The Insider

By Marjorie Censer
November 7, 2018 at 11:12 AM

Vectrus said yesterday sales in its most recent quarter reached $308 million, up 14 percent from the same three-month period a year earlier.

The contractor's quarterly profit hit $9.9 million, up 70 percent from the prior year.

Vectrus said 4 percent of its sales boost was related to its base business; the remainder came from its acquisition of SENTEL.

In a call with analysts yesterday, Chuck Prow, Vectrus' chief executive, said the company has diversified its business. Three years ago, Army work made up 91 percent of the company's sales; today, that figure is 72 percent.

Almost half of the contractor's new work has come from the Air Force, according to a company chart.

By Justin Katz
November 7, 2018 at 9:38 AM

Huntington Ingalls Industries announced yesterday General Dynamics Electric Boat awarded the company's Newport News Shipbuilding business a $197 million contract modification for long-lead-time materials and advance construction activities for the first Columbia-class ballistic missile submarine.

The money will be used to procure major components and commodity material and to begin advance construction on the first Columbia-class submarine (SSBN-826), expected to begin full construction in fiscal year 2021 and be delivered in FY-28.

Columbia class is the Navy's stated No. 1 acquisition program.

By Marjorie Censer
November 7, 2018 at 9:35 AM

Kratos Defense & Security Solutions said yesterday it will soon open another drone manufacturing facility to build a tactical drone program known as Thanatos.

“We are close to executing a lease on another large, new drone manufacturing facility, which will require custom buildout over the next several months for security-related reasons, related to a new tactical program we have recently been successful on,” Eric DeMarco, Kratos' chief executive, said during a call with analysts yesterday evening.

DeMarco said the program is known as Thanatos and will have a financial impact on the company beginning in 2020. “We are unable to provide any further details at this time,” he said.

Last week, Kratos formally opened a new tactical drone manufacturing facility in Oklahoma. DeMarco said at the time the first drone is planned to come off that line early next year.

Meanwhile, Kratos said yesterday sales in its most recent quarter hit $159 million, up 1 percent from the same three-month period a year earlier. The company recorded quarterly profit of $1.7 million, up from a loss of $4.3 million the prior year.

By Tony Bertuca
November 6, 2018 at 10:38 PM

House Democrats surged to victory Tuesday night, according to major media projections, reclaiming a majority for the first time since 2010 and positioning the defense budget for a potential shake-up.

Most significant for defense will be a change in key chairmanships at the House Armed Services and Appropriations committees.

Rep. Adam Smith (D-WA) is expected to be the next chairman of the House Armed Services Committee. He has said he thinks the current $716 billion defense budget is too high and plans to oppose new spending on nuclear weapons.

Losing the House also means an uphill battle for GOP defense hawks, who must also work against a White House that has directed a $33 billion cut to planned defense spending in fiscal year 2020.

Watch Inside Defense for news and analysis as this story unfolds.

By Rachel Cohen
November 6, 2018 at 3:26 PM

Lockheed Martin this week received a $350 million boost to a Joint Air-to-Surface Standoff Missile and Long-Range Anti-Ship Missile production support contract it won last year, raising the ceiling to $450 million.

Under the pair of awards, Lockheed "will provide lifecycle support for all efforts related to JASSM, Long-Range Anti-Ship Missile, JASSM Extended Range and any JASSM variant in the areas of system upgrades, integration, production, sustainment, management and logistical support," according to the Defense Department's Nov. 5 contract announcement. The initial $100 million contract was awarded in April 2017.

Lockheed is set to build its 16th JASSM lot, now comprised entirely of the extended-range variant. It's also developing an "extreme-range" version that can reportedly fly up to 1,000 nautical miles.

The Air Force plans to buy 4,900 missiles for $6 billion over the life of the program, according to FY-19 budget documents, and has programmed 46 LRASM units for $160 million so far.

JASSM -- which was used in combat for the first time in April -- and its offshoots are expected to fly on the B-1, B-2, B-52, F-15, F-16 and F-35. Only the B-1B and F-15E currently carry the extended-range version. Inside Defense previously reported the military was on track to hit early operational capability for the LRASM on the B-1 in September.

By Maximilian Kwiatkowski
November 6, 2018 at 2:34 PM

Army and industry representatives will meet again to discuss a virtual cyber warfare training simulator that will work like a firing range for the all of the Defense Department's keyboard warriors.

An industry day for the Persistent Cyber Training Environment is scheduled for Nov. 26 in Orlando, FL, according to a Federal Business Opportunities notice. This will be the second such meeting this year.

The training system is "to enable the [cyber mission force] to conduct joint training, exercises, mission rehearsals, experimentation, certification, re-certification, and assessments of cyber capabilities in support of the National Security Strategy," according to a draft statement of work by the Army program executive office for simulation, training, and instrumentation.  

The system has been compared to a marksmanship range in how it will simulate various obstacles a CMF operator might face. However, PCTE is also much more than that as it must also simulate a realistic environment and scenarios as well as connect one range to another wirelessly in other locations.

"In short, PCTE is not a cyber range. It is every aspect of a training exercise that would take place on a range," according to the draft statement.

Nov. 2 was the last day the Army would accept information from industry as part of its fact-finding mission for PCTE.

A request for proposals for the training system is to be released in fiscal year 2019, with an award to follow in early FY-20, according to a presentation the Army made last November. The award could be as much as $750 million, with a seven-year period of performance.

By John Liang
November 6, 2018 at 2:13 PM

This Election Day INSIDER Daily Digest has news on the Air Force's strategic airlift needs, MQ-9 Reapers, the Defense Information Systems Agency's annual forecast to industry and more.

The Air Force could need additional strategic airlift in the coming years:

As Air Force contemplates strategic airlift, options for more capacity are bleak

As Pentagon officials reckon with a potential requirement for additional strategic airlift to execute the new National Defense Strategy, a blueprint for action was mapped out in policy reviews to support capping C-17 production in 2015, including a potential $7 billion tab to restart the C-17 line, upgrading C-5s in the bone yard to grow the fleet and increased reliance on civilian cargo haulers.

The Pentagon issued a multimillion-dollar contract for MQ-9 Reapers yesterday:

General Atomics to continue building MQ-9s as Air Force considers RPA's future

General Atomics this week received a $263.4 million contract to build more MQ-9 Reapers, the latest award issued as the Air Force eyes buying around 100 of the remotely piloted aircraft over the next five years.

The Defense Information Systems Agency held its annual "forecast to industry" conference this week:

DISA 'raising the bar' on contractor cybersecurity expectations

LINTHICUM, MD -- The Defense Information Systems Agency will begin reviewing how well contractors protect government data, with consequences for companies who don't implement adequate cybersecurity, DISA's top official told industry this week.

Document: DISA's 2018 forecast to industry briefing slides

Army Lt. Gen. Aundre Piggee, deputy chief of staff (G-4), spoke at an AUSA breakfast this morning:

Piggee: Army training to be more self-sufficient in maintenance

The Army's head of logistics said today he is focused on "going back to the basics" by taking over maintenance from contractors and relearning "the fundamentals" that were lost during counterinsurgency and counterterrorism operations.

In case you missed this yesterday:

Army to re-purpose Navy booster and build road-mobile, deep-strike hypersonic weapon

The Army is launching a Long-Range Hypersonic Weapon program to develop a capability to punch through contested, anti-access environments -- a big-ticket acquisition project that will re-purpose a Navy hypersonic booster being developed by Lockheed Martin for use on a road-mobile system, giving ground forces a conventionally armed strategic system for the opening salvos of a major fight.

By Marjorie Censer
November 6, 2018 at 1:27 PM

Oshkosh still sees foreign sales opportunities in the Middle East, but concerns over the alleged murder of a journalist by Saudi Arabia are creating a "pause" on sales to that country.

Wilson Jones, Oshkosh's chief executive, did not mention the alleged murder directly, but said "what has changed" in the Middle East is "just the pause button" as an investigation takes place.

"We still see positive opportunities in the Middle East -- maybe not as much in the Kingdom [of Saudi Arabia] today as they work through this current issue -- but around the Kingdom, there are other allies," he said at a Baird conference.

Additionally, Jones noted he expects foreign orders of the Joint Light Tactical Vehicle could start late next year or into 2020.

By Marjorie Censer
November 6, 2018 at 10:12 AM

Maxar Technologies said today its Digital Globe business has signed a three-year extension of its EnhancedView service-level agreement with the National Reconnaissance Office, adding $900 million to its backlog.

"The agreement, now known as EnhancedView Follow-On (EVFO), adds three option years to the current contract under the same terms and value of $300 million per year, providing continuity of service and revenue visibility potentially through August 2023," the company said.

Additionally, Maxar said, "DigitalGlobe has also finalized a separate contract to further integrate its imagery production, distribution and operations with U.S. Government systems through a secure, cloud-based infrastructure."

"The additional government-funded integration will allow for closer interoperability and facilitates continuity between current and future ground and space architectures," the company added.

By Marjorie Censer
November 6, 2018 at 9:54 AM

KeyW said today sales in its most recent quarter hit $126.7 million, up nearly 4 percent from the same three-month period a year earlier.

The contractor reported a quarterly loss of nearly $2 million, less than the $6 million loss it reported the prior year.

During the quarter, KeyW said, the company executed a contract modification with the prime contractor on KeyW's largest flight services program.

"In 2019, the company will cease flight operations on the program, but will continue providing operations and maintenance for sensor solutions to support the ongoing program mission requirements," KeyW said.

Bill Weber, KeyW's chief executive, said during a call with analysts this morning the company is seeking to perform more frequently as a prime contractor.

"We will still subcontract," he said. "But there are a lot of opportunities that KeyW's in a good position to take a prime position on, and we're going to do that more and more."

By Marjorie Censer
November 5, 2018 at 3:59 PM

Peraton said today it has named Alan Stewart chief financial officer.

He joins the company from Systems Planning and Analysis, where he was CFO and treasurer. Stewart has also previously served as CFO of Vistronix.

By John Liang
November 5, 2018 at 2:45 PM

This Monday INSIDER Daily Digest has news on the Army's secret plans for a new hypersonic strike weapon, Air Force cyber developments, the Pentagon's cloud strategy and more.

Last month, the Army presented secret plans for a new deep-strike weapon to a select industry audience:

Army to re-purpose Navy booster and build road-mobile, deep-strike hypersonic weapon

The Army is launching a Long-Range Hypersonic Weapon program to develop a capability to punch through contested, anti-access environments -- a big-ticket acquisition project that will re-purpose a Navy hypersonic booster being developed by Lockheed Martin for use on a road-mobile system, giving ground forces a conventionally armed strategic system for the opening salvos of a major fight.

Brig. Gen. Timothy Lunderman, the Air National Guard assistant to the Air Forces Cyber commander, recently spoke at Fifth Domain's CyberCon:

Air Forces Cyber official sees challenges in sustaining new cyber operators

Six months after the Air Force's cyber mission forces declared full operational capability, one official said the service faces significant challenges as it looks to institutionalize and sustain its cyber operators.

DOD Chief Information Officer Dana Deasy recently sent a memo to department leaders on the Pentagon's cloud strategy:

Pentagon cloud strategy points to 'multi-vendor' future, with centralized oversight

The Defense Department will pursue a computing environment featuring different types of clouds and multiple vendors, but the chief information officer's role as a central governing authority will be key to reaching an "optimized" environment, according to an overview of the Pentagon's cloud strategy.

Document: DOD memo on Pentagon cloud strategy

Check out our deep dive into the implications of a potential Democratic takeover of the House or Representatives on the Navy's shipbuilding plans:

Democratic House could create new obstacles to building larger Navy

A potential party flip in the House following this week's midterm elections could put the Navy's already uphill battle for a 355-ship fleet on a more difficult track.

The Pentagon's industrial policy chief spoke recently at the U.S. Chamber of Commerce in Washington:

Pentagon moving on defense industrial base policy changes

The Pentagon in the coming year will be able to implement about one-third of the 300 classified policy recommendations in its recent report on the defense industrial base, according to Deputy Assistant Defense Secretary for Manufacturing and Industrial Base Policy Eric Chewning, who helped manage the study.

Document: Defense industrial base report

By Marjorie Censer
November 5, 2018 at 1:59 PM

The Project on Government Oversight today unveiled a "revolving door" tracker, documenting cases in which government officials went to work for companies they previously oversaw or regulated.

The database includes more than 380 high-ranking Pentagon officials and military officers hired by the private sector within two years of their departure, according to POGO.

"POGO's report found that as of 2018, fiscal year 2016's top 20 defense contractors had hired at least 645 former senior government officials, military officers, members of Congress, and senior legislative staff," the organization said in a release. "Nearly 90 percent of those former federal employees now work as lobbyists, where the operational skill is influence-peddling."

One-quarter -- or 95 -- of the tracked officials ended up at one of the Pentagon's top five contractors: Boeing, General Dynamics, Lockheed Martin, Northrop Grumman or Raytheon.

By John Liang
November 5, 2018 at 11:45 AM

With the Pentagon's Cyber Strategy -- issued this fall -- in place, the Defense Department is "driving relentlessly to implement it," according to Deputy Defense Secretary Pat Shanahan.

In his October message recently posted on the Pentagon website, Shanahan focuses mainly on cybersecurity:

We conducted a Cyber Posture Review and are rapidly closing identified gaps, launched a new Cyber Excepted Service, and elevated [U.S. Cyber Command] to a full combatant command. In addition, twice a month I participate alongside senior leadership in a Cyber Working Group to accelerate and integrate implementation efforts across the Department. Together, these leaders -- from [CYBERCOM chief] General [Paul] Nakasone and [Defense Information Systems Agency chief] Vice Admiral [Nancy] Norton to our CIO Dana Deasy and our Under Secretary for Acquisition and Sustainment Ellen Lord -- are modernizing our systems, taking defensive measures to protect our military and other critical systems, and developing the other cyber capabilities identified in our strategy.

We are working hand-in-hand with industry -- from traditional defense to banking, energy, and technologies companies—to protect critical data, technology, and infrastructure. Our military superiority and security -- in cyber as in other areas -- depends on their strength and security. Together, we are raising the bar on cybersecurity and enhancing our coordination through DOD-Industry partnerships such as the Enduring Security Framework and the Defense Industrial Base Cybersecurity Program.

The days of analyzing this problem are over. We are taking action, and we will deliver results. As we charge forward, we must keep pace with the threat, get our warfighters the tools they need, and stay closely coordinated. Cybersecurity is not an IT problem -- computers are central to everything we do and keeping these systems secure is everybody's job. You are on the front lines of this fight -- so, please, take these simple steps to improve your cyber hygiene, and do your part to turn back the enemy.

Read Shanahan's full October message here.

By Marjorie Censer
November 5, 2018 at 9:37 AM

Northrop Grumman has agreed to pay $25.8 million to settle claims it overstated the number of hours its employees worked on two battlefield communications contracts with the Air Force, the Justice Department said late last week.

The company has already made earlier repayments that bring the total recovery amount to about $27.5 million, the department added.

“The Air Force entered into two contracts with [Northrop Grumman] for battlefield communications services: the Battlefield Airborne Communications Node contract and the Dynamic Re-tasking Capability contract,” DOJ said. “Today’s settlement resolves allegations that NGSC billed the Air Force for labor hours purportedly incurred between July 1, 2010, and December 31, 2013, by individuals stationed in the Middle East who had not actually worked the hours claimed.”

Northrop “also entered into a separate agreement with the Criminal Division of the U.S. Attorney’s Office for the Southern District of California related to these contracts under which it has agreed to forfeit an additional $4.2 million,” the Justice Department added.

Except for the behavior admitted in connection with the criminal agreement, the resolved claims remain allegations and there is no determination of civil liability under the settlement, according to DOJ.

In a statement, Northrop said it identified the time charging issues, investigated them and reported them to the government in 2013.

“The improper charging was in direct violation of company policies, procedures and training,” the contractor said. “The company offered to refund improper charges in 2013, took disciplinary action including termination of employees, and implemented corrective actions. The company has cooperated with the government investigation.”