The Insider

By John Liang
January 26, 2011 at 1:00 PM

No growth may be good growth. At least according to Deloitte's new 2011 outlook on the aerospace and defense industry. In a statement, the company announces:

"Flat was the new up" in 2010. Last year was a comparatively good year contrasted with many other industries. Aerospace & Defense (A&D) sector sales and profits were relatively flat, which was good in a recessionary environment. Looking ahead, flat revenues and profits may again be the story for the overall industry in 2011.

The Deloitte report, "Aerospace & Defense 2011 Outlook," attributes the forecast to the continued impact from anticipated defense spending cuts, offset by an uptick in commercial aerospace, and the slow recovering economic cycle.

There is a sense of unease as the Department of Defense (DOD) budgets for research, development and procurement are moderating or declining. Given the slowdown in U.S. defense spending, the report suggests that contractors need to consider how to replace revenues in areas such as foreign military sales, growth in adjacent markets and through gap filling and scale building acquisitions for example.

By Marcus Weisgerber
January 25, 2011 at 10:35 PM

The Pentagon will not send political appointees or anyone from the inner circle of the KC-X tanker program to testify at a high-profile hearing on last year's snafu in which the Air Force inadvertently sent bid evaluation data to the wrong parties, instead opting to send a uniformed acquisition official and a senior cyber crime official.

Maj. Gen. Wendy Masiello, program executive officer for combat and mission support in the service's acquisition shop, and Steven Shirley, executive director of the Pentagon's Cyber Crime Center, will occupy the witness tables in the Dirksen Office Building hearing room on Thursday morning.

In her role Masiello oversees service contracts, not the high-profile weapon system acquisitions.

Last year the Air Force acknowledged that it had mistakenly send computer files containing evaluation data of each bidder's KC-X proposal to opposite parties. Boeing received EADS data, and vice versa. It came to light later that Boeing did not open the file on the disk, but an EADS employee did.

Shirley -- a former vice commander of the Air Force Office of Special Investigations -- is expected to testify on the computer forensics involved in the service's investigation into the snafu.

Boeing-friendly Sen. Maria Cantwell (D-WA) urged Levin to hold the hearing.

By Dan Dupont
January 25, 2011 at 9:54 PM

The Unmanned Aerial Vehicle Caucus is no more.

Instead, its co-chairmen said today, the group will henceforth be known as the Unmanned Systems Caucus.

From a statement issued by the two, Reps. Howard “Buck” McKeon (R-CA) and Henry Cuellar (D-TX):

The goal of the U.S. House Unmanned Systems Caucus is to educate members of Congress, stakeholders, and the public on the strategic, tactical, law enforcement and scientific value of unmanned systems.

“I’m excited by the continued development and evolution of unmanned systems. The science and technology behind these systems are literally saving lives in civil and military communities. Our caucus is dedicated to educate and informing members of congress, the private sector, and the public about the importance and value of unmanned systems to the country,” said McKeon.

Since inception, the caucus has progressed to larger-scale support to now include ground and maritime systems. The caucus wanted to reflect that new expanded focus with the updated name.

“We have seen tremendous growth in the land, air, and maritime sectors of the industry over the last two years. I am excited to promote the entire industry and its advancements in science and technology while developing unmanned systems.

“Unmanned Systems have saved countless lives on the battlefield. I believe these systems and their capabilities go far beyond Department of Defense use, and I demonstrate continued success as they become more prevalent within our civilian communities,” McKeon added.

Co-chairman, Congressman Cuellar stated, "Unmanned Systems are essential to further maintain security on our borders and to combat illegal activity at our ports of entry. Their importance to our national security efforts cannot be overestimated, as they provide necessary information in moments of natural disasters at home as well as in the efforts to combat Al Qaeda in Afghanistan. We must do everything in our power to keep our communities safe and this caucus will help us reach that goal.”

The Unmanned Systems Caucus, originally formed as the Unmanned Aerial Vehicle Caucus in 2009, recognizes the overwhelming value of unmanned systems in the scientific, intelligence, law enforcement, and homeland security communities. The 31 members of the bipartisan caucus are committed to the growth and expansion of these systems in all sectors.

By Dan Dupont
January 25, 2011 at 9:34 PM

The Pentagon announced today that the president as nominated  Air Force Lt. Gen. Eric Fiel to take over as commander of Air Force Special Operations Command, Hurlburt Field, FL.

Fiel is the vice commander of U.S. Special Operations Command. He would succeed Lt. Gen. Donald Wurster as commander.

From Fiel's official Air Force biography:

General Fiel entered the Air Force in 1981 as a graduate of Officer Training School. He has held a variety of assignments and has commanded at the squadron, group and wing levels. Additionally, he has held a variety of staff positions at major command, unified command, Air Staff and Secretary of the Air Force levels. Prior to his current assignment, he was Chief of Staff, Headquarters U.S. Special Operations Command, MacDill Air Force Base, Fla.

General Fiel has significant experience in combat and leadership positions in major joint contingency operations. He commanded a special operations squadron during Bosnia and Kosovo operations. From September 2001 to March 2003, he was forward-deployed as the Joint Special Operations Air Component Commander in Operation Enduring Freedom. From May 2006 to April 2008, he was forward-deployed as a Task Force Commander multiple times for operations Enduring Freedom and Iraqi Freedom.

By Marcus Weisgerber
January 25, 2011 at 8:20 PM

The Air Force claims fixes are on the way for a new wide-area airborne surveillance sensor pod that service testers lambasted in an evaluation report last month.

To recap, an internal Air Force audit of the new, supposedly all-seeing Gorgon Stare sensor, conducted by Air Combat Command's 53rd Wing, reveals an unreliable system of high-power cameras that frequently crashes during test flights. The Dec. 30 report -- marked “Draft/Predecisional” -- lists a number of major issues with the Sierra Nevada Corp.-built pod that need to be addressed before the system is deployed in Afghanistan.

Here is the Air Force's official statement on the draft report:

This system is being fielded to meet a Combatant Command requirement for a persistent, wide-area surveillance capability that allows multiple users to access the data from one platform.

This is a very advanced technology the Air Force is developing rapidly to meet warfighter requirements.

Gorgon Stare is in the first increment of a multi-increment program, and the second increment will increase the warfighter's capabilities by range and resolution.

The document leaked was a draft memo that was later revised in January.

The January memo includes three issues that we have identified and have fixes in place. The first was addressing critical Technical Order shortfalls; the second was Gorgon Stare Ground Station image and grid coordinate generation; and the third was Remote Video Terminal compatibility. We're working all three issues and do not believe they will affect the deployment schedule.

Air Force leadership understands the importance of providing quick, timely and actionable ISR for the field. Gorgon Stare will not be fielded until the theater commander accepts it.

The Air Force takes its responsibility seriously because lives depend on the quality of the intelligence products that are produced.

While the statement identifies fixes for some of the more minor problems reveled in the report, it makes no mention of issues the system has tracking people one they exit a vehicle or tracking anything at night.

By Dan Dupont
January 25, 2011 at 7:45 PM

Rep. Pete Stark (D-CA) today announced a bill called the "Defense and Deficit Reduction Act" that he says would "take defense spending back to 2008 levels for the next five years."

In a statement, Stark said the House has passed a "meaningless budget resolution directing House Budget Committee Chairman Paul Ryan to freeze non-defense spending to 2008 levels," whereas his bill would have a "meaningful effect on the deficit, saving $182 billion."

From the statement:

"We can't be serious about reducing the deficit if we're going to wall off 60 percent of our discretionary spending from cuts," said Rep. Stark. "This legislation would save $182 billion, from a sector riddled with extra planes and engines that the Pentagon doesn't want. At a time when we are spending seven times the next closest nation on our military, we must look toward defense for waste and potential savings."

You can watch video of Stark during debate on the earlier resolution.

By Dan Taylor
January 25, 2011 at 7:18 PM

Echoing comments made by senior Defense Department officials in recent weeks, Navy Secretary Ray Mabus told reporters today that department leaders are in discussions with Congress on the effects of a year-long continuing resolution if a defense appropriations bill for fiscal year 2011 is not passed.

"I know that [Defense] Secretary [Robert] Gates, Bob Hale, the comptroller of the Pentagon, and all of the services are actively engaged [with Congress] in talking about this and explaining what the repercussions are of operating under the traditional continuing resolution," he said following an event in Washington.

Mabus said a continuing resolution, which caps spending at 2010 levels and bans any new starts, "presents some real issues for DOD as a whole," and "those are going to have some real impacts on the Navy and on DOD going forward."

The federal government is operating under a continuing resolution passed by Congress late last month. That resolution expires March 4 and Congress will have to either pass an omnibus appropriations bill before that date or extend the continuing resolution.

Last week, InsideDefense.com reported that the Pentagon is finalizing contingency plans for how to endure under a continuing resolution that would last the balance of FY-11. Pentagon acquisition chief Ashton Carter has asked the service procurement chiefs to identify which programs would be affected if Congress extends the stopgap spending measure beyond March 4 instead of passing the appropriations bill.

By Sebastian Sprenger
January 25, 2011 at 3:07 PM

The Army still owes Congress a report with information about the analysis of alternatives crafted as part of the Ground Combat Vehicle program. As Inside the Army reports in this week's issue, quoting an Army spokeswoman, officials submitted an "interim response" to lawmakers on Jan. 15. That was the deadline day for a reporting requirement in the fiscal year 2011 National Defense Authorization Act.

As it turns out, that interim response amounts to very little. The one-page memo, which we obtained this week, simply states the report will be late. "The U.S. Army Training and Doctrine Command completed a GCV AoA Executive Summary Briefing, containing a thorough and detailed listing of the AoA results, in response to an Army tasking in December 2010," Army Deputy Chief of Staff (G-3/5/7) Lt. Gen. Daniel Bolger wrote in the memo.

"That report is currently in staffing and the Army will forward the report to the committees no later than March 31, 2011, along with an explanation of any plans, if any, to adjust the requirements of the GCV program during the technology-development phase," Bolger wrote.

The delay means a provision on the authorization legislation takes effect, restricting the use of funds for the program. But don't expect the Army to get too worked up about that. As the three-month evaluation period of the GCV begins, no contract is due to be handed down anyway. And with the report scheduled for delivery in later March, Army officials can wait out the ensuing 30 days of congressional vetting mandated by law and still be able to spend money shortly after a milestone A decision, which is expected in late April.

Of course, there is also the question of how much money lawmakers would appropriate for GCV in a long-overdue defense spending bill in March, if they can agree on a budget bill for the remainder of FY-11 in the first place.

By Dan Taylor
January 24, 2011 at 8:53 PM

The P-8A Poseidon program awarded its first low-rate initial production contract to manufacturer Boeing late Friday.

The contract, valued at $1.53 billion, covers the purchase of six P-8A maritime surveillance aircraft and “associated spares, support equipment and tools, logistics support, trainers and courseware,” according to a Jan. 21 Defense Department contract announcement. Work should be complete in January 2013.

P-8 program manager Capt. Mike Moran told Inside the Navy last week that the program is already hard at work on the second LRIP contract, which Boeing should receive in the summer for seven aircraft.

However, if the Pentagon has to run on a continuing resolution for the rest of the year, the program will only be able to buy six aircraft. The program is studying whether that would jeopardize the 2013 in-service date of the aircraft, according to Moran.

By John Liang
January 24, 2011 at 3:30 PM

Last August, the Defense Security Cooperation Agency notified Congress of a possible Foreign Military Sale to Kuwait of 209 MIM-104E PATRIOT Guidance Enhanced Missile-T (GEM-T) Missiles for an estimated cost of $900 million.

This morning, Raytheon announced a $145 million portion of that sale, according to a company statement.

The Army's Aviation and Missile Command at Redstone Arsenal, AL, "issued the contract to complement Kuwait's Configuration-3 radar system upgrade work already underway at Raytheon," the statement reads. Further:

"This new GEM-T missile production contract highlights the efforts by Kuwait Air Defense to maintain readiness and effectiveness of the Patriot Air and Missile System to counter evolving regional threats," said Sanjay Kapoor, vice president of Patriot Programs at Raytheon Integrated Defense Systems (IDS). "We continue to modernize the Patriot system and are committed to providing Kuwait and our 11 other partner nations globally with increased system reliability and reduced life-cycle costs."

According to the Aug. 11, 2010, DSCA announcement:

This proposed sale will contribute to the foreign policy and national security of the United States by helping to improve the security of a Major Non-NATO ally which has been, and continues to be, an important force for political stability and economic progress in the Middle East.

Kuwait needs these missiles to meet current and future threats of enemy air-to-ground weapons. Kuwait will use the increased capability as a deterrent to regional threats and to strengthen its homeland defense. Kuwait will have no difficulty absorbing these missiles into its armed forces.

The proposed sale of this equipment and support will not alter the basic military balance in the region.

By Christopher J. Castelli
January 24, 2011 at 2:10 PM

Defense cuts are "absolutely" on the table, Eric Cantor (R-VA), the House majority leader, said Sunday on NBC’s Meet the Press.

"I've said before, no one can defend the expenditure of every dollar and cent over at the Pentagon." he said. "And we've got to be very serious to make sure that they are doing more with less as well."

This week, the House will have a vote on the floor directing its appropriations committees "to go about deliberating on where those cuts are" for defense and other areas, Cantor noted. Across the government, there are hundreds of programs that will have to be cut, he added.

On CBS' Face the Nation, Sen. Chuck Schumer (D-NY) accused Republicans of seeking to avoid defense cuts despite the huge the deficit. "But for instance, they leave the military totally out," he said. "Now, I'm for a strong military, and I've always supported it. But everyone knows there's waste and inefficiency in the military budget. Defense Secretary Gates has proposed cutting $150 billion out of it. And if you want to be fair, if you want to convince people that you're really for cutting, you have to cut the waste across the board."

Meanwhile, former Chairman of the Joint Chiefs of Staff and Secretary of State Colin Powell said on CNN that defense cuts should be considered. "Yeah. I think we have to look at everything, both domestic and our international accounts. As we draw down from Iraq and as, over the next several years, we draw down from Afghanistan, I see no reason why the military shouldn't be looked at," Powell said.

"When the Cold War ended 20 years ago, when I was chairman and Mr. Cheney was secretary of defense, we cut the defense budget by 25 percent, and we reduced the force by 500,000 active duty soldiers," Powell added. "So it can be done. Now, how fast you can do it and what you have to cut out remains to be seen. But I don't think the defense budget can be made, you know, sacrosanct and it can't be touched." But the "real money" is in the entitlements such as Social Security, Medicare and Medicaid, he said. "And unless we do something about those, you can't balance the budget."

Such cuts are tough to make politically, Sen. Kent Conrad (D-ND) said on ABC’s This Week: "The American people say don't touch Social Security, don't touch Medicare, don't cut defense. That's 84 percent of the federal budget. . . . So, you know, there needs to be leadership to help the American people understand how serious this problem is and that it's going to take a lot more than cutting foreign aid and taxing the rich. You're not going to solve the problem that way."

Asked about rumors he might be tapped to succeed Defense Secretary Robert Gates, Powell told CNN: "But the administration knows that I'm quite content with the work I'm doing now with young people, with education and a variety of other interests that I have. . . . I'm not anxious to be offered a government job and I'm not interested in a government job."

By John Liang
January 21, 2011 at 10:32 PM

The House Armed Services Committee just released the witness list for next Wednesday's hearing on Defense Secretary Robert Gates' budgetary efficiencies proposals.

A notable absence: Gates himself. Instead, the following Pentagon officials are slated to appear, according to the committee statement:

  • The Honorable William Lynn, Deputy Secretary of U.S. Department of Defense;
  • General Peter W. Chiarelli, USA, Vice Chief of Staff of the U.S. Army;
  • Admiral Jonathan W. Greenert, USN, Vice Chief of Naval Operations of the U.S. Navy;
  • General Joseph F. Dunford Jr., USMC, Assistant Commandant of the U.S. Marine Corps; and
  • General Philip M. Breedlove, USAF, Vice Chief of Staff of the U.S. Air Force.
By Marcus Weisgerber
January 21, 2011 at 10:10 PM

The Senate Armed Services Committee has scheduled a hearing next week to review the Air Force's inadvertent disclosure of KC-X tanker evaluation data.

While the witnesses testifying at the Jan. 27, 9:30 a.m. hearing are “to be determined,” it's fair to say that David Van Buren, the Air Force's acting acquisition executive, would likely be one of them. The hearing is the latest bit of drama to surround the service's tanker replacement effort.

Committee Chairman Carl Levin (D-MI) agreed to hold the hearing late last year in response to an incident in which the Air Force mistakenly sent Boeing bid evaluation data to EADS and EADS data to Boeing. Boeing-friendly Sen. Maria Cantwell (D-WA) urged Levin to hold the hearing.

The announcement comes one day after Cantwell sent a letter to Levin urging him to ask the Air Force the following questions:

  • What steps were taken to ensure EADS did not gain an unfair competitive advantage by having Boeing data for more than a month before the investigation was completed by the Air Force?
  • What did the Air Force’s forensic analysis show?
  • Were each company’s actions consistent with ethics rules, standards and practices described in the Air Force’s ethics briefing each bidder received?
  • Will the data release compromise the part of the bidding process that includes the three adjustments to price?
  • If so, what does this means for the competition?

Last week, Air Force Secretary Michael Donley said he does not expect the congressional investigation into inadvertent disclosure of KC-X data to hinder the service's plans to award the $35 billion contract. "I don't think the hearing issue is connected to our source-selection process," Donley said at a Jan. 12 Air Force Association-sponsored breakfast.

By John Liang
January 21, 2011 at 9:05 PM

With all the recent brouhaha about Defense Secretary Robert Gates' proposed cancellation of the multibillion-dollar Expeditionary Fighting Vehicle program, we thought it might be worthwhile to go back and revisit some of the governmental paper trail before and after his decision -- all the way back to 2007:

GD Briefing Slides On Keeping EFVs

In a Jan. 12, 2011, presentation labeled "everybody wins," General Dynamics lobbyists argue that cutting the Expeditionary Fighting Vehicle procurement quantity of record from 573 to 200 vehicles would save billions of dollars while providing jobs in Ohio and Michigan.

Lawmakers' Letters On The EFV Program

In a Jan. 6, 2011, letter to President Obama, Ohio Sen. Sherrod Brown (D) and Reps. Marcy Kaptur (D), Patrick Tiberi (R), Steve Austria (R), Bob Latta (R), Tim Ryan (D), Michael Turner (R), Steven LaTourette (R) and Jim Jordan (R) oppose the elimination of the Expeditionary Fighting Vehicle program. Also includes a Jan. 6 Brown/Kaptur/Jordan statement, a related Jan. 6 letter from Jordan to Defense Secretary Robert Gates and a Jan. 7 letter from Turner to Gates.

CRS Report On The Marine Corps' EFV

The Sept. 1, 2010, Congressional Research Service report discusses background and issues for Congress regarding the Marine Corps' Expeditionary Fighting Vehicle.

Sen. Brown Letter To Mabus On The EFV Program

In a Sept. 28, 2010, letter to Navy Secretary Ray Mabus, Sen. Sherrod Brown (D-OH) urges Mabus to continue the Expeditionary Fighting Vehicle program.

Virginia Senators' Letter To Gates On EFV

In a Sept. 30, 2010, letter to Defense Secretary Robert Gates, Virginia Sens. Mark Warner (D) and Jim Webb (D) call for the Expeditionary Fighting Vehicle program to complete development and testing before its fate is decided.

DOD's Expeditionary Fighting Vehicle ADMs

The June 5, 2007, acquisition decision memorandum certifies "a restructured (EFV) program that extends System Development and Demonstration (SDD) to allow development of a second set of EFV prototypes and delays milestone C (MS C) to 2011." Also includes a subsequent June 18, 2008, ADM that approves proceeding to the SDD-2 phase, including the procurement of seven prototype systems. Note: Both memos are marked "for official use only."

By John Liang
January 21, 2011 at 4:25 PM

InsideDefense.com reported earlier this month that the Pentagon had insulated its weapon system modernization accounts from a five-year, $78 billion cut imposed on military spending by the White House during the fiscal year 2012 budget endgame, allowing the services to retain $100 billion in efficiencies garnered since June by cutting overhead activities to bolster procurement and force structure accounts. Further:

Anticipating scrutiny of defense spending because of the nation's weakening fiscal position, Gates last spring began pushing the DOD to begin finding ways to be more efficient. In total, Gates today said the Pentagon identified $154 billion in efficiencies over five years, a sum greater than the $102 billion target he set in June.

"For all of these DOD-wide initiatives, a major objective beyond creating monetary savings was to make this department less cumbersome, less top-heavy, and more agile and effective in the execution of its responsibilities," Gates said. "My hope and expectation is that, as a result of these changes over time, what had been a culture of endless money, where cost was rarely a consideration, will become a culture of savings and restraint."

In the end, the military departments each found more than $28.3 billion over five years, as Gates requested, collectively identifying $100 billion in efficiencies. Of this sum, $28 billion will be spent by all four services to finance what Gates said are “higher-than-expected operating costs,” including health care, pay housing expenses, weapons maintenance and training.

"Frankly, using the savings in this way was not my original intent or preference, but we have little choice but to deal with these so-called 'must-pay' bills -- and better to confront them honestly now than through raiding investment accounts later," Gates said.

The defense secretary originally wanted efficiencies to be plowed back into modernization and force structure accounts.

One of the outside organizations tasked in recent years to explore ways of reducing overhead is the Defense Business Board. Arnold Punaro, who chaired a DBB task group that looked at the topic last summer, noted in July that this was not the first time the DBB has been asked to look into ways of reducing overhead:

I might point out that a number of the DBB members to include our Chairman Michael Bayer, Dov Zakheim, Denis Bovin and others worked on an effort I chaired in 1997 for then Secretary Cohen where we spent almost a year making recommendations on many of the same overhead problems the Department faces today. Not many of the problems identified then have been solved. These problems are difficult, both inside and out of the Pentagon, and they require discipline over a number of years to fully address.

In some cases, you never get to the facts or merits because of the emotion tied up in issues. Frankly speaking, many are in what some call the "too hard" box because about every three years either someone in the Pentagon or on the outside or both, conducts another study on trying to effectively address DoD’s overhead. Today the Task Group is identifying many of the tough choices that must be made, not only because it is good business management, but today's fiscal environment and future war fighting requirements will not tolerate these inefficiencies.

This Board has been recommending ways for the Department to improve its effectiveness and delivery of service for years. The Board's most important work to date was our advice for the Transition to the incoming 2009 Administration. In that report, the DBB articulated three existential challenges facing the Department that required immediate attention: (1) lowering the overhead cost, (2) slowing the ballooning acquisition costs, and (3) addressing the root causes of health care costs.

Time will tell whether DOD takes the board's recommendations into account -- and whether they pay off. Click here to read the DBB's findings from last year.

And see below for our coverage of some of the DBB's more recent work:

Defense Business Board: Establish New Office For Strategic Sourcing

DefenseAlert, Jan. 20, 2011 -- The Pentagon should establish an office within its acquisition directorate to oversee strategic sourcing directives and prevent duplication and inefficiency among the military departments, according to the Defense Business Board.
DOCUMENT: DBB Strategic Sourcing Task Force Final Report
RELATED: Business Board: Pentagon Should Reconsider CMO Position