The Insider

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February 14, 2011 at 7:09 PM

Defense Secretary Robert Gates is sticking to his guns with the press right now and refusing to entertain questions on Egypt or any other topic not related to the budget, noting that he is slated to testify before two committees later in the week and will have plenty of chances to talk about Egypt then.

Asked about the reaction on Capitol Hill to his defense budget plans, Gates noted that in meetings today "there really wasn't much discussion at all . . . about the politics of the budget. There were . . . a number of questions for clarifications sake, but really nothing beyond that."

Watch more here.

By Jordana Mishory
February 14, 2011 at 4:12 PM

The Pentagon's fiscal year 2012 budget request throws its support behind adding $2.2 billion for National Nuclear Security Administration weapons activities between 2013 and 2016, according to a summary of the request posted on the White House's website.

"These funds will enhance the reliability of the nation's nuclear weapons complex and support the goals of the Nuclear Posture Review as the United States and Russia implement the New Strategic Arms Reduction Treaty (START)," the summary states.

Senators ratified the New START treaty during December's lame duck session after a long-fought battle.

The budget also calls for funding to sustain nuclear deterrence in order to protect the nation and promote worldwide stability. To do so, the administration wants to "modernize America's nuclear arsenal and the complex that sustains it." This will help to deter nuclear buildup and proliferation.

"This includes specific commitments to maintain continuous at-sea deployments of ballistic missile submarines in the Atlantic and Pacific Oceans, as well as the ability to surge additional submarines during crises; sustain the Air Force's Minuteman III missile through 2030; and modernize the heavy bomber force so it can serve for the indefinite future," the summary states. "The budget continues the president's global lockdown initiative to secure nuclear materials, detect and deter nuclear testing and smuggling, and support verification and implementation of international nonproliferation treaties."

The administration is requesting a $553 billion base budget -- an increase of $22 billion over FY-10 appropriations. Congress never passed an FY-11 appropriations bill. The summary states that the request reflects investment in priorities including nuclear security.

By Amanda Palleschi
February 14, 2011 at 4:08 PM

President Obama's budget request for fiscal year 2012 provides $2.3 billion to "support improved cybersecurity efforts" in the Defense Department and "greater joint planning efforts" between DOD and the Department of Homeland Security to increase the effectiveness of U.S. cybersecurity efforts, according to documents released this morning by the White House. DOD and DHS signed a memorandum of agreement last year to align and enhance U.S. cyberdefense capabilities.

DOD's FY-12 budget request also seeks a $119 million boost to support U.S. Cyber Command, which was stood up in 2010 to “direct the operation and defense of specific DOD information networks,” according to a budget request summary issued by the White House.

“In addition to bolstering ongoing operational capabilities, the administration funds new and ongoing cybersecurity science and technology; enhances DOD activities to protect core defense information systems; and, in partnership with DHS, supports cybersecurity demonstration and pilot programs to protect critical network systems,” the summary adds.

DHS, meanwhile, is seeking $459 million in FY-12 for its National Cyber Security Division. Further, the intelligence community's FY-12 budget request also seeks funds to boost federal cybersecurity, the details of which are not specified in the White House summary.

By John Liang
February 11, 2011 at 11:01 PM

The Congressional Budget Office just released a report titled the "Long-Term Implications of the 2011 Future Years Defense Program." In it, CBO projects the "costs of DOD's plans for its base budget (reflected in the [future years defense program], along with other long-term plans released by the department) by using factors that are consistent with the department's recent experience."

The report presents the following conclusions:

* To execute its base-budget plans for the period covered by the FYDP, DoD would need about $187 billion (or 7 percent) more over those five years than if funding was held at the 2010 level of $537 billion. Over the 10 years from 2012 to 2021, DoD would need a total of $680 billion (or 13 percent) more than if funding was held at the 2010 level.

* From 2011 to 2015, DoD's base budget would grow at an average annual rate of 2.3 percent, after an adjustment for inflation. Beyond the FYDP period, from 2016 to 2028, average annual growth in the costs of DoD's base-budget plans would be 0.8 percent after an adjustment for inflation. At those rates, DoD's base budget would rise from $548 billion in 2011 to $601 billion in 2015 and to $665 billion in 2028.

* The primary cause of long-term growth in DoD's budget from 2011 through 2028 would be increasing costs for operation and support, which would account for nearly all of the increase. In particular, CBO projects that there would be significant increases in the costs for military and civilian compensation, military medical care, and various operation and maintenance activities.

* That large contribution of operation and support costs to budget growth is a change from earlier projections, in which sharp growth in anticipated requirements to replace and modernize weapon systems (the so-called bow wave) was the primary factor underlying budget growth beyond the years covered by the FYDP. In the current projections, acquisition costs would steadily grow from $189 billion in 2011 to a peak of $218 billion in 2017 (an increase of about 15 percent) before decreasing and leveling off—albeit with year-to-year variations—at an average of about $200 billion per year thereafter.

Stay tuned to InsideDefense.com's Defense Budget Alert on Monday, Feb. 14, for in-depth coverage of the Pentagon's rollout of the fiscal year 2012 budget request.

By Christopher J. Castelli
February 11, 2011 at 9:58 PM

Defense Secretary Robert Gates is scheduled to conduct a press briefing at 2 p.m. EST on Monday, Feb. 14 to discuss the Pentagon's fiscal year 2012 budget request, the department announced today. About 30 minutes later, Defense Department Comptroller Robert Hale and Lt. Gen. Larry Spencer, the Joint Staff's director for force structure, resources and assessment, are slated to provide an overview briefing on the defense budget proposal.

Next, the military departments will take their turns at the podium. According to DOD, the Army will brief its budget plan at 3:15 p.m., the Navy at 4 p.m. and the Air Force at 4:45 p.m. Stay tuned to InsideDefense.com for full coverage of the Pentagon's budget plans.

By John Liang
February 11, 2011 at 5:20 PM

Beginning Feb. 20, companies will have to certify that they are in compliance with a rule that requires an employer to obtain an export license for making available controlled technology, data and knowledge to non-U.S. workers, Inside U.S. Trade reports today:

The new rule for so-called "deemed exports" will require a company to certify on its formal visa request that it is in compliance with the license requirements. The U.S. Citizenship and Immigration Services (CIS) requires Form I-129, a petition for a non-immigrant worker, for foreign workers using H-1B, H-1B1 Chile/Singapore, L-1 and O-1A visas.

Licenses are required if these non-U.S. employees work with information and technology controlled under the International Traffic in Arms Regulations (ITAR) or the Export Administration Regulations (EAR).

The new form requires that a company declare that either an export license is not required for the non-U.S. employee or it is required and will be obtained before controlled data or technology is released to a non-U.S. worker.

Last April, the Pentagon published a new rule in the Federal Register that would amend the Defense Federal Acquisition Regulation Supplement (DFARS) "to address requirements for complying with export control laws and regulations when performing DOD contracts. The rule recognizes contractor responsibilities to comply with existing Department of Commerce and Department of State regulations and prescribes a contract clause to address those responsibilities."

By John Liang
February 10, 2011 at 10:32 PM

EADS North America today submitted its response to the Air Force's request for final proposal revisions in the KC-X aerial refueling tanker competition.

In its statement, EADS reiterated that its KC-45 aircraft would "be built in the United States by 48,000 American workers." Further:

If the Air Force selects the KC-45, EADS North America will build the tanker along with commercial freighter aircraft at a new aircraft production center in Mobile, Alabama, using a supplier base of hundreds of U.S. companies in more than 40 states.

"Our fighting men and women deserve the most modern, capable and proven tanker in the world, and American workers deserve the jobs that the KC-45 will create here at home," said Ralph D. Crosby Jr., EADS North America Chairman. "We're proud to compete on the merits of our tanker offering and support the warfighter's right to choose the aircraft they will go to war in."

The statement also takes a shot at competitor Boeing's tanker submission:

Because of its superior capabilities and efficiency, the EADS North America KC-45 will provide the Air Force substantial savings in operating costs compared to the concept aircraft that the Boeing company is offering. In true Air Force operational scenarios, Boeing's concept tanker will cost 15 percent to 44 percent more, measured on the basis of cost per gallon of fuel delivered, Crosby said.

Demonstrated cost efficiency is one reason that in four straight competitions, U.S. allies have chosen the A330-based tanker that EADS North America is offering the Air Force over the older Boeing 767 tanker. All of the KC-45's refueling systems have been proven in flight, with more than a thousand aerial refueling contacts and over 1.5 million pounds of fuel transferred to a wide range of receiver aircraft.

The concept aircraft and refueling systems that Boeing is offering to the Air Force have never been built, flown or tested.

"We're offering a real aircraft that has proven what it can do for our men and women in uniform, not asking the Air Force and U.S. taxpayers to take a huge gamble on an airplane that only exists on paper," Crosby said.

UPDATE: Boeing also submitted its proposal the same day.

By John Liang
February 10, 2011 at 4:21 PM

The Government Accountability Office announced this morning that it has launched its own flickr image-sharing page.

From its statement:

The GAO Flickr page features selected photos and graphics from GAO reports that are searchable, viewable, and downloadable by visitors to the site.

"GAO continues to seek out new, innovative ways to convey our findings," said Gene L. Dodaro, Comptroller General of the United States and head of the GAO. "The images in our reports help tell the story of government accountability by making complex concepts and data more understandable. Our Flickr page will allow us to highlight selected images and share them more easily with Congress and the public."

InsideDefense.com readers can click on these links to view GAO's national security and international affairs image sites, which one assumes will be added to in the future.

By John Liang
February 9, 2011 at 7:47 PM

U.S. Joint Forces Command is one step closer to being disbanded.

Army Gen. Raymond Odierno, the head of JFCOM, announced today that Defense Secretary Robert Gates had signed a memo "providing guidance and direction to execute the disestablishment of" JFCOM. In a statement, Odierno further says:

I will oversee the implementation and transition of the disestablishment. It's my intent to conduct the orderly disestablishment of JFCOM while continuing to provide support to the combatant commanders and services during the transition. USJFCOM will be disestablished as a four-star combatant command by the end of August 2011 and all personnel moves will be completed by March 2012.

We will transfer streamlined, relevant joint functions to appropriate Department of Defense (DOD) entities and we will ensure we sustain the momentum and gains in jointness while maintaining critical interaction with NATO and other multi-national partners. We are making a major departure from past organizational design, procedure, and mindset to more effectively execute core functions and sustain the jointness we worked so hard to achieve in the past.

When the transition is complete, roughly 50 percent of JFCOM personnel and budget will remain along with core missions, such as joint training, joint force provider, joint concept and doctrine development and joint integration. These functions will be aligned under the Joint Staff for leadership and direction.

The centerpiece of the transition is a reorganization centered on our core Unified Command Plan missions, such as joint training, joint integration, and joint concept development. This reorganization will allow us to better interact with and synchronize adaptive joint training, doctrine and concept development supported by modeling, simulation and experimentation.

Throughout the planning effort we worked closely with the Pentagon, the Virginia delegation and the governor's office. I appreciated the input and involvement of the Virginia delegation and the governor's office.

The work force of U.S. Joint Forces Command has persevered with the utmost professionalism and dedication during these times of uncertainty. As we go forward, we will continue to support the joint warfighter and also leverage all available resources to assist the work force.

By Jason Sherman
February 9, 2011 at 4:15 PM

In an address this morning in New York, Ashton Carter, the Pentagon's acquisition chief, encouraged the lower tiers of the defense industrial base to consider consolidating, offering "guideposts" for potential private-sector mergers and acquisitions that would be subject to approval by the federal government.

Speaking to industry executives, financial analysts and investors at a conference sponsored by investment bank Cowen Group, Carter outlined issues DOD will consider in reviewing proposed M&A activity, which is expected to increase as military spending flattens out after a decade of steady increases.

Here are Carter's comments on the seven guideposts, from his prepared remarks:

First, in the main we will rely on normal market forces to make the most efficient adjustments to the defense industrial base. This is not only in accordance with good economic theory, but necessary to prevent the defense industry from becoming further distanced from the main currents of 21st century technology, creativity, and capital markets. These forces will doubtless lead to an uptick in the volume of M&A and other industry adjustments in the coming period, and this is normal. For our part, the Defense Department welcomes needed adjustments that lead to greater overall efficiency but will require transparency with respect to all contemplated transactions. We will examine these transactions to ensure that the Department’s long-term interests in a robust and competitive industrial base dominate any near-term or one-time proposed savings, that potential organizational conflicts of interest are avoided or carefully mitigated, and that we have full visibility into restructuring costs and the potential for continuing capital investment and R&D. The interests of the taxpayer and the warfighter will be forefront in our minds as we review proposals that may result in the creation of weaker stand-alone firms less likely to thrive without the necessary capital structure that their larger parent company is able to provide. In such cases transparency will be essential so that we are confident the value created largely by the Department over the years is not lost to the detriment of the taxpayer or the warfighter. The Defense Department would not want to see its industrial base experience what has happened in some other sectors of the economy: poor risk management, unnecessary leverage, and excessively short-term behavior at the expense of long-term health. Transparency allows all these things to be addressed early in the process, which is in the interest of all involved.

Second, as President Obama made clear to all Federal departments and agencies when he took office and most recently last month in Schenectady, NY, competition is one of the key drivers of productivity and value in all sectors of the economy, including defense. Accordingly, the Department is not likely to support further consolidation of our principal weapons systems prime contractors. A number of our specific Better Buying Power initiatives are aimed at increasing competition among all our suppliers and throughout our procurement of goods and services. Sometimes competition is provided by having two or more providers of the same thing go head-to-head, but where this is not possible we can still harness this power through a wide variety of other competitive strategies that provide real incentives for increased productivity. Where program costs can be reduced, government and industry can share the savings, which will be directly reflected in earnings and profit.

Third, we will be looking at our industry sector by sector – from shipbuilding to professional services, and from stealth to space – because the dynamics are different in each sector. Deputy Secretary Lynn has directed a comprehensive sectoral study of our industry, which is being led by Brett Lambert. This will not be a one-time snapshot, but rather an ongoing guide to us as we seek to sustain the health, vibrancy, and efficiency of the industrial base upon which our security depends. While we cannot sustain the base in a given sector if it has the wrong size and shape for the new era, once it is right-sized and right-shaped, the government will take an interest in keeping it that way.

Fourth, our interest in the defense industrial base extends throughout its entire spectrum. Far too often, people view our industrial base as being made up of those who receive prime awards. The truth is that perhaps two-thirds to three-quarters of every dollar we award at the prime level is spent for subcontracted goods and services at the so-called “lower tier” of the industry. But while these companies might be “lower tier” in this sense, they are not of lower importance -- they are centrally important to a healthy industrial base. They are frequently rich in technology and dynamism. They are also important drivers of program cost – frequently down but sometimes up – and the sources of supply chain efficiencies or, alternatively, disruptions in major programs. So their health and performance are critical to us. Smaller firms, start-ups, and new entrants provide needed new technology, new faces, and new ideas to the defense industry. The nation’s small businesses add vitality to our base in both prime and subcontractor roles. Mid-sized companies are especially important and worthy of fostering, as they can grow into new sources of innovation and competition.

Fifth, the Better Buying Power Guidelines give heightened attention to the increasing importance of the “services” component of the “goods and services” we require – again provided by firms not often considered “defense companies.” These services are as essential as weapons systems to mission accomplishment, and Better Buying Power directs a number of steps to better understand and manage this part of the Department’s spend. Currently about half of our prime contract spending is in the services sector – and this does not take into account the portion of services required by traditional procurement programs. The “services” portion of the industrial base is correspondingly growing and changing. Some of the companies that provide these needed services have grown quite large and take an important place in our industrial landscape alongside the more familiar brand names. Others are innovative small businesses. As we improve our approach to services procurement, we will be attentive to its industry foundation.

Sixth, a key part of our defense industrial strategy is to encourage new entrants. These offer competition, renew and refresh the technology base, and ensure that defense is benefitting from the main currents of emerging technology. We must accordingly work constantly to lower the barriers to entry. We are addressing many of these barriers – such as needless or timeconsuming paperwork – as part of the Better Buying Power initiative because they impose unnecessary costs. But another objective of eliminating non-productive processes is to make it easier for companies to do business with us. We continue to seek industry feedback and ideas on how to do this.

Seventh and finally, globalization is affecting security and commerce in profound ways, and this trend has implications for our industry. In Afghanistan our troops fight alongside forces from a wide coalition of other friendly nations, and we anticipate that in the future it will be rare indeed that we fight alone. In the industry that supports these international security efforts, we likewise simply cannot avoid or wall ourselves off from globalization. Depending on the program, from a few percent to much more of the value-added in defense goods and services is sourced overseas – mostly to companies that serve as subcontractors to U.S. primes and that provide, for example, a particular specialized part. Sometimes that is where the best technology or best value can be found, and when it is, we owe it to the warfighter to do so. Globalization of our market is not an option - it is a reality. Our utilization of, for lack of a better term, “non-heritage” firms is essential for nearly all of the systems upon which we rely. We are committed to continue opening our markets while at the same time striking the appropriate balance with security concerns. Just as we have opened our markets to the leading firms from around the world, we urge our partner nations to do likewise. Exports obviously strengthen our industry’s competitiveness, but they also enhance our security – and international security – when they build the capacities of international partners. We are doing our part by implementing President Obama’s reforms of our antiquated export control regulations and procedures, and we expect our efforts will result in increasingly open and fair competitions around the globe.

By John Liang
February 8, 2011 at 10:52 PM

A day after Defense Secretary Robert Gates hosted his French counterpart Alain Juppe for dinner at the same tavern that Secretary of State John Quincy Adams hosted French Gen. Lafayette in 1824, the two signed a statement of principles for a U.S.-French space security partnership.

Some Gates excerpts:

Today, the minister and I sign a bilateral statement of principles on space situational awareness that will go a long way to addressing one of the key security challenges of the 21st century. As the new national security space strategy puts it, space is becoming increasingly congested, contested and competitive. A growing number of nations are using space for an expanding variety of purposes, manned spacecraft, satellites, the International Space Station and more, increasing the odds of accidental collisions.

At the same time, space-based technologies underpin many essential civilian and defense capabilities, precision navigation, climate monitoring, secure communications and natural disaster warnings. Space situational awareness agreements like this one help us mitigate these and other risks by sharing information and pooling our varied capabilities. This arrangement will foster safety and reduce the chances of mishaps, misperceptions and mistrust. Such cooperation is a key aspect of the national security space strategy.

. . . and some Juppe excerpts:

I want to emphasize the high level of confidence in this relation both at the level of the political dialogue and in the military cooperation between our two countries, which allows a closer cooperation, including in the most strategic domains like space. Secretary Gates and myself, signing a declaration of principles, laying the principles of a new and ambitious partnership in terms of space situational awareness is a symbol of this will to cooperate.

Signing such an agreement between the USA and another NATO country is a first. Through all our space capabilities, France is a reliable partner. In a mutual interest, our two countries have decided to reinforce their defense-space cooperation in order to safeguard access and use of space with a peaceful end in view.

By Tony Bertuca
February 8, 2011 at 10:29 PM

President Obama has officially nominated Gen. Martin Dempsey to become the Army's next chief of staff, according to the Feb. 7 Congressional Record.

Dempsey, currently the chief of Army Training and Doctrine, was recommended for the post by Defense Secretary Robert Gates on Jan. 6.

If confirmed by the Senate, Dempsey will replace Gen. George Casey, who is expected to retire in April.

Dempsey has been chief of TRADOC since 2008 and previously served as the interim chief of U.S. Central Command.

By Tony Bertuca
February 8, 2011 at 5:33 PM

The chief of the Army's Tank-automotive and Armaments Command spoke this week about the importance of making technological advancements to vehicle platforms in the face of constraining budgets, laying out a basic wish list for the command and the service.

Maj. Gen. Kurt Stein of TACOM Life Cycle Command spoke on Feb. 7 at a tactical wheeled vehicles conference in Monterey, CA.

"We need faster technology and integration and the willingness to change," said Stein, according to a transcript of his remarks provided by TACOM. "The best technologies from the [19]90s are not good enough for a 21st-century Army."

Stein told the audience the Army needed trucks with a high level of commonality across multiple platforms and systems.

"We need increased fuel and more energy-efficient vehicles," he said. "We need lighter vehicles -- with all the same gadgets and armor protection we have today. We need your relentless determination to build quality into every product and service you provide. And finally, we need all of this at a reduced cost."

Stein envisions a future that will make his mission even tougher given the current fiscal environment. "The persistent conflict we've endured for the past decade will not end any time soon," he said. "The demand for military resources will likely continue to remain strong. Military budgets will be subject to reductions, adjustments, shifts in priorities, and the elimination of certain programs.

"Some modernization efforts may be slowed in order to focus resources on current requirements," Stein concluded

By John Liang
February 7, 2011 at 10:51 PM

Now that the Obama administration's fiscal year 2012 budget submission date has been set for next Monday, the Senate Armed Services Committee has started scheduling its usual round of hearings with the heads of the military departments and combatant commands.

First on the docket, as we reported last week, the committee will hear testimony from Defense Secretary Robert Gates and Chairman of the Joint Chiefs of Staff Adm. Michael Mullen on Thursday, Feb. 17.

This afternoon, the committee announced a Tuesday, March 1 hearing to have Navy Adm. Eric Olson, head of U.S. Special Operations Command, and Marine Corps Gen. James Mattis, chief of U.S. Central Command, talk about their FY-12 plans and priorities.

The following week on March 8, Navy Secretary Raymond Mabus, Chief of Naval Operations Adm. Gary Roughead and Marine Corps Commandant Gen. James Amos will testify on their FY-12 budget proposals.

By John Liang
February 7, 2011 at 10:42 PM

Eleven aerospace and defense industry associations sent a letter to Congress late last week urging lawmakers to support a fiscal year 2011 defense appropriations bill instead of another continuing resolution, and today a bunch of defense CEOs ratcheted up the pressure from industry.

Lockheed Martin CEO Robert Stevens and 13 of his colleagues sent a letter of their own on the same subject.

"We strongly support Defense Secretary Gates' recommendation to pass a full FY2011 defense appropriations bill to avoid unnecessary risk to our national security," Stevens said in a statement. "Without appropriate full-year funding decisions on national security programs, we will face costly schedule delays and breaks in production that will increase overall program costs and interrupt the delivery of critical equipment to warfighters."

The letter, delivered to Congress today, states:

We fully understand and support the imperative of addressing the difficult fiscal challenges that face the nation. We also know that national security and aerospace programs will be considered for reductions in responding to those challenges. These are important issues that deserve a deliberative approach by the Congress.

The current CR provides funding for most aerospace and national security programs at fiscal year 2010 levels. In addition, it contains provisions limiting production rates and prohibiting new starts. While these restrictions are understandable in a short-term CR, they are very difficult to implement for national security programs that by design adapt to changing circumstances. Failure to address funding decisions for individual national security programs on a full-year basis will lead to program dislocations, funding interruptions and adverse consequences on U.S. employment not only in the current fiscal year but for many years to come.