The Insider

We kick off this Thursday INSIDER Daily Digest with continued coverage of DOD's FY-17 budget submission.

The Pentagon continues to look for ways to trim its spending:

DOD reforms expected to save billions of dollars over next five years

The Pentagon intends to save billions of dollars over the next five years through a series of reform initiatives that include reducing headquarters activities and optimizing information technology, among others, according to President Obama's fiscal year 2017 budget overview documents released Feb. 9.

The Navy's UCLASS program has been renamed CBARS:

New details surface about Navy's unmanned aerial tanker program

The Navy revealed new details about its most highly anticipated new-start program -- an unmanned airborne tanker operating from an aircraft carrier -- during the Feb. 9 budget rollout.

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The Navy wants to speed up the delivery of prototype systems:

Navy seeks $55 million for new rapid prototyping fund

The Navy is requesting $55 million in fiscal year 2017 to establish a dedicated funding line for prototyping projects in an effort to more quickly deliver in-demand weaponry to the fleet outside of the normal acquisition process.

Deploying the Marine Corps JSF variant won't be easy:

Marines will be 'stretched thin' during first-ever F-35 deployment

The Marine Corps will be "stretched thin" on spare parts during its first-ever Joint Strike Fighter operational deployment to Japan because of funding cuts the Navy and Congress made two years ago, according to a program official.

Not having a multiyear procurement plan for JSF could be risky:

F-35 JPO: Pentagon opted out of FY-17 investment in JSF multiyear

The Defense Department's fiscal year 2017 budget does not include near-term plans to invest in a multiyear F-35 procurement deal, but buy-in from international partners will keep it alive should the United States opt in in future years.

The Air Force gave out a few -- very few -- details about its new Long-Range Strike Bomber program:

Air Force reveals $12 billion funding plan for new bomber -- and little else

The Air Force has reworked the Long-Range Strike Bomber funding profile, proposing a five-year, $12 billion research and development allocation between fiscal years 2017 and 2021 -- a $1.7 billion reduction compared to last year's outlook -- and reflecting the first budget request to factor Northrop Grumman as prime contractor on the high-priority aircraft project.

Keep an eye out for the Air Force's upcoming Huey helicopter replacement strategy:

Air Force steps away from modified service aircraft for Huey replacement

The Air Force could lay out its acquisition strategy for the UH-1N replacement this spring, a plan that has moved away from a modified service aircraft option toward a possible sole-source acquisition.

The Defense Department this week announced a pair of Aegis missile defense contract awards.

On Feb. 10, the Army awarded Alpharetta, GA-based AMEC Programs a $183 million contract for the third phase of building the Aegis Ashore missile defense system based in Poland.

"Bids were solicited via the Internet with four received," according to an Army contract announcement, which adds: "Fiscal [years] 2015 and 2016 military construction; research, development, testing, and evaluation; and other procurement funds in the amount of $173,874,936 were obligated at the time of the award."

The contract has an estimated completion date of April 9, 2018, the statement reads.

On the same day, the Missile Defense Agency awarded Lockheed Martin's Moorestown, NJ-based Mission Systems and Training business unit a $40 million contract modification to provide "support of advanced concept initiatives by the Aegis Ballistic Missile Defense (ABMD) Program Office to identify technology for introduction into present and future ABMD baselines and upgrades."

The new modification increases the total cumulative contract value to $2.18 billion, according to MDA.

Work on the contract is expected to be completed by Oct. 27, 2019, the agency said. 

"Fiscal 2015 research, development, test and evaluation funds in the amount of $50,000 are being obligated at the time of award, and will expire at the end of the current fiscal year. Fiscal 2016 research, development, test and evaluation funds in the amount of $6,400,000 are being obligated at the time of award," the statement reads.

According to an overview of MDA's FY-17 budget request submitted to Congress this week:

MDA requests $630 million for EPAA Phase 3 in FY 2017. This includes the deployment of a second Aegis Ashore site in Poland, upgrade of the Aegis Ballistic Missile Defense (BMD) weapon system, and delivery of a new SM-3 variant, the Block IIA. Aegis Ashore construction for the Poland site is scheduled to begin in FY 2016, with a [Technical Capability Declaration] by the end of calendar year 2018. For EPAA Phase 3, Aegis Ashore sites and Aegis BMD ships will be capable of launching SM-3 Block IA, IB, and IIA variants, providing improved defensive coverage against short- through intermediate-range threats.

MDA requests $514 million in procurement for Aegis BMD, which plays a critical role in both homeland and regional defense. MDA will procure 35 Aegis SM-3 Block IB missiles in FY 2017, for a total of 247 SM-3 Block IB missiles procured by the end of FY 2017. MDA will deliver 39 SM-3 Block IB missiles to the Fleet, for a delivery total of 146 missiles.

MDA requests $73 million of Operation and Maintenance funding for the Aegis BMD program to perform missile recertification, repair eff orts, demilitarization, and Ordnance Assessment/Surveillance. This funding includes BMD Computer Program, Ship Equipment, and Aegis Ashore - Romania sustainment, as well as Fleet integration support.

Orbital ATK said today it has opened a regional office in Singapore, marking the company's third new location abroad in the past three months.

In a statement, Orbital ATK said it's "following a deliberate process of increasing its availability to and direct engagement with customers and industry partners."

"The Singapore office will enable closer and more in-depth support for all Orbital ATK customers in the region," the contractor added.

Orbital ATK also has country offices in England, Saudi Arabia and the United Arab Emirates.

The contractor's push comes as many of the largest contractors are seeking bolstered sales abroad. Raytheon, for instance, earlier this month reported international sales made up 31 percent of total sales in 2015, marking a new high.

The chief executive of CSRA struck a positive note today, praising improved certainty around the federal budget as well as cost savings found within the company.

The contractor reported quarterly earnings for the first time since it was formed late last year by merging Computer Sciences Corp.'s U.S. public sector work with SRA International.

Larry Prior, CSRA's chief executive, said the company's customers "are operating with appropriated budgets that show growth."

"Despite the backdrop of a presidential election coming up, government spending should be fairly predictable," he said.

Additionally, Prior said the newly created business has already realized its anticipated annual savings of $80 million through synergies.

"As we are trimming our infrastructure . . . we are continuing to prioritize our investments in business development," he added.

The company reported quarterly sales of $1.03 billion, up 3.3 percent from the same period last year, because of the addition of one month of SRA sales.

NCI said today sales in 2015 hit $333 million, up from $317 million the prior year.

Profit too grew in 2015, hitting $12.2 million, an increase of 44 percent from 2014.

The contractor attributed the sales increase in part to its acquisition of Computech. NCI saw a decrease in revenue from the PEO Soldier program, which represented nearly 10 percent of all sales.

During a call with analysts this afternoon, Brian Clark, NCI's chief executive, said 2015 was a "stabilizing year."

"We see pockets of opportunity for growth now that there is greater budget certainty," he said, adding that he's seeing "incremental" movement away from the lowest-priced, technically acceptable contracting approach.

The Air Force's fiscal year 2017 budget request issued this week proposes a more-than-$3-billion reduction in Long-Range Strike Bomber development spending between FY-17 and FY-20 than it had proposed in its FY-16 request.

Service officials told reporters during a Feb. 9 Pentagon briefing that the lower proposal does not represent cuts to the program, but rather a more accurate cost estimate. Before awarding the new bomber development contract to Northrop Grumman last October, the service conducted a new independent cost estimate that pegged per-aircraft costs at $564 million -- $40 million less than its average procurement unit cost requirement of $606 million in 2016 dollars -- and its development cost at $23.5 billion.

Carolyn Gleason, a budget deputy in the service's financial management office, reiterated during the briefing that the plan laid out across the FY-17 future years defense plan does not change the scope of the effort, but simply reflects the more accurate cost estimate -- which takes into account Northrop's winning proposal.

After Northrop won the contract last fall, its competitor -- a Boeing-Lockheed Martin team -- protested the award. A Government Accountability Office decision is expected Feb. 16.

A new report set for release this morning takes aim at Pentagon waste, calling for greater oversight and departmental auditability.

In particular, the report, produced by the Center for International Policy and authored by William Hartung, takes aim at the Joint Land Attack Cruise Missile Defense Elevated Netted Sensor System -- or JLENS -- which last year pulled free of its mooring.

Hartung writes that "this was only the latest instance in a troubled program."

"One thing that Congress can and should do is hold more regular oversight hearings on Pentagon spending," the report contends. "But perhaps the most important thing Congress can do to prevent waste, fraud and abuse at the Pentagon is to pass legislation that gives the Department of Defense financial incentives to get its books in order so that it can finally pass an audit."

Full report: http://ow.ly/Y8hpd