The Insider

Jilted cloud company expresses 'disappointment' over reduced DOD contract 
By Justin Doubleday
March 7, 2018 at 1:30 PM

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.

On Monday, the Pentagon said it was reducing the potential ceiling of a production agreement with REAN Cloud from $950 million to just $65 million, limiting the services under the award to U.S. Transportation Command rather than the entire Defense Department.

In a statement provided to Inside Defense today, REAN Cloud managing partner Sekhar Puli expressed the company's “disappointment” with the reduced scope and said many agencies are still interested in buying the services. 

“REAN Cloud has not been made aware of the basis for the DOD’s recently stated intention to reduce the contract ceiling to $65 million,” Puli said in the statement. “However, it is clear that many DOD agencies wish to procure these services. Based on the threat of legal action and protest by the old guard, the only winners in this delay are those large companies that stand to lose money if the DOD proceeds with innovation. In the meantime, the cost of maintaining antiquated government infrastructure has not subsided.”

Oracle America protested the REAN Cloud award on Feb. 20.

In early February, DOD awarded the $950 million production agreement as a follow-on to a successful prototype project initiated last year by the Defense Innovation Unit Experimental and TRANSCOM. The prototype award was made competitively through an other transaction agreement, meaning DOD could award the follow-on production contract without further competition. While the prototype work was specific to TRANSCOM, the Pentagon said the production agreement made REAN's cloud migration services available to all DOD agencies.

The agreement generated controversy, however, because REAN Cloud is an Amazon Web Services premier partner, and the Pentagon's cloud executive steering group is in the midst of orchestrating a department-wide cloud services competition.

REAN Cloud says its offerings “can automate all stages of the cloud adoption lifecycle such as pre-migration assessment, migration, testing, compliance documentation, operations and more,” and it points to awards the DIUx project won by saving costs and accelerating implementation of cloud environments.

“We are honored to be performing work for the U.S. military,” Puli said. “We look forward to continuing productive discussions with entities across the DOD who still plan to migrate their IT infrastructure.”

SECNAV: Navy, Marine Corps lower unfunded priorities list due to top line increase
By Lee Hudson
March 7, 2018 at 1:08 PM

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.

Navy Secretary Richard Spencer told reporters today after a House Appropriations defense subcommittee hearing that in past years the Navy and Marine Corps were “stretched to their furthest limits of comfort. We are very happy with what we have” in FY-19, he said.

Chief of Naval Operations Adm. John Richardson told reporters after the same hearing the Navy’s strategic approach to the unfunded priorities list was to not “add on any new dimensions.” Instead, the service included projects to accelerate or increase the procurement quantities of certain items such as the E-2D Advanced Hawkeye aircraft.

Meanwhile, Marine Corps Commandant Gen. Robert Neller said today his service is focused on infrastructure improvements. He recently visited Marine Corps Base Camp Pendleton, CA, and service members there made it a point to show him the 1950s-era dining facility.

It “can service about 300 people, [and] there’s like 4,000 Marines out there,” he said. 

Further, Richardson said the Navy will soon begin revising its force structure assessment due to the release of a new National Security Strategy.

“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,” he added.

White House urges 'deep breath' on talks between North and South Korea
By Tony Bertuca
March 6, 2018 at 4:54 PM

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.

“It's a good idea for everybody to keep some perspective, take a deep breath,” the senior White House official told reporters. “We have about 27 years of history of talking to the North Koreans and there's also a 27-year history of them breaking every agreement they've ever made. The North Koreans have earned our skepticism, so we're a bit guarded in our optimism.”

The official said total denuclearization of the Korean Peninsula remained the Trump administration's unshakable position.

“Our posture toward the regime will not change until we see credible moves toward denuclearization,” the official said. “If the North Korean regime is serious about denuclearization, then its words will be met with actions.”

The official said the willingness of Kim Jong Un's regime to begin talking to its southern neighbor was the result of the “maximum pressure” campaign inflicted by ongoing sanctions.

Meanwhile, the Trump administration has yet to nominate a U.S. ambassador to South Korea and the official did not speculate on who would lead any potential talks with the Kim regime or what would be necessary to make them happen.

“There's not much I can say right now, mainly because I don't want to get ahead of the president,” the official said.

Carrier block buy may save Navy $1 billion to $2.5 billion
By Justin Katz
March 6, 2018 at 4:52 PM

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 Navy will continue to study that possibility through the spring, acquisition executive Hondo Geurts told the House Armed Services seapower and projection forces subcommittee. 

He added the procurement strategy historically saved the Navy 10 percent on costs of the Nimitz-class aircraft carriers.

Talking to reporters after the hearing, Geurts stressed the Navy has not made a decision. “We have not decided to do it. We have not decided not to do it,” he said.

Geurts was testifying about the Navy’s fiscal year 2019 budget alongside Vice Adm. William Merz, deputy chief of naval operations for warfare systems (N9), and Lt. Gen. Robert Walsh, commanding general of Marine Corps Combat Development Command.

"A two-ship buy allows for design stability, lower material costs through economic order quantity procurements, and a reduction in engineering hours," Navy spokeswoman Colleen O'Rourke told Inside the Navy in 2016 when the service began studying a potential block buy. 

"With the incorporation of digital shipbuilding, production personnel would be able to use three-dimensional models to construct ship systems, therefore eliminating the need to create two-dimensional drawings and thereby reducing plans costs,” she said.

Thornberry worries Trump's steel tariff will 'promote' Russia and China 
By Tony Bertuca
March 6, 2018 at 2:57 PM

House Armed Services Committee Chairman Mac Thornberry (R-TX) said today he is worried that President Trump's plans to broadly tax imported steel and aluminum will hurt the U.S. defense industrial base, antagonize longtime allies and assist geopolitical adversaries like Russia and China.

“Tariffs are a bad idea,” he told reporters on Capitol Hill. “It will increase the cost of building ships and airplanes. What I worry most about, however, are the geostrategic implications. If we make it more difficult for allies to work with us, to trade with us, then we are promoting China's and Russia's best interests as they try to undercut us.”

Trump is expected to finalize the tariff policy some time this week, despite the fact the Defense Department has warned the White House that it could “impair” national security.

House Speaker Paul Ryan (R-WI) and others in the GOP have publicly opposed the tariffs as well.

Thornberry, who oversees the House version of the defense authorization bill, said his committee is limited in its ability to impact trade policy.

“Trade is not something this committee can directly affect, but what we can do is try to understand the implications of it,” he said. “We are hurting ourselves by picking trade fights and economic fights with others.”

Nominee to lead CYBERCOM advances to full Senate
By Tony Bertuca
March 6, 2018 at 2:20 PM

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.

Also advancing is the nomination of Brent Park to be deputy administrator for defense nuclear nonproliferation at the National Nuclear Security Administration.

If confirmed, Nakasone will succeed Adm. Mike Rogers.

During his March 1 confirmation hearing, Nakasone said cyber vulnerabilities among U.S. defense contractors pose a top threat to U.S. national security and require a new, "comprehensive" approach.

"As military defenses are relatively formidable, critical infrastructure and the defense industrial base and private sector are likely seen as a rich source of information and a critical vulnerability in the nation’s armor," he said in written testimony provided to the committee.

The INSIDER daily digest -- March 6, 2018
By Thomas Duffy
March 6, 2018 at 1:57 PM

Today's INSIDER Daily Digest includes a look at a new assessment of the threat of small drones as well as the latest from the chief of U.S. Africa Command.

First, we dig into a new study by the Army Research Office of the National Academies of Sciences, Engineering, and Medicine. The assessment was commissioned in 2016 to review the “emerging major threat” from small unmanned aircraft systems to soldiers on foot and lightly armored vehicles.

Small UAVs seen as 'a significant and growing' threat to U.S. infantry forces

Commercially available, high-performance unmanned aerial systems -- when used for nefarious means -- pose “a significant and growing threat” to U.S. forces, particularly dismounted infantry and lightly armored vehicles in the Army, Marine Corps and Special Operations Forces.

Air Force Secretary Heather Wilson today appeared at an event in Washington and addressed multidomain command-and-control career development.

Wilson advocates for squadron-level MDC2 task forces rather than mid-career cadre

Air Force Secretary Heather Wilson said today the service should train airmen as multidomain command-and-control operators early in their careers, rather than stand up a mid-career group  as recommended by last year’s enterprise study of MDC2.

U.S. Africa Command chief Gen. Thomas Waldhauser was on Capitol Hill this morning.

AFRICOM chief: New Chinese presence in Africa could threaten U.S. global strategy

The global mission of the U.S. military may become increasingly challenged in the coming years by Chinese and Russian activities in Africa, according to the chief of U.S. Africa Command.

Meanwhile, Inside the Army heard from the service's Space and Missile Defense Command chief, who said the Army is running ahead of schedule in its effort to deliver two Avenger battalion equipment sets to Europe this year.

M-SHORAD efforts progressing, but funding challenges persist

The Army's effort to provide an interim short-range air defense capability to Europe is proceeding as planned, according to service officials.

The Strategic Capabilities Office is planning to work on several Navy projects, including one dubbed Kingfisher and another known as the Contender.

SCO requests nearly $500M in fiscal year 2019 on five Navy-related projects

The Strategic Capabilities Office is spending nearly $500 million in fiscal year 2019 for Navy and Marine Corps related projects including a new-start project, dubbed Kingfisher, to increase the range of lightweight torpedoes.

Finally, the outgoing director of the Army's Rapid Equipping Force says other service organizations should not necessarily “become more REF-like.”

Retiring REF director warns against one-size-fits-all approach

The Army's Rapid Equipping Force has been touted as a potential model for efforts to expedite acquisition, but its outgoing director highlighted the challenges inherent in that approach.

Wicker: Rand Corp. report demonstrates need for 355-ship Navy
By Justin Katz
March 6, 2018 at 11:42 AM

Sen. Roger Wicker (R-MS) today pointed to a Rand Corp. report warning the United States may lose its next war to argue the Navy must have a 355-ship fleet.

Wicker, the Senate Armed Services seapower subcommittee chairman, has been a vocal advocate for a larger fleet. Last year, he introduced legislation mandating the Navy reach 355 ships as soon as possible. Critics have argued the number of ships is not the best way to measure the effectiveness of the Navy.

Wicker today cited a December 2017 Rand report that said the United States is “failing to keep pace” with major adversaries such as China and Russia as proof the country needs a larger Navy. He said he has “gotten a bit tired” of Congress giving “lip service” to the fleet requirement.

“[Former President] Ronald Reagan could do it under [Navy] Secretary [John] Lehman, and the requirement back then was 600 ships,” Wicker said at a defense conference in Washington. “If they could do it then, we can do it now and we ought to do it now.”

Wicker also said the president’s budget request for shipbuilding is not “robust” enough. The fiscal year 2019 request seeks $22 billion for 10 new ships; Wicker said he wants a $26 billion request for 14 new ships. Historically, the shipbuilding account averages $16 billion per year, according to the Congressional Budget Office.

Asked how he would spend Navy shipbuilding funds in the upcoming FY-18 omnibus spending bill, Wicker said he wants to build a ninth big deck amphibious ship and two Littoral Combat Ships and to complete the fleet’s 12th aircraft carrier faster than the anticipated 2060 timeframe.

Speaking at the same conference, House Armed Services Committee Ranking Member Adam Smith (D-WA) called the 355-ship Navy a “fantasy.”

“We can barely predict what’s going to happen in two months from now,” he said. “Really? In 2050, you’re going to tell me how many ships we’re going to have?”

Smith was referring to the Navy’s 30-year shipbuilding plan, released alongside the FY-19 budget request, which anticipates the fleet will reach 355 ships in the 2050s.

Walters: Marines seek commercial solutions for FY-19 budget priorities
By Lee Hudson
March 6, 2018 at 11:17 AM

The Marine Corps' fiscal year 2019 budget priorities include a commercial-off-the-shelf air defense missile, an expeditionary unmanned aerial vehicle and long-range fires, according to a senior officer.

Assistant Marine Corps Commandant Gen. Glenn Walters said today at the McAleese Defense Programs conference in Washington the Marine Corps is seeking commercial solutions to meet its needs.

This strategy will allow the service to have a “bridge” solution in the field while working toward “getting the ultimate capability.” For instance, it took more than a year to deliver unmanned quadcopters after service commandant Gen. Robert Neller called for every infantry squad to be outfitted with one.

Walters said today he remains concerned about the FY-18 spending bill and whether Congress will pass an omnibus package that includes the Pentagon by March 23, when the latest continuing resolution ends. Additionally, he said the Marine Corps needs Congress to grant the military more time to spend the FY-18 money.

“Everything in our plan is predicated” on those two items, he said.

Last month, Walters echoed this sentiment during a Senate Armed Services readiness subcommittee hearing. “It might help if the appropriators can give us some flexibility so we can spend ‘18 money in ‘19 and . . . give us some authorities to . . . move money around when we’re executing,” he said.

The Surface Warfare Enhancement Act, a bill introduced by Senate Armed Services seapower subcommittee Chairman Roger Wicker (R-MS) and cosponsored by SASC Chairman John McCain (R-AZ), includes a provision that allows for 85 percent of the Navy’s operations and maintenance funding in the FY-19 budget to be spent over two years. This includes ship and aircraft operations and maintenance.

DOD's new on-premise cloud granted authority to operate
By Justin Doubleday
March 6, 2018 at 9:56 AM

The Defense Information Systems Agency has granted CSRA approval to begin operating a new on-premise, commercial cloud environment.

DISA granted milCloud 2.0 the provisional authorization to host “Impact Level 5” data, meaning the servers can now host unclassified national security systems, high-sensitivity systems containing Controlled, Unclassified Information (CUI), and Mission Critical Information (MCI), according to a company press release issued today.

“For the next 60 days we will be working with our early adopters to fine-tune our business processes,” Caroline Bean, DISA milCloud 2.0 program manager, said in a March 6 statement. “The next step will be to open the doors for business to everyone else who is waiting to onboard. Our target is early May.”

In June, DISA awarded CSRA an indefinite-delivery, indefinite-quantity contract worth up to $498 million for milCloud 2.0 commercial cloud infrastructure services. Early last month, General Dynamics announced it plans to acquire CSRA in a $9.6 billion deal.

MilCloud 2.0 is a contractor owned and operated, commercial cloud environment hosted on military premises, with locations at Maxwell Air Force Base in Alabama and Tinker Air Force Base in Oklahoma. MilCloud 1.0, meanwhile, is entirely owned and operated by the U.S. military.

In a Feb. 6 interview, Damon Bramble of CSRA said the company had already been working with the “early adopter community” to test milCloud 2.0 as they waited for the authority to operate the system. The early adopters set up a “healthy pipeline of potential consumers” for milCloud 2.0 services, he said.

“When you're dealing with Impact Level 5, you're tending to deal with more sensitive systems, whether it's financial systems, [human resource] systems, logistics systems or global command-and-control systems,” Bramble explained.

The milCloud 2.0 contract includes allowance for Impact Level 6, or classified information, according to Bramble, but the system would need to be certified with additional security controls to host such information.

Meanwhile, the Pentagon’s cloud executive steering group is planning to conduct a new cloud competition, called the Joint Enterprise Defense Infrastructure, to accelerate DOD’s adoption of commercial cloud. While some believe the steering group’s competition may reduce or even eliminate the work of previous cloud contracts, Bramble said there’s space for multiple clouds at DOD.

“The cloud future across the DOD is likely to be very hybrid, very multi-cloud,” he said. “There's no problem with these initiatives working together to support that ultimate charter of accelerating adoption.”

Senate Appropriations Committee chairman to resign
By Tony Bertuca
March 5, 2018 at 4:55 PM

Senate Appropriations Committee Chairman Thad Cochran (R-MS), citing his failing health, plans to resign from office by April 1, according to an announcement from his office.

"I regret my health has become an ongoing challenge," he said. "I intend to fulfill my responsibilities and commitments to the people of Mississippi and the Senate through the completion of the 2018 appropriations cycle, after which I will formally retire from the U.S. Senate."

Congress is scheduled to complete a fiscal year 2018 omnibus spending bill by March 23.

Cochran said he hoped for a "smooth transition" of political power in Mississippi. As for Washington, Sen. Richard Shelby (R-AL) is the next-most-senior Republican on the Senate Appropriations Committee after Cochran, who is the 10th-longest serving U.S. senator in history.

Senators urge budget flexibility for DOD
By Tony Bertuca
March 5, 2018 at 4:43 PM

A bipartisan team of lawmakers from the Senate Armed Services Committee are urging their colleagues on the Appropriations Committee to consider granting the Defense Department flexibility in spending billions of additional operations and maintenance funds, according to a recent letter.

"In an effort to ensure that the department can responsibly allocate and obligate Fiscal Year 2018 funds with only half of the fiscal year remaining, we urge Congress to provide the department with greater spending flexibility for the remainder of this fiscal year,” the March 5 letter states. "As such, we request that the Appropriations Committee consider exempting the Department of Defense from statutory limitations on obligating funds in FY-18."

The senators support options similar to those advocated by House Appropriations defense subcommittee Chairwoman Kay Granger (R-TX).

Congress can either extend the one-year limitation on the Pentagon's O&M accounts or alter the so-called "80-20 rule," which prohibits DOD from spending more than 20 percent of its O&M money in the final two months of the fiscal year, according to the letter.

"Either of these two exceptions will ensure that service secretaries will have the flexibility to obligate funds in an efficient manner to restore readiness and execute the National Security and Defense Strategy," the letter states.

The letter was signed by Sens. Jim Inhofe (R-OK), Mike Rounds (R-SD), Joni Ernst (R-IA), David Perdue (R-GA), Tim Kaine (D-VA), Mazie Hirono (D-HI) and Jeanne Shaheen (D-NH).

Congress has until March 23 to finalize an FY-18 omnibus spending bill poised to inject and additional $85 billion into the defense budget above statutorily mandated caps. Though lawmakers have agreed to final toplines for defense and non-defense spending, appropriators are still crafting a final bill.

Navy, Air Force seek $4.5 billion C-130J multiyear procurement
By Justin Katz
March 5, 2018 at 4:12 PM

The Navy and Air Force are seeking congressional approval for a $4.5 billion C-130J multiyear procurement contract for fiscal years 2019 to 2023, according to budget justification documents.

The Navy KC-130J aircraft provides tactical in-flight refueling and assault support transport. The Air Force variants -- HC/MC/AC-130J -- are designed for combat search and rescue, special operations, and close air support and armed reconnaissance.

"This multiyear contract will provide the U.S. Government maximum savings in both price and delivery schedule," according to Air Force budget justification documents. "Specifically, savings for the [FY-19] through [FY-23] attributable to this MYP strategy is estimated at $581.9 million [then-year dollars], for a total of 11.4 percent."

Further, the advanced procurement funding will enable prime contractor Lockheed Martin "to authorize and place on order materials, equipment suppliers and subcontractors with sufficient lead time to support the planned delivery schedule within the context of the multiyear funding, prices, and cancellation ceilings," the documents said.

The Navy would seek 14 additional KC-130Js -- totaling 23 aircraft -- compared to FY-18 projections throughout the future years defense program. Meanwhile the Air Force would procure 29 aircraft total through those same years.

The Navy's increases represent "an effort to better align [Marine Corps] Program of Record (POR) completion with the [Air Force] POR completion resulting in lower overall program cost," according to Navy budget documents.

The services are nearing the end of their previous multiyear contract spanning from FY-14 to FY-18.

The INSIDER daily digest -- March 5, 2018
By John Liang
March 5, 2018 at 2:33 PM

Multiyear procurement authority for the Navy's E-2D Advanced Hawkeye program, Lockheed Martin's CEO commenting at her company's annual media day and more highlight this Monday INSIDER Daily Digest.

The Navy is seeking a multiyear procurement authority as part of its fiscal year 2019 budget request, a move that would consolidate remaining E-2D aircraft purchases in the $22 billion program of record into a single, five-year deal:

Navy wants to consolidate remaining E-2D Advanced Hawkeye aircraft in $3.5 billion deal

The Navy is asking Congress for permission to negotiate a $3.5 billion contract with Northrop Grumman to buy E2-D Advance Hawkeye aircraft in a multiyear deal that would bundle two dozen of the airborne surveillance, detection and tracking systems as part of a block buy the service says would net savings of $336 million.

Lockheed Martin CEO Marillyn Hewson told reporters today her company has identified three policy areas likely to have the greatest impact on the business:

Lockheed looks to regulatory and acquisition reform in 2018

Reforming regulations and the acquisition process will be two areas of policy focus for Lockheed Martin in 2018, according to the company's chief executive.

No RDT&E money was projected for active protection systems for Bradley and Stryker vehicles in last year's budget request:

Iron Fist, Iron Curtain time lines adjusted from FY-19 request

Following delays in "characterization" of the non-developmental active protection systems for Bradley and Stryker, the effort would receive $42.3 million in fiscal year 2019 research, development, test and evaluation funding that was not planned for last year.

The Navy's Expeditionary Surveillance Towed Array Sensor System (SURTASS-E) will provide "a modular flexible and rapidly deployable mobile acoustic wide area surveillance capability":

Navy to spend $5 million on surveillance sensor, may shift money to RPED

The Navy intends to obligate an additional $5 million for a surveillance sensor system, but will transfer that money from the program line item to its rapid prototyping fund should congressional appropriators direct that fund's creation in the fiscal year 2018 budget, according to documents viewed by Inside the Navy.

A white paper released last week by the Army Capabilities Integration Center outlines a plan to achieve the service's goal of enabling units to operate for up to a week without resupply:

ARCIC envisions array of changes to reduce demand for operational units

The Army has codified its requirement for brigade combat teams to become more expeditionary to fulfill the Multi-Domain Battle concept, outlining plans to reduce its demand for fuel, water and ammunition.

Inside Defense spoke with the House's top defense appropriator late last week:

Top House defense appropriator outlines options to extend DOD funding

House and Senate lawmakers are weighing three legislative options to give the Pentagon flexibility to spend billions in additional fiscal year 2018 operations and maintenance dollars, the House's top defense appropriator told Inside Defense.

Hewson: 'We are seeing more consolidations'
By Marjorie Censer
March 5, 2018 at 1:23 PM

The defense industry is seeing additional consolidation, which Lockheed Martin is monitoring, the company's chief executive said today.

Speaking to reporters at Lockheed's annual media day in Arlington, VA, Marillyn Hewson said the contractor is regularly weighing additional acquisitions.

"For us personally, we're always looking at opportunities from an acquisition standpoint that would make sense for our company," she said. "We're very satisfied with the portfolio that we have."

Hewson said Lockheed particularly weighs deals that would bring new capabilities or broaden its market access.

"In terms of the industry as a whole, I do think we are seeing more consolidations that are happening at certain levels," she added. "We'll continue to watch that and how that competitive environment operates for us."