The Insider

Highlights from Inside the Navy
By Lee Hudson
March 12, 2018 at 9:28 AM

Here are some must-reads from this week's edition of Inside the Navy:

1. Initial cost estimates for the F-35 Joint Strike Fighter's newly re-shaped Continuous Capability Development and Delivery plan indicate the effort could cost about $16 billion in development and procurement funds through fiscal year 2024 -- though the head of the program told reporters last week that number will likely shrink as the joint program office refines the details of its new strategy.

Full story: Initial F-35 C2D2 costs estimated at $16 billion through FY-24

2. The Navy and Marine Corps have requested roughly $1.7 billion in their fiscal year 2019 unfunded priorities list, a number that is drastically lower compared to previous years, because of an increase in top line budget funding, according to the Navy secretary.

Full story: SECNAV: Navy, Marine Corps lower unfunded list due to top line increase

3. The Marine Corps and F-35 joint program office discovered cost estimates for F-35B sustainment "were underrunning expectations" by 10 to 15 percent.

Full Story: Marines, JPO discover F-35B cost short by 15 percent

Highlights from Inside the Army
By Courtney McBride
March 12, 2018 at 9:25 AM

Some must-reads from this week's edition of Inside the Army:

1. Army senior leaders teed up key decisions last week for Chief of Staff Gen. Mark Milley and Secretary Mark Esper on Army Futures Command.

Full story: McCarthy: 'About 30 cities' under consideration for Army Futures Command

2. The Army's fiscal year 2019 budget submission includes some funding to support the work of the cross-functional teams pursuing modernization priorities, but more meaningful gains are slated for FY-20, according to the service's deputy chief of staff (G-8).

Full story: G-8: CFTs, modernization priorities to see major funding gains in FY-20

3. Commercial vendors are being scared off by the government's "onerous" rules, according to the Army's acquisition executive.

Full story: Jette: Army acquisition reform comes down to fewer restrictions

4. The Army has built a network infrastructure "for a specific fight," but the rise of near-peer adversaries necessitates a new approach that relies on internal and external innovation, from new technologies to streamlined acquisition processes, according to a senior service official.

Full story: Ostrowski calls for 'open dialogue' with industry, 'speed to market'

Week ahead
By Tony Bertuca
March 12, 2018 at 5:00 AM

The week ahead is full of appearances by senior Pentagon officials at Capitol Hill hearings and think tank events.

Monday

The Center for Strategic and International Studies hosts a discussion with the three military service secretaries.

Tuesday

The Senate Armed Services Committee holds a hearing on the fiscal year 2019 budget with the chiefs of U.S. Central Command and U.S. Africa Command.

The Senate Armed Services cybersecurity subcommittee holds a hearing on the cyber posture of the military services.

Wednesday

The Senate Armed Services strategic forces subcommittee holds a hearing on the Energy Department's defense activities and programs.

The Air Force Association hosts a breakfast with the chief of Air Force Materiel Command in Arlington, VA.

The Federal Innovation Summit begins in Washington.

The House Appropriations defense subcommittee holds a hearing on the Air Force budget.

The House Armed Services Committee holds a hearing on space warfighting readiness.

The House Armed Services seapower and projection forces subcommittee holds a hearing on the Air Force budget.

The House Armed Services emerging threats and capabilities subcommittee holds a hearing on FY-19 science and technology programs.

Thursday

The Senate Armed Services Committee holds a hearing on U.S. Pacific Command.

The House Appropriations defense subcommittee holds a hearing on the Army's FY-19 budget request.

The House Armed Services Committee holds a hearing on U.S. European Command and competition with Russia.

The House Armed Services tactical air and land forces subcommittee holds a hearing on airborne intelligence, surveillance and reconnaissance programs.

The House Armed Services strategic forces subcommittee holds a hearing on national security space programs.

Friday

The Center for Strategic and International Studies hosts a discussion on security cooperation.

The INSIDER daily digest -- March 9, 2018
By Thomas Duffy
March 9, 2018 at 2:20 PM

This Friday's INSIDER includes the latest news on the potential national security impacts of President Trump's new metal tariffs, details on the Pentagon's plans to acquire a single cloud information system, and news from senior Air Force officials on the F-35 buy-rates and data rights.

U.S. allies are leery of discussing the new tariff policy:

Foreign defense industrial base officials cautious on Trump's new metal tariff

Defense industrial base officials from the United States, the United Kingdom, Australia and Canada met in Washington today to discuss transnational security cooperation, but were leery of weighing in on potential disruptions caused by President Trump's new tariffs on steel and aluminum.

But U.S. allies can apply for exemptions:

Trump's new steel tariffs to provide carve-outs for U.S. allies

President Trump, citing national security concerns, is ordering new tariffs on steel and aluminum today with temporary exemptions for Canada and Mexico and potential exemptions for other U.S. allies on a case-by-case basis.

Meanwhile, the Defense Department has crafted a controversial cloud strategy:

Pentagon plans multibillion-dollar bet on single cloud

Architects of the Joint Enterprise Defense Infrastructure program envision a future where data moves freely between Defense Department users in a single cloud environment, enabling innovations like machine learning and artificial intelligence, but questions persist about the efficacy of their plan and the fate of other DOD cloud programs.

The Air Force secretary is taking a wait-and-see approach on plans to increase purchases of the F-35:

Donovan: Air Force riding out F-35 uncertainty before upping its buy-rate

The under secretary of the Air Force said this week the service's decision to procure the F-35 Joint Strike Fighter on a measured ramp is as much about the current uncertainty around the program's operational testing time line and future modernization strategy as it is about cost.

And the chief of the F-35 program is almost ready to talk data rights with Lockheed Martin:

Winter: Pentagon mulls data rights needed to continue F-35 development

The F-35 joint program office is determining what data rights it needs from Lockheed Martin and lower level suppliers to continue Joint Strike Fighter modernization and production sustainment, according to the program's senior official.

Finally, DOD wants to find billions in efficiencies:

Pentagon's new business reform chief eyes $46B in efficiencies over five years

The Pentagon's new chief management officer told the Senate Budget Committee this week he is confident the Defense Department will be able to find $46 billion in wasteful spending over the next five fiscal years that can be redirected to higher priorities.

Highlights from Inside the Air Force
By Courtney Albon
March 9, 2018 at 10:35 AM

Must-reads from this week's issue of Inside the Air Force:

1. Upgrading the MQ-9 Reaper to track moving targets more effectively will improve the Lynx synthetic aperture radar but cannot replace the E-8C Joint Surveillance Attack Radar System's capabilities, General Atomics tells Inside the Air Force.

Full Story: General Atomics growing MQ-9 radar range in response to new JSTARS plan

2. The F-35 joint program office is determining what data rights it needs from Lockheed Martin and lower-level suppliers to continue Joint Strike Fighter modernization and production sustainment, according to the program's senior official.

Full Story: Winter: Pentagon mulls data rights needed to continue F-35 development

3. Lockheed Martin is planning its fourth multidomain command-and-control tabletop exercise this summer that will use automated tools to plan kinetic and non-kinetic effects in air, space and cyberspace.

Full Story: Lockheed builds on MDC2 exercises with new objectives, technology

Navy awards $77 million contract mod to fix the Fitz
By Lee Hudson
March 9, 2018 at 9:49 AM

The Navy awarded Ingalls Shipbuilding a roughly $77.6 million contract modification to repair, maintain and modernize the guided missile destroyer Fitzgerald (DDG-62), which was damaged in a collision last year.

In late January, the Fitz arrived at the Port of Pascagoula in Mississippi and then made its way to Ingalls. The Navy anticipates the repairs will take about two years, according to a March 8 contracts announcement.

"Work on the ship is expected to occur on a land level facility throughout 2018 and one to two quarters of 2019," according to a Jan. 19 Navy statement.

The Fitzgerald will then undergo testing and trials to "ensure all systems and spaces are restored to full functionality and operational capability," according to the Navy.

On June 17, 2017 the ship was involved in a collision with the Philippine-flagged ACX Crystal. Seven sailors died, and the ship was damaged on the starboard side above and below the waterline.

"Due to the extent and complexity of the restoration, both repair and new construction procedures will be used to accomplish the restoration and modernization efforts," the Jan. 19 statement reads. "Various Hull Mechanical and Electrical (HM&E), C4I and Combat System equipment, including the electronic warfare suite, radar, switchboard, gas turbine generator, and air condition plant, require repair and/or replacement."

The ship will also receive upgrades originally planned for installation during a fiscal year 2019 availability.

Navy reveals acquisition strategy for training helicopter fleet replacement
By Lee Hudson
March 8, 2018 at 4:38 PM

The Navy revealed earlier this week the TH-57 Sea Ranger training helicopter fleet will be replaced with a commercial solution and will divulge schedule details next year, according to a service official.

Rear Adm. Scott Conn, air warfare director in the office of the chief  of naval operations (N98), said March 6 the Navy is taking a new approach to replace 115 TH-57s.

“We're going for commercial off-the-shelf aircraft that is going to be competed and we're going then after the competition, buy those aircraft,” he said during a Senate Armed Services seapower subcommittee hearing. “And we're still working through the actual maintenance plan [and] certification plan.”

The Navy considered several different paths for replacing the TH-57. These include a COTS solution, a combination of procurement and services contract, or a services contract to provide aircraft simulators and ground instructors, according to fiscal year 2019 budget justification documents.

Inside the Navy reported in June 2017 the service anticipates releasing a request for proposals to replace the TH-57 in late FY-19 or early FY-20.

"While the Navy, Marine Corps and U.S. Coast Guard aircraft have been recapitalized to new technology, the training helicopters have remained with the late 1970s technology," Navy spokesman Michael Land wrote in a June 2017 statement.

The outdated technology results in a variety of training capability gaps ranging from use of the flight management system to digital cockpit integration to flight and mission planning.

"Along with the aircraft's advanced age . . . the associated increased cost of sustainment indicate the need for a replacement," Land wrote.

On June 1, the Navy posted a special notice on the Federal Business Opportunities website calling for industry to submit responses to a request for information.

"The number of helicopters will not be one-for-one," Land wrote. "The exact number is still under study and will take into consideration factors such as attrition, planned aircraft service life and planned aircraft availability."

AIA urges Trump to reconsider tariffs
By Tony Bertuca
March 8, 2018 at 3:21 PM

The Aerospace Industries Association has sent a letter to President Trump asking him to reconsider his plans to impose new tariffs on steel and aluminum.

“Our industry employs 2.4 million people in the United States and produced a trade surplus of $86 billion last year,” the letter states. “Tariffs on aluminum and steel would jeopardize that surplus and put those jobs at risk. Tariffs will also disrupt the supply chain and lead to trade retaliation, diminishing our industry’s market leadership in the global economy.”

Trump is expected today to announce a 25 percent tariff on imported steel and 10 percent on aluminum.

“The letter is the latest effort to highlight our industry’s deep concerns that tariffs on aluminum and steel will raise costs and disrupt the supply chain, putting U.S. global competitiveness at risk,” AIA said.

AIA President and CEO Eric Fanning told CNBC last week the tariffs would impact companies “big and small.”

DOD reverses policy limiting SIGAR data; new report shows record Taliban gains 
By Justin Doubleday
March 8, 2018 at 3:19 PM

The Defense Department has lifted restrictions on the Special Inspector General for Afghanistan Reconstruction publishing data on Taliban control over local populations, and SIGAR subsequently released a document showing insurgent control has reached a record high.

Late last month, SIGAR quietly released an addendum to its January quarterly report showing 55.8 percent of Afghanistan's 407 districts are under Afghan government control or influence, while the Taliban have hold over 14.3 percent of the districts, the highest it's been since SIGAR began reporting on the district-control data in 2015. Meanwhile, the remaining 30 percent of Afghanistan's districts are “contested,” according to the addendum.

In the quarterly report released in January, SIGAR said the Resolute Support campaign had restricted the auditors from reporting on district, land-area and population control for the first time. In the report, SIGAR John Sopko wrote the development was “troubling for a number of reasons, not least of which is that this is the first time SIGAR has been specifically instructed not to release information marked 'unclassified' to the American taxpayer.”

DOD subsequently said the data had been restricted as a result of “human error.” In the addendum, SIGAR notes the Resolute Support Campaign officially informed the auditors on Feb. 15 “it was an error and the data had been remarked for public release.”

The key points in the now-released data, according to the addendum, are the percentage of districts under insurgent control or influence has doubled since 2015, the percentage of contested districts has risen by nearly 50 percent since 2015, and the percentage of districts under government control or influence had decreased by over 20 percent since 2015.

The INSIDER daily digest -- March 8, 2018
By Thomas Duffy
March 8, 2018 at 2:06 PM

This Thursday INSIDER includes rules for talking with industry, a plan for the Joint Strike Fighter to buy more than one aircraft at a time, a new Navy force structure review, and the Army acquisition chief weighing in on reform measures.

We kickoff with the deputy defense secretary explaining how government should talk with industry:

Shanahan lays out Pentagon's guide for communicating with industry

Defense Department officials have a “critical responsibility” to engage with industry and should not fear such interactions as long as they stay within ethical and legal boundaries, Deputy Defense Secretary Patrick Shanahan makes clear in new guidance.

The Joint Strike Fighter program sees a chance upcoming to bundle some aircraft buys:

DOD: FY-21 is earliest chance to begin bundling U.S. F-35 orders into multiyear contracts

The Defense Department is considering options to bundle U.S. orders for the F-35 Joint Strike Fighter into multiyear contracts with Lockheed Martin as soon as fiscal year 2021, potentiality consolidating annual purchases of about $11 billion for nearly 100 aircraft into mega-deals that would provide industrial base stability and notionally yield savings compared to yearly contracts.

The Navy will once again look at the size and capability of its fleet:

Navy to conduct new force structure assessment in upcoming year

The Navy intends to conduct another force structure assessment within the next year to account for the new national defense strategy, according to a senior Navy official.

The Joint Strike Fighter program may have a large cost associated with its next development step:

Initial F-35 C2D2 costs estimated at $16 billion through FY-24

Initial cost estimates for the F-35 Joint Strike Fighter's newly re-shaped Continuous Capability Development and Delivery plan indicate the effort could cost the Defense Department about $16 billion in development and procurement funds through fiscal year 2024 -- though the head of the program told reporters Wednesday that number will likely shrink as the joint program office refines the details of its new strategy.

The Army's assistant secretary thinks government business rules should be loosened:

Jette: Army acquisition reform comes down to fewer restrictions

Commercial vendors are being scared off by the government's “onerous” rules, according to the Army's acquisition executive.

Highlights from Inside the Pentagon
By Tony Bertuca
March 8, 2018 at 11:20 AM

Here are some must-reads from this week's edition of Inside the Pentagon:

1. The Pentagon is planning to award a single indefinite delivery, indefinite quantity contract for commercial cloud services in September, sticking with a sole-source acquisition strategy highly criticized by some in industry late last year.

Full story: Pentagon will award single IDIQ contract for commercial cloud

2. It could take at least 10 years and billions of dollars for the Defense Department to achieve a clean audit, though the department can begin seeing benefits from the process far sooner, according to Pentagon Comptroller David Norquist.

Full story: Pentagon comptroller: Clean audit could take 10 years

3. The Defense Department is considering options to bundle U.S. orders for the F-35 Joint Strike Fighter into multiyear contracts with Lockheed Martin as soon as fiscal year 2021, potentiality consolidating annual purchases of about $11 billion for nearly 100 aircraft into mega-deals that would provide industrial base stability and notionally yield savings compared to yearly contracts.

Full story: DOD: FY-21 is earliest chance to begin bundling U.S. F-35 orders

GD declares quarterly dividend
By Thomas Duffy
March 8, 2018 at 11:10 AM

General Dynamics board of directors on March 7 declared a regular quarterly dividend of 93 cents per share on the company’s common stock, payable May 11, 2018, to shareholders of record on April 13. 

This is the 21st consecutive annual dividend increase authorized by the General Dynamics board. The 10.7 percent increase is consistent with increases over the past five years. The company’s 2017 revenue was $31 billion.

Sanders targets CEO compensation
By Tony Bertuca
March 7, 2018 at 5:05 PM

Sen. Bernie Sanders (I-VT) on Wednesday asked Pentagon Comptroller David Norquist during a Senate Budget Committee hearing to provide him with a report detailing how the Defense Department can effectively negotiate CEO salaries of defense contractors. 

Norquist said he was unaware of anything the Defense Department could do to impact the compensation of CEOs at private companies, but said U.S. taxpayers “should be paying for the service that we receive.”

Sanders said CEOs from DOD's top five contractors made a cumulative $96 million in compensation in 2016, pointing out that the CEO of Lockheed Martin earns 100 times more than the defense secretary. 

Marillyn Hewson, CEO of Lockheed Martin, earned nearly $20.6 million in 2016, according to the Securities and Exchange Commission. During the hearing, Sanders seemed unaware that the chief executive of Lockheed Martin was a woman, referring to the CEO as "this guy."

"Does it make sense that we pay the Secretary of Defense $200,000 or less and we give a contractor, who gets 92 percent of his revenue from the taxpayers of this country, $18 million in taxpayer money?” Sanders said. “It sends a message if a corporation gets the overwhelming percentage of its revenue from the federal government to give their CEO a large salary. It tells me they’re going to do a lot of other things to ignore the needs of taxpayers.”

Sanders said that Lockheed, because the bulk of its revenue comes from taxpayers, is basically “a government agency, a private one, but a government agency virtually fully funded by U.S. government.”

A spokesman for Lockheed was not immediately available to provide comment.

Navy to conduct new force structure assessment in upcoming year
By Justin Katz
March 7, 2018 at 4:26 PM

The Navy intends to conduct another force structure assessment within the next year to account for the new national defense strategy, according to a senior Navy official. 

"There's a series of events that have to happen before we do the FSA starting with the combatant commanders all the way down to the defense planning guidance that leads us to the scenarios we need to plan for," Vice Adm. William Merz, deputy chief of naval operations for warfare systems (N9), told the House Armed Services seapower and projection forces subcommittee yesterday.

He added that multiple studies on the Navy's force architecture all point to the service needing a larger fleet.

"We don't expect much of that to change with the next FSA. There may be some changes on the margin, there may be another number that we're shooting for, but it's going to be bigger than we are today. We have to move out and we have to move out aggressively as we go forward," he said.

Responding to concerns from Rep. Mike Gallagher (R-WI), whose home state of Wisconsin houses shipbuilders that produce littoral combat ships, Merz also said the Navy will revisit the mix of its small surface combatants during the next FSA.

Merz was testifying about the fiscal year 2019 budget request alongside Navy acquisition executive Hondo Geurts and Lt. Gen. Robert Walsh, commanding general of Marine Corps Combat Development Command.

Talking to reporters today after a House Appropriations defense subcommittee hearing, Chief of Naval Operations Adm. John Richardson said, “The [2016] force structure assessment did account for a resurgent Russia, it did account for China, and all sorts of things so it wasn’t a completely uninformed dynamic."

Richardson was testifying about the FY-19 budget today alongside Navy Secretary Richard Spencer and Marine Corps Commandant Gen. Robert Neller.

The INSIDER daily digest -- March 7, 2018
By Thomas Duffy
March 7, 2018 at 3:17 PM

Today's INSIDER looks at the repercussions of DOD scaling back a recently awarded cloud contract, the reason behind a smaller Navy-Marine Corps unfunded list, talks between North and South Korea, a Navy aircraft carrier buy, and the nomination of the next CYBERCOM chief.

We start with the recent nearly $1 billion contract award the Pentagon has now shaved back to $65 million:

Jilted cloud company expresses 'disappointment' over reduced DOD contract

REAN Cloud says it is disappointed with the Pentagon's decision to dramatically reduce the scope of its nearly $1 billion contract for cloud migration services, blaming “the old guard” of defense contractors for holding back the U.S. military from harnessing innovative technologies.

Senior Navy officials claim a bigger budget in 2019 has allowed them to pare back on their annual unfunded priorities list:

SECNAV: Navy, Marine Corps lower unfunded priorities list due to top line increase

The Navy and Marine Corps have requested roughly $1.7 billion in their fiscal year 2019 unfunded priorities list, a number that is drastically lower compared to previous years, because of an increase in top line budget funding, according to the Navy secretary.

A White House official is urging caution over possible upcoming talks between the two Koreas:

White House urges 'deep breath' on talks between North and South Korea

The Trump administration expects to have further discussions in the coming week with South Korean officials about high-level diplomatic talks they have begun with North Korea, but a senior White House official urged skepticism and calm.

The Navy may be able to save American taxpayers millions of dollars by doubling up on buying the next two aircraft carriers:

Carrier block buy may save Navy $1 billion to $2.5 billion

If the Navy pursues a block buy strategy for its next two aircraft carriers (CVN 80 and 81), the service anticipates it will save between $1 billion and $2.5 billion, according to the service's top acquisition official.

The nomination of the next head of U.S. Cyber Command took another step this week:

Nominee to lead CYBERCOM advances to full Senate

The nomination of Lt. Gen. Paul Nakasone to be chief of U.S. Cyber Command and director of the National Security Agency is headed to the full Senate for a confirmation vote, according to a statement from the Senate Armed Services Committee.