost the election.

As a former CIA officer turned well-respected assistant secretary of defense for (deep breath) special operations, low-intensity conflict and interdependent capabilities, Vickers is, on the face of things, an unusual choice for such a job. But the guy is also a bona fide budgeting expert, from back when he was at Andy Krepinevich’s think tank, the Center for Strategic and Budgetary Assessments. (I thought I was all slick with the news of Vickers’ inclusion in this budgetary “small group,” but it turns out that InsideDefense had this already.)

I have a request out to talk to Vickers, but this is a reasonably good sign that Gates intends to make good on his recent calls to rebalance the way the Pentagon budget and acquisitions process buys a lot of stuff that isn’t relevant to the two wars the United States is currently fighting. Vickers has a long history of discussing imbalances in Pentagon budgetary priorities and how irregular warfare often gets the shaft. Indeed, a presentation he gave to a House panel in November 2005 argued that “the current defense portfolio is out of balance” and specifically criticized the Pentagon for having “excess capacity for traditional challenges — and not enough for irregular warfare (i.e., [the war on terror]), disruptive threats (i.e., China), and countering WMD.” (He did, however, urge greater purchases of the F-22 fighter jet in addition to greater surveillance capabilities, so it’s not as if he’s a zealot.)

Andy Krepinevich, Vickers’ old boss, said not to read too much into Vickers’ writings for the think tank, since he hadn’t been there in two years and “so much has changed — Iraq has simmered down, Afghanistan has bubbled up.” Still, it’s hard to see how the Pentagon’s budgetary priorities have privileged irregular warfare since Vickers left CSBA and entered the Defense Department.

One interesting footnote: one of Vickers’ old CSBA colleagues is Steve Kosiak — they’ve even collaborated on some reports over the years — and now Kosiak is head of defense programs for that very same Office of Management and Budget, so that might help explain Vickers’ inclusion in the process. “The two of them got along well,” said Krepinevich. “That relationship will come in handy.”

On the stimulus question, he’s not wrong. Defense spending indeed stimulates the economy. It’s just curious how all of these old and wheezing defense platforms of dubious/debatable utility to national security are suddenly presented as important parts of economic recovery — and presented outside the context about what other, perhaps-less-expensive measures might be more stimulative. To be fair, Kagan doesn’t advocate for any particular defense program, but that just makes the argument a bit generic and tacked-on.

But all of this proceeds from the incorrect premise that Obama is going to cut defense spending. In fact, as CQ’s Josh Rogin reported yesterday, Obama’s Office of Management and Budget is capping the ceiling on non-war-related spending at eight percent above the fiscal 2009 budget. It’s possible that Obama will ask the Pentagon to rein in its projections for future defense spending. But those are projections and not actual spending. A simple Google search would have spared us Kagan’s column — presuming, that is, it was written in good faith.

Update: I should have noted that Glenn Greenwald hit this before I did.

Late Update: CQ’s numbers were a bit off the first time around, so Josh Rogin’s story is updated. The ceiling OMB placed on the fiscal 2010 defense budget is still $14 billion higher than the fiscal 2009 one.