The Insider

Energy Impact
By John Liang
July 14, 2011 at 7:52 PM

The Pentagon recently looked at 249 renewable energy projects proposed in 35 states and Puerto Rico, and found that "229 have little or no impact on military missions, thus clearing the way for the future production of more than 10 gigawatts of renewable energy generation capacity," according to a Defense Department statement released this afternoon. Further:

These new energy projects will increase the nation's energy security while ensuring that our military services have the test capabilities, training venues, and equipment to help keep America safe.

The DoD will undertake further studies and negotiations with developers, in consultation with the appropriate federal agencies and state and local governments, of the 20 projects that may pose adverse impacts on military readiness and operations.  The department's goal in those negotiations will be to mitigate any potential adverse effects and allow the projects to move forward that are found to have little or no impact on military missions.

The review involved approximately 6,500 wind turbines and 30 solar projects, according to DOD. Click here to view the complete list of the projects.

Cyberspace Strategy
By John Liang
July 14, 2011 at 6:13 PM

The Pentagon's new cyberspace strategy has five "strategic initiatives":

Treat cyberspace as an operational domain to organize, train, and equip so that DOD can take full advantage of cyberspace's potential;

Employ new defense operating concepts to protect DOD networks and systems;

Partner with other U.S. government departments and agencies and the private sector to enable a whole-of-government cybersecurity strategy;

Build robust relationships with U.S. allies and international partners to strengthen collective cybersecurity;

Leverage the nation's ingenuity through an exceptional cyber workforce and rapid technological innovation.

Vice Chairman of the Joint Chiefs of Staff Gen. James Cartwright said during a briefing this morning that the Pentagon must shift its cybersecurity focus from defensively protecting its networks to deterring hackers' attacks. As InsideDefense.com reports:

During a breakfast with reporters, Cartwright said the Defense Department's approach to cybersecurity consists of "90 percent of thinking about how to build the next best firewall and 10 percent thinking about what we might do to keep them from attacking us."

DOD, he said, must reverse those percentages.

The Pentagon released its long-awaited cybersecurity strategy today, after Cartwright spoke. He noted the strategy addresses how the department should defend its networks. But, he added, the next iteration must look at how to dissuade and disincentivize would-be attackers. DOD has to convince hackers that the price of attacking a DOD network will be too costly, he said.

The "'if-I-don't-get-in-today-I'll-just-try-them-again-tomorrow mindset' -- we've got to change that," Cartwright said. "Right now we're on a path that is too predictable -- way too predictable. It's purely defensive."

Click here for the rest of the article, and here to read the document.

Dirty Bombs
By John Liang
July 13, 2011 at 6:39 PM

A recent Congressional Research Service report on conventional bombs that could spread radiation within a population base raises a host of issues on how to deal with such so-called "dirty bombs," including:

• the priority for countering [Radiological dispersal devices] vs. other [chemical,biological, radiological and nuclear weapons];

• the priority given to securing domestic vs. overseas radioactive sources;

• whether to establish a radiation detection system in cities;

• how best to prepare for decontamination following an RDD attack;

• how to dispose of potentially large volumes of waste generated by decontamination;

• whether to modify certain personnel reliability standards;

• whether to modify the pace of a program for implementing certain security enhancements for U.S. radioactive sources; and

• how to improve radiological forensics capability.

CRS doesn't normally release its reports to the public.

Empaneled
By Christopher J. Castelli
July 12, 2011 at 8:44 PM

Rep. Buck McKeon (R-CA.), chairman of the House Armed Services Committee, and Ranking Member Adam Smith (D-WA) today announced the creation of a "special bipartisan panel," led by Rep. Mike Conaway (R-TX) and Rep. Rob Andrews (D-NJ), charged with addressing "the ongoing challenge of financial management in the Pentagon."

In a statement, the lawmakers said the panel would address "broad issues surrounding Defense Department financial management," including the extent to which financial management systems deliver timely, reliable and useful information for decision-making and reporting; DOD's ability to identify efficiencies and waste utilizing financial management systems; the proficiency of financial management personnel in financial and budgetary accounting in order to manage defense resources; and the effectiveness of the Financial Improvement and Audit Readiness plan.

“In these difficult fiscal times, making every penny in the defense budget count must be a top national security priority,” said Conaway. "Improving accountability and reducing waste within the DOD will save taxpayers money and it is essential to reducing our deficit," added Andrews.

'Specially Designed'
By John Liang
July 12, 2011 at 3:00 PM

The Commerce Department could unveil as early as this week a new definition for generic parts, components, accessories and attachments that are "specially designed" for weapons but are not significant enough to fall under the strict controls of the U.S. Munitions List (USML), and for end items that have a uniquely military use but also a civil and commercial application, Inside U.S. Trade reported late last month.

Kevin Wolf, assistant Commerce secretary for export administration, told the Regulations and Procedures Technical Advisory Committee (RPTAC) on June 14 that these items warrant some degree of control on the Commerce Control List (CCL), just not the same degree of control that they now face on the USML. Inside U.S. Trade further reported:

For example, among the end items the proposed definition is meant to cover are machine tools specially designed to make missiles, he said.

This new definition of specially designed will be part of a broader proposed regulation to be issued in July, before the July 18-21 export control update conference. It will lay out the framework for moving items of the USML to the CCL as part of the administration's export control reform initiative.

Many specially designed items on the USML are expected to move to the CCL as part of the administration's export control reform initiative, Wolf said. Remaining on the USML will be items that have apparent military and intelligence system, he said.

Wolf said the ultimate goal is to write out the term "specially designed" altogether from U.S. control lists and come up with better descriptions of items that are controlled. But, since the term is used in various forms within the multilateral export control regimes such as the Wassenaar Arrangement and Missile Technology Control Regime (MTCR), he acknowledged that working multilaterally to replace that term could take "a very long time."

The USML reflects the International Traffic in Arms Regulations (ITAR), which uses the term "specifically designed or modified" as one of three elements defining a defense item.

The Export Administration Regulations (EAR), which govern the CCL, use the term "specially designed" in a number of different contexts and no clear indication if its definition in one area applies to the others, according to private-sector sources.

For example, section 772 of the EAR defines "specially designed" in the context of the Missile Technology Control Regime (MCTR) as a piece of equipment designed only for use in a missile that has no other function or use. It is also used to define ancillary cryptography, which is subject to less stringent export controls than other types of encryption.

According to Wolf, the new definition has to be a term that is "common, objective [and] not inconsistent" with the definition of specially designed in the MTCR, which he said is narrowly tailored to that specific control regime and not acceptable to other applications of the term, such as decontrolling generic parts and components that have potential for use in commercial end items.

Reducing Nukes
By John Liang
July 11, 2011 at 4:06 PM

Reducing the number of nuclear weapons in the world cannot be done by a single nation, according to a senior State Department official.

Under Secretary of State for Arms Control and International Security Ellen Tauscher said in a speech in Paris late last month that "we need other countries to step forward with us and follow in our footsteps. Other countries need to be as transparent and as open as we are to provide confidence for deep reductions. Our actions show that transparency and security can go together. Secrecy may sometimes be necessary, but it also can lead to misunderstandings, miscalculations, and mistrust."

According to the text of her just-released speech, delivered on June 29:

While we have a growing consensus that a world without nuclear weapons is in all our interests, it is still fragile. Nuclear disarmament itself is not necessarily the Holy Grail, especially if we do not increase international stability and security. The journey and each step along the way is just as important, if not more important than the destination. These steps can enhance our mutual security and create a growing sense of momentum.

It is for this very reason why the P-5 follow-on conference, which begins tomorrow morning and will continue through Friday, is such a valuable exercise. It is a successor to an initial conference held in London in September 2009.

All of us have brought our experts from capitals to have a frank and detailed exchange on verification and transparency measures that can further enable future steps on disarmament.

From an American perspective, we so enjoy coming to these conferences that we want to make it a regular habit. It is important that our emerging dialogue in the P-5 context evolve into a regular component of our bilateral and multilateral relationships. That is essential if we are to make progress on the objectives set forth in the 2010 NPT Review Conference Action Plan.

One core principle we should all share is that, as we draw down, other countries should not build up. That is why the United States is investing so much energy to begin negotiations on a Fissile Material Cutoff Treaty (FMCT). There are already too many nuclear weapons and too much fissile material for such weapons in this world. We do not need more fissile material that could be used to make more bombs, and we do not want to add to the risk of theft or misuse.

It remains our strong preference to house FMCT negotiations within the Conference on Disarmament (CD). Yet, so long as efforts to agree on a Program of Work remain deadlocked, it is only appropriate that we explore alternate venues.

Preserving the FMCT inside the CD when that body remains paralyzed only ensures that progress on an FMCT will remain out of our collective grasp.

Appropriations Approval
By Christopher J. Castelli
July 8, 2011 at 4:17 PM

The House today voted 336-87 to approve the fiscal year 2012 defense appropriations bill.

Senate appropriators have not yet released their version of the bill.

Lynn Out -- Updated
By Dan Dupont
July 7, 2011 at 5:29 PM

The Associated Press is reporting that Deputy Defense Secretary Bill Lynn will resign this year:

In a further shake-up of U.S. defense leaders, the Pentagon's second-ranking official said Thursday he intends to resign but has agreed to stay on the job until Defense Secretary Leon Panetta chooses a successor.

Deputy Defense Secretary William J. Lynn III said in an Associated Press interview that he told Panetta last Friday, on Panetta's first day as Pentagon chief, that he planned to resign for personal reasons.

"I thought this was a logical point for me to depart the Pentagon," Lynn said during the interview in his office.

He said he told Panetta that he would be best served by having a deputy who was willing to stay at least through President Barack Obama's first term, which ends in January 2013.

"I did not think I could commit for that type of timeline," he said.

Lynn said he was leaving for "personal, family reasons," and wanted to spend more time with his children. He said it had nothing to do with Obama's choice of CIA director Panetta to succeed Robert Gates. Lynn said he knew Panetta only slightly from periodic contact while both served in the Clinton administration.

UPDATED 1:45: Panetta has issued a statement:

William J. Lynn III, the third-longest serving deputy secretary in the post-Cold War era, today announced his intention to step down as deputy secretary and return to private life. Lynn met with Secretary of Defense Leon E. Panetta late last week to discuss his plans. At Panetta’s request, Lynn has agreed to remain until a successor is in place this fall.

“Bill Lynn has provided outstanding advice and counsel to this department and to the nation over the course of his long career,” said Panetta. “I will rely on his experience and expertise during this transition period. His service will be greatly missed.”

As the nation’s 30th deputy secretary of defense, Lynn capped a nearly two-decade career of government service, during which he served as senior national security advisor to the late Sen. Edward Kennedy and a senior advisor to five secretaries of defense.

“It has been a rare privilege to serve in the Department of Defense during such a challenging time,” said Lynn. “And it has been an honor to serve alongside an outstanding group of civilian and military members who every day demonstrate the value to this nation of their unwavering commitment and dedicated service.”

During his tenure, Lynn helped the department navigate new strategic and fiscal realities, while supporting efforts in two wars. He helped create a new space policy, the department’s first ever operational-energy strategy, and a landmark cyber strategy to protect the nation in the digital age, including the creation of the U.S. Cyber Command. He received widespread praise from America’s men and women in uniform for expanding their use of social media to communicate with their families while deployed.

Lynn also oversaw the department’s budget process, relations with the defense industry, and acquisition process, including the department’s successful bid for a new refueling tanker.

Improving the care and treatment of wounded warriors was also a signature issue for Lynn, who implemented a new system of disability evaluation and oversaw the department’s development of an integrated electronic health record.

Lynn will continue living in the Washington D.C., area but has not yet announced any future plans.

Defense Business Systems
By John Liang
July 7, 2011 at 3:17 PM

The Pentagon acquisition office recently released a "directive-type" memo outlining an updated acquisition policy for defense business systems (DBS). The memo:

Establishes policy requiring the use of the Business Capability Lifecycle (BCL) model as the acquisition process for DBS, and assigns responsibilities and provides procedures for meeting BCL and DBS requirements. The principles of BCL can be applied at the increment or at the release level - BCL provides the framework for structuring the definition, development, testing, production, deployment, and support of DBS. This model is a guideline and tailoring, consistent with statute and sound business practice, is encouraged.

The memo mandates that BCL is "the overarching framework for the planning, design, acquisition, deployment, operations, maintenance, and modernization of DBS," and applies to any DBS modernization effort with a total cost of more than $1 million. Further:

When a Major Automated Information System (MAIS) DBS employs an incremental acquisition approach, all functional capabilities associated with a given increment shall be reflected in any resultant Acquisition Program Baseline (APB) (cost, performance, and schedule) and must be achievable within 5 years from when funds were first obligated. For all DBS that are not MAIS or otherwise designated, they must achieve Initial Operating Capability within 5 years from Milestone (MS) A. Delivery of capability within an increment (e.g., releases, sub-phases, software drops) must be based on technologies that have been determined to be mature at the MS B decision review. Functional capabilities that are not supported by adequate cost estimates, mature technologies, etc., shall be deferred to subsequent program increment(s).

CSAR Shift
By Gabe Starosta
July 6, 2011 at 5:50 PM

An omnibus reprogramming request submitted to Congress on June 30 would shift $10 million in research and development money appropriated for the CSAR-X program, which was canceled two years ago.

The omnibus reprogramming request, signed by Defense Department Comptroller Robert Hale, involves the transfer of some $6 billion among DOD accounts, and one section of the document focuses on funds appropriated in fiscal year 2010. One of those FY-10 items involves slightly more than $10 million in research, development, test and evaluation accounts for the CSAR-X, which then-Defense Secretary Robert Gates killed in June 2009. The Air Force has since replaced the initiative with a competition for a new combat-search-and-rescue helicopter known as HH-60 Recap.

Boeing won the original CSAR-X competition in 2006, but protests from other contractors prevented work on the project for years, leading Gates to cancel it. The reprogramming request, if approved, would still leave $4 million in the CSAR-X RDT&E account.

Fighters For Taiwan
By John Liang
July 6, 2011 at 3:13 PM

Lobbyists for Taiwan are claiming that allowing the island to import F-16 fighter aircraft would have a "positive impact" on U.S. jobs, noting Lockheed Martin announced last week that 1,500 workers would be laid off from its aeronautics division.

U.S.-Taiwan Business Council President Rupert Hammond-Chambers said in a statement released today:

The recent Perryman Report shows that the follow-on sale of F-16s to Taiwan would have a positive economic impact around the country, generating some US$8.7 billion in gross output and sustaining approximately 16,000 direct and indirect jobs over the life of the program. That would represent a significant economic boost to states such as Ohio and Florida -- where unemployment stands at 8.6 percent and 10.6 percent, respectively. Reports estimate that 1,800 workers in Ohio and 1,900 in Florida depend on an F-16 sale to Taiwan. Should the Taiwan sale fail to materialize, however, current orders would only sustain the F-16 production line for another two years.

Tanks For Egypt
By John Liang
July 5, 2011 at 6:45 PM

The Pentagon wants Congress to approve a foreign military sale of 125 M1A1 Abrams tank kits and related equipment to Egypt that would cost nearly $1.33 billion, according to a recently released Defense Security Cooperation Agency statement. Further:

The Government of Egypt has requested a possible sale that includes 125 M1A1 Abrams tank kits for co-production, 125 M256 Armament Systems, 125 M2 .50 caliber machine guns, 250 M240 7.62mm machine guns, 125 AGT-1500 M1A1 series tank engines and transmissions, 120mm test cartridges, spare and repair parts, maintenance, support equipment, special tool and test equipment, personnel training and equipment, publications and technical documentation, U.S. Government and contractor engineering and logistics support services, and other related elements of logistics and program support. Articles may be provided in furtherance of a co-production agreement. The estimated cost is $1.329 billion.

This proposed sale will contribute to the foreign policy and national security of the United States by helping to improve the security of a friendly country that has been and continues to be an important force for political stability and economic progress in the Middle East.

The additional M1A1 tanks will provide Egypt with a modern tank fleet, enhancing its capability to meet current and future threats. This will contribute to Egypt’s goal to update its military capability while further enhancing interoperability between Egypt, the U.S., and other allies. Egypt, which has co-produced the M1A1 Abrams tank, will have no difficulty absorbing the additional tanks.

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

The prime contractors will be General Dynamics in Sterling Heights, Michigan, Honeywell International Incorporated in Phoenix, Arizona, and Allison Transmission Motors in Indianapolis, Indiana. There are no known offset agreements proposed in connection with this potential sale. . . .

There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.

However, Inside the Army reported in April that the recent unrest in the Middle East could put a damper on such a sale.

Over the past year, lawmakers have become agitated over a Pentagon proposal to shut down the Abrams production line. The issue has drawn the attention of the speaker of the House, who intends to ask the Army secretary to review the decision, according to government officials. As ITA reported in April:

The Abrams is produced by General Dynamics Land Systems and hundreds of subcontractors working out of a government-owned plant in Lima, OH. But, for fiscal reasons, the Army wants to stop production of the Abrams M1A2 in 2013 and begin work again in 2016 with an upgrade effort. GDLS and its host of subcontractors have been lobbying Congress to change the Army's mind.

The companies' claim that Abrams manufacturing impacts the economies of 48 states has garnered support from many lawmakers, including House Speaker John Boehner (R-OH), whose congressional district is adjacent to where the Abrams plant is located.

"Congressman Boehner intends to ask Secretary [John] McHugh to review the Army's current plan to cut tank production and ask that the excessive costs of shutting down the Lima plant are considered," according to Brittany Bramell, the speaker's spokeswoman.

An Army study from 2008 estimates the cost of a three-to-four-year Abrams shutdown and restart would not exceed $800 million, whereas producing 70 tanks annually between fiscal year 2012 and FY-15 would cost roughly $2.1 billion, according to an April 14 statement from the Army.

For more combat vehicle news, click here.

Gates Memo On NII
By John Liang
July 5, 2011 at 5:11 PM

Last week, Inside the Pentagon reported that Defense Secretary Robert Gates had quietly agreed late last year to transfer responsibility for the Defense Department's information network to U.S. Cyber Command, but reversed that decision in the twilight of his tenure, according to a memo he wrote. Further:

Gates' memo on the disestablishment of the Pentagon's Networks and Information Integration (NII) office, issued earlier this week, describes DOD's plans for shuttering the office following months of uncertainty about how the department would proceed.

Inside the Pentagon reviewed a copy of the memo, which is addressed to DOD acquisition executive Ashton Carter, NII boss and Chief Information Officer Teri Takai and Christine Fox, the director of the cost assessment and program evaluation shop.

Gates -- who retires today and will be succeeded by Leon Panetta -- first announced plans for NII's closure last August. Gates' chief of staff, Robert Rangel, set a March 30 deadline for the task. When DOD failed to meet the deadline, Pentagon officials admitted the task was harder than expected, but they declined to comment on the details of internal deliberations.

But the new memo reveals Gates "tentatively agreed" last December to "a conceptual approach that involves transferring significant responsibility for the operation of the DOD information network" from NII and the Defense Information Systems Agency to CYBERCOM.

The website for Takai's office states she is responsible for setting policy and providing oversight of information processes, systems and technologies. DISA provides information technology and communications support to the White House, the armed services and the combatant commands. CYBERCOM chief Gen. Keith Alexander has said his command coordinates, integrates and synchronizes activities to direct the operations and defense of DOD networks.

Gates writes that issues raised by Fox's office in February led him to "recognize there are a number of significant policy, operational and practical concerns with shifting DISA to CYBERCOM that no longer make it a viable approach."

The department will abandon plans for such a shift and refocus on disestablishing NII, the memo states.

"To this end, I believe the best course for the Department is to return to the original goal of disestablishing NII into a smaller and more focused and strengthened Chief Information Officer (CIO) office that has a strong relationship between DISA and CYBERCOM and achieves savings from eliminating functions that are duplicative or no longer necessary," Gates writes.

We now have a copy of the memo. Click here to view it.

Small Biz Set-Aside
By John Liang
July 5, 2011 at 3:25 PM

The Missile Defense Agency has sent out a feeler to gauge small businesses' interest in working on a set-aside contract for MDA's Upgraded Early Warning Radar effort. According to a June 30 Federal Business Opportunities notice:

The purpose of this Request for Information (RFI)/Sources Sought is to aid the government in determining if there is sufficient small business industrial expertise and interest to proceed with a small business set-aside, competitive procurement for the desired capability described below. Only small businesses should reply to this announcement.

This RFI/Sources Sought defines the tasks and scope for the UEWR & CD BIT which shall be acquired through a developmental Indefinite Delivery/Indefinite Quantity (IDIQ) contract to plan, execute, and analyze UEWR & CD BMDS flight tests, UEWR & CD BMDS ground tests (including MDA integration testing with the Single Stimulation Framework and at each participating radar site as necessary), and element stand-alone ground tests.

This RFI/Sources Sought includes developmental efforts for test provisioning, operation and non-COTS maintenance for the hardware-in-loop (HWIL) representations for each UEWR & CD sensor along with laboratory facilities that shall be required to execute Pre-Mission Testing/System Pre-Mission Testing (PMT/SPMT) for flight tests, BMDS ground testing, and element ground testing.

Building Ships
By John Liang
July 1, 2011 at 3:10 PM

Analysts from Wall Street firm Credit Suisse met with shipbuilder Huntington Ingalls Industries execs this week and noted "a cautiously optimistic tone." In a research note, Credit Suisse analysts write: "While HII sees upside in earnings and cash flow over the long-term, it is now focused on the heavy lifting required in the short and mid-term to build a cultural and operational foundation to achieve that end." Further:

■      No Guidance Yet: HII has yet to offer EPS guidance, citing visibility around Avondale as a key factor, and instead suggested investors track ship progress & milestones over financial targets.

■      Gulf Coast Margin Remains Key Driver & Watch Item: Mgmt reiterated its 9%+ L/T margin target by year-end 2014 (currently at 5-6% overall, and near 2% in the Gulf Coast).  Poorly priced contracts on LPDs 22-25 and LHA-6 (now at or near zero margin as prior mgmt’s plan for serial efficiencies were never realized) will begin to roll off later this year.  As new ships (DDG-113, LHA-7, LPD-26) move from planning to construction, margin should ramp, albeit slowly. HII noted that normally, lead ship contracts should earn ~8% while serial production ships represent a ~10% margin opportunity.

■      Mgmt Frames Report of Higher Potential Cost on Aircraft Carrier:  A June 2011 CBO report estimates that CVN-78 (Ford) may exceed its $12B budget target by $600M or more.  HII cautioned that its portion of the work is far below the $12B total cost, and the excess cited may not be attributable to HII.  Under this cost-plus contract, higher costs are recoverable, but fee could be impacted, depending on the responsible party & the share line.

■      No Near-Term Catalysts; Reiterate N with $35TP: While we see eventual EPS growth as bad contracts roll off, the linearity of improvement is unclear, especially since new work (with presumably better pricing) will be booked conservatively at first. Thus, visibility on margin improvement (the key catalyst) is still a year or more distant in our view. Reiterate N with a $35 TP.

Inside the Pentagon reported in April that HII, according to DOD, was not moving fast enough to fix its management deficiencies:

Huntington Ingalls Industries' shipyards stumbled last year in Defense Department reviews concerning earned value management, the Pentagon's top tool for ensuring industry delivers weapons on time and on budget. Since then, the shipbuilder has not made enough progress addressing the problems, said Capt. Cate Mueller, spokeswoman for Navy procurement chief Sean Stackley.

"The Navy participated in the recent EVM reviews with the Defense Contract Management Agency at the shipyards and, while noting progress, is not satisfied with the rate of progress," said Mueller. "We will continue to provide oversight while working with the shipyards to ensure appropriate priority is placed on correcting these deficiencies."

The Navy's comments came in response to remarks by Mike Petters, the shipbuilder's president and CEO, who recently said his company has "more work to do" on earned value management but also questioned whether all the rules should apply (Inside the Pentagon, April 7, p1).

DOD uses the EVM tool to flag problems, forecast cost and schedule performance, and get troubled Pentagon procurement programs back on track. Asked whether the company should apply all 32 of the Pentagon's management rules to each of its contracts, Petters said no.

"I wish it was that simple, but it's not," he said. "We get certified by our customer to invoice and report. And we do that, we go through all those certifications and we don't have any issues. Then we have another agency monitor and inspect and they come up with areas that we need to go work on. And then we take a look at those and say, 'Is that something that really makes sense for this business or not?' And then we have a discussion with our customer about that."