On Dec. 7, the House and Senate Armed Services Committees released the text of the Fiscal Year 2025 National Defense Authorization Act (FY25 NDAA) (H.R. 5009) accompanied by the Joint Explanatory Statement (JES), detailing the results of negotiations between the House and Senate versions of the bill during the conference process. The NDAA passed the House on Dec. 11 with a bipartisan vote of 281-140, with 200 Republicans and 81 Democrats voting in favor, before advancing to the Senate where it was passed with another bipartisan vote of 85-14 and sent to the president’s desk for signature.
Going into conference, the most significant difference between the House and Senate versions was the House’s topline of $895.2 billion versus the Senate’s $923.3 billion. This discrepancy resulted from the House NDAA and Defense Appropriation bills remaining consistent with the spending caps set by the 2023 Fiscal Responsibility Act (FRA), while the Senate Armed Services Committee adopted a bipartisan amendment to add $25 billion to the NDAA topline. This amendment was supported by incoming Senate Armed Services Committee Chair Roger Wicker (R-MS), and while the House position prevailed and the final version of the NDAA is consistent with FRA spending levels, this debate over the defense topline will remain an important issue to monitor in the new Congress.
Key Provisions
While adhering to the FRA’s discretionary spending toplines for defense, the FY25 NDAA made strides in authorizing funding for critical national security objectives as well as to force restructuring and modernization efforts based on lessons learned from ongoing conflicts. Some of the most notable items addressed by the bill include:
Drones
Informed largely by the ongoing conflicts in Ukraine and the Middle East, the FY25 NDAA includes numerous provisions to address the growing challenge that drones pose to U.S. military installations and on the battlefield. Specifically, the bill requires the Pentagon to develop a comprehensive counter-drone strategy and assess its current counter-unmanned aerial (c-UAS) system capabilities to better prepare U.S. forces to respond to drone attacks. This includes a provision mandating the creation of a c-UAS threat library, cataloging drone incursions and counter-drone solutions. The bill also instructs the Department of Defense (DOD) to recommend policy changes to streamline the Pentagon’s response to drone threats through reducing the need to coordinate responses with other federal organizations. Commercially, the bill takes direct action against DJI, Autel Robotics and their subsidiaries, requiring these organizations to be added to the Federal Communications Commission’s (FCC) “Covered” Equipment List one year from the bill’s enactment if they are found to pose national security risks to the United States.
Artificial Intelligence
The NDAA also takes actions to integrate AI capabilities to enhance and provide autonomous capabilities for U.S. military systems and general operations. Notably, this year’s NDAA requires the establishment of two AI pilot programs: one to develop near-term use cases and demonstrations of AI for security-related biotechnology applications; and the other to utilize AI software to augment facility workflow and operational tasks. Additionally, the bill directs the DOD to investigate the value of creating centers of excellence that would analyze advancements in AI-enabled weapons systems, countermeasures and tactics, and would facilitate collaboration with foreign partners regarding best practices and standards. Congress has also sought to build additional infrastructure for AI integration through requiring the DOD to establish an advanced computing infrastructure program specifically for AI capabilities. The NDAA reinforces these items with provisions to improve human usability of AI systems. The bill also consistently reaffirms the U.S. policy of maintaining a human “in the loop” for critical issues and includes a sense of Congress that AI will not compromise the integrity of nuclear safeguards or undermine the requirement for human actions in the employment of nuclear weapons.
Servicemember Pay
One of the primary points of emphasis in this year’s NDAA was to provide significant increases to pay and benefits available to servicemembers. Building on the House Armed Services Committee’s bipartisan Quality of Life Panel Report, members highlighted the challenges facing those in uniform, particularly junior enlisted servicemembers, who struggle to support their families and are contributing to recruiting and retention issues facing the military. Following the panel’s work, the final version of the bill includes a 14.5% pay increase for junior enlisted servicemembers and a 4.5% increase for all other servicemembers along with improvements to the Basic Allowance for Subscience and Basic Needs Allowance programs. The bill also seeks to improve the quality of life and access to health care for servicemembers’ families through eliminating copays for TRICARE beneficiaries for contraceptives, authorizing funding to improve housing, funding for child care assistance programs and improving the process for military spouses to transfer professional licenses between states.
Indo-Pacific
Consistent with previous years’ NDAAs and the findings of the Commission on the National Defense Strategy, the FY25 NDAA continues the trend of addressing China as the principal challenge to U.S. national security objectives. This year’s bill takes numerous actions to enhance security partnerships in the Indo-Pacific to maintain peace and deter potential aggressions. The bill specifically targets improving U.S. regional partnerships and defense cooperation including plans for strengthening extended deterrence commitments to South Korea and enhancing trilateral defense cooperations and communications between the United States, Japan and South Korea. The bill also seeks to expand capabilities in the region through increasing support for the development of unmanned underwater systems and improving missile defense and radar systems in Guam. Additionally, the bill requires the United States to engage with Japan regarding Pillar II’s advanced capabilities to bring further innovation into the alliance and increase deterrence capabilities in the region. The bill also increases U.S. support for Taiwan by establishing the Taiwan Security Cooperation Initiative to improve Taiwan’s self-defense capabilities through such measures as the authorization of funding to aid Taiwan’s acquisition of anti-ship, coastal and missile defense capabilities.
Conflicts in Israel and Ukraine
This year’s bill takes actions to address the ongoing conflicts in the Middle East and Ukraine and includes provisions outlining U.S. partnerships moving forward. Regarding the Middle East and Israel, the FY25 NDAA reaffirms U.S. policy to cooperate with Israel to ensure it maintains an adequate stock of interceptors and defense systems to counter missile threats from regional opponents. It also requires the United States to increase partnerships with Israel on initiatives such as subterranean warfare exercises, Defense Innovation Unit activities and military trauma and education training. In addition, the bill authorizes $110 million for Israel to procure components for Iron Dome, $40 million for David’s Sling and $50 million for the Arrow 3. On Ukraine, the bill takes action to prohibit funding relating to Russian sovereignty over internationally recognized territory of Ukraine, requires an assessment of the course of the conflict and mandates the establishment of a working group to identify lessons learned from the war.
Looking Ahead
In September, the House voted on a group of legislative proposals that highlighted congressional China-competition priorities with hopes that these would be included in the final version of the FY25 NDAA or another end-of-the-year legislative package. This China competition-focused legislation was the culmination of a series of hearings led by the House Select Committee on the Chinese Communist Party, the Energy and Commerce Committee, the Foreign Affairs Committee and the Oversight Committee. The package was not ultimately attached to the final version of the NDAA, leaving an opportunity for the next Congress to reconsider this legislation in the future. For more information about “China Week,” please see this link.
China Competition
Congress continues to debate on how to legislate outbound investment. There was a proposal to include a provision in the FY25 NDAA and another in the failed continuing resolution (CR). There are disagreements between China hawks and the House Financial Services Committee regarding how to approach the restrictions on U.S. investment in China. Retiring House Financial Services Chair Patrick McHenry (R-NC) previously blocked provisions in favor of allowing the Trump administration to consider outbound investment proposals. House Financial Services Committee members wish to create an outbound investment policy that builds on existing sanctions; whereas China hawks push for stronger restrictions. We expect members will look to continue the debates on outbound investment and attempt to include it in the Fiscal Year 2026 NDAA.
With the BIOSECURE Act excluded from the CR, the next Congress will look to reintroduce legislation that targets Chinese biotechnology firms and enhances U.S. domestic manufacturing capabilities in pharmaceuticals and key products. In negotiations, the legislation received large bipartisan and bicameral support; however, it did meet difficulties with some key members. Sen. Rand Paul (R-KY), Rep. James McGovern (D-MA) and similar-minded members expressed disapproval of the BIOSECURE Act, claiming it does not include due process for the companies named in the bill. Since Sen. Paul is the incoming Senate Homeland Security and Governmental Affairs Committee chair, it will be difficult for an exact copy of the current text of BIOSECURE to advance in Congress during the next session. However, there is still the possibility members will look to enact legislation aimed at the Chinese biotechnology and pharmaceutical industry because of its prominence in the People’s Liberation Army’s plan to dominate the next Revolution in Military Affairs (RMA). Members are also interested in securing the U.S. pharmaceutical supply chain due to disruptions during the COVID-19 pandemic and concerns about drug shortages.
We anticipate Congress will also focus on increasing funding and other incentives to enhance U.S. domestic manufacturing capabilities to prevent foreign entities of concern from disrupting supply chains. There are already a series of proposals to prevent the United States from engaging with untrusted technology companies, including this year’s proposal to prevent selling chips and semiconductors to entities connected to Huawei Technologies. With the support of the Select China Committee and China hawks within the incoming Trump administration, Congress will be focused on increasing domestic capabilities to prevent malign Chinese influence in the U.S. economy, the emerging and advanced technology sector and supply chains.
There are also a series of other China competition-focused legislative proposals that Republicans will look to include in future NDAAs. In February 2024, the Republican Study Committee, led by Rep. Kevin Hern (R-OK), released the Countering Communist China Act (H.R. 7476). This messaging bill includes a variety of legislative policies addressing concerns regarding U.S.-China strategic competition. In September 2024, Sen. James Risch (R-ID), the incoming Senate Foreign Relations Committee chair, introduced the STRATEGIC Act (S. 5131). Sen. Risch’s bill is the Senate Republican approach to U.S.-China strategic competition. With the Republican trifecta, members and the administration will look to enact proposals discussed in both the Countering Communist China Act and the STRATEGIC Act through the FY26 NDAA.
Defense Spending
Incoming Senate Armed Services Committee Chair Roger Wicker (R- MS) expressed his desire to increase the discretionary defense spending cap of the DOD. This year, he was the principal supporter of the bipartisan Senate amendment to increase defense spending by $25 billion for the Senate’s versions of the Defense Authorizations and Appropriations bills. After the Senate’s toplines were rejected in the final version of the FY25 NDAA, Sen. Wicker expressed interest in pursuing the increase with the incoming Trump administration. Sen. Mitch McConnell (R-KY), incoming Senate Appropriations Subcommittee on Defense chair, also expressed his desire to significantly increase and sustain U.S. defense spending under the Trump administration. We expect Sens. McConnell and Wicker to work together and with their counterparts in the House to find a compromise to meet their desire for an increase in defense spending and satisfy concerns from the House.
Social Policy
The FY25 NDAA highlighted concerns within the Democrat Party on using the annual defense bill as a vehicle for restricting certain social policies, including gender-affirming care and reproductive rights. During the vote in the House, a group of Democrats voted against the bill in protest of the provision preventing TRICARE from providing coverage for gender affirming care to children of servicemembers under the age of 18. In the next Congress, Republicans may look to expand on existing provisions or those excluded from the NDAA while Democrats had control of the Senate.
Next Steps
Following the broad bipartisan support the conferenced bill received in Congress, the bill is expected to be signed by President Biden without objection, marking this the 64th consecutive passage of the NDAA. Despite this agreement on the FY25 NDAA, the Defense Appropriations bills are still undergoing negotiations. As Congress finalizes passage of a continuing resolution to extend through March, the House and Senate Defense Appropriations bill toplines currently stand at $833 billion and $852.2 billion, respectively. These appropriations discussions may alter how authorized funding is ultimately allocated during the FY25 budget cycle as these decisions will not be finalized until after the 119th Congress is sworn in.
If you wish to engage on key policy priorities for the Fiscal Year 2026 National Defense Authorization Act or defense appropriations, please contact one of the authors of the alert.
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