The Insider

By John Liang
April 29, 2022 at 1:58 PM

This Friday INSIDER Daily Digest has news on Navy shipbuilding, military aid to Ukraine and more.

Chief of Naval Operations Adm. Michael Gilday said this week that he uses the submarine force as an "exemplar" to build the future surface fleet:

Gilday: Navy needs confidence of submarine production in surface fleet

The Navy needs to bring its confidence in submarine production to the surface fleet, according to the service's top uniformed official.

The Defense Department's $16.4 billion portion of the overall supplemental request to help Ukraine fend off an ongoing Russian invasion seeks $500 million to establish a new munitions fund:

Austin touts newly proposed 'Critical Munitions Acquisition Fund'

Defense Secretary Lloyd Austin said today the new $33 billion aid package the Biden administration has proposed for Ukraine would include a new "Critical Munitions Acquisition Fund" to help surge production of anti-tank and anti-aircraft weapons now and in the future.

Textron CEO Scott Donnelly spoke about the Army's Future Vertical Lift effort during his company's earnings call this week:

Army FVL programs on pace in FY-22 and FY-23 budgets, Textron executive says

The Army's fiscal year 2022 budget provided funding for programs Textron is involved with at similar levels to what the company expected, Textron's CEO said Thursday, although he suggested the Army's FY-23 request was lacking in some areas.

Air Force Maj. Gen. Kevin Kennedy spoke about U.S. Cyber Command during this week's TechNet Cyber conference:

CYBERCOM prepares to gain enhanced budgetary control

BALTIMORE, MD -- U.S. Cyber Command is laying the groundwork for receiving enhanced budgeting authority in fiscal year 2024, a move the outfit's director of operations says "is absolutely vital" in continuing to mature the command.

More cyber news from our colleagues at Inside Cybersecurity:

Timeframe for CMMC voluntary assessments shifts to August as Pentagon rulemaking plan solidifies

Cybersecurity Maturity Model Certification Accreditation Body CEO Matthew Travis says he expects the Defense Department in early August to allow official third-party assessments under the voluntary cybersecurity certification program, kicking off the start of an interim period where company certifications will be accepted when the CMMC requirements start showing up in contracts next year.

The Army would spend $139 million on the M88 Hercules armored recovery vehicle procurement program in fiscal year 2023:

Army budget strengthens Hercules, cuts other armor enablers

Spending on the Army's armored recovery vehicle would more than double under the service's fiscal year 2023 budget request, compared with FY-22 levels, but funding would drop for the other tank-based vehicles that support armored brigades.

Several aspects of the fiscal year 2023 budget proposal contribute to cost reduction while still advancing capabilities that will better address potential future adversaries, such as China and Russia, Air Force Secretary Frank Kendall told lawmakers during a hearing this week:

Kendall: Legacy divestment and RDT&E investment will cut down cost

By divesting from legacy platforms and investing early in new capabilities, the Air Force will be able to reduce long-term costs while transforming the service to meet modern threats, Secretary Frank Kendall told the House Armed Services Committee Wednesday.

By Shelley K. Mesch
April 28, 2022 at 3:57 PM

The Senate on Thursday confirmed two of President Biden's nominees for assistant Air Force secretaries.

Frank Calvelli, a senior vice president at Booz Allen Hamilton, was confirmed as the first assistant Air Force secretary for space acquisition.

Kristyn Jones, a managing director in KPMG’s federal advisory practice, was confirmed as assistant Air Force secretary for financial management and comptroller.

Both confirmations passed on a voice vote.

In his Senate Armed Services Committee nomination hearing, Calvelli said he would “drive speed” into the process for fielding new capabilities and bolster resiliency in space architecture.

By Tony Bertuca
April 28, 2022 at 3:55 PM

House Armed Services Committee Chairman Adam Smith (D-WA) said today the panel intends to mark up its version of the fiscal year 2023 defense authorization bill June 22 and get it off the floor in early July.

Smith announced the date today at the end of the committee’s annual “members day” hearing.

Democrats and Republicans are expected to debate several key national security issues, but the overall spending topline the bill authorizes will likely be the primary point of disagreement.

Democrats, led by Smith, mostly back President Biden’s $813 billion request for the total U.S. defense budget, which includes $773 billion for the Pentagon.

Republicans, however, citing concerns over historic inflation, say they want to see the FY-23 budget increased by 5% above the level enacted in FY-22, plus inflation. While Republicans haven’t tied themselves to a specific number, they could -- depending on what rate of inflation they argue is reasonable -- end up pushing for an increase in defense spending as high as $100 billion.

By John Liang
April 28, 2022 at 2:02 PM

This Thursday INSIDER Daily Digest has news on the Navy's next-generation destroyer program, the F-35 Joint Strike Fighter and more.

Congress asked the Navy to provide a report on the utilization of an Integrated Product and Process Development type acquisition strategy for the DDG(X) program:

Navy using Columbia program to define DDG(X) acquisition

The Navy has sent Congress a plan to build the next-generation destroyer using the Columbia-class submarine program's acquisition strategy.

An upcoming F-35 business case assessment will review proposed engine and power and thermal management system solutions:

F-35 JPO targets summer for completed assessment of engine modernization options

The head of the F-35 joint program office is working toward completing a planned assessment exploring options for future propulsion system efforts this summer to help inform the services' approach to engine modernization for the fighter aircraft.

Air Force Col. Andre Johnson, the head of the Defense Information Systems Agency's Joint Spectrum Center, spoke this week at the TechNet Cyber conference in Baltimore:

DISA lays out timeline for developing capabilities tied to DOD's so-called 'EMS flagship'

BALTIMORE, MD -- The Defense Information Systems Agency is poised to reach a key capability milestone later this year tied to officials' work advancing their primary electromagnetic spectrum contribution to the Pentagon's Joint All-Domain Command and Control effort.

In completing its review of Capability Set 23, the Army determined new network capabilities are technologically mature, operationally relevant and cost effective:

Army completes critical design review for Capability Set 23

The Army on Tuesday completed a critical design review of a suite of network technologies it says will improve its ability to store, access and manage data.

The Pentagon comptroller spoke with lawmakers this week about the need for more money to send arms to Ukraine:

McCord: DOD will soon ask Congress for more funds to send weapons to Ukraine

Pentagon Comptroller Mike McCord said today the Defense Department has nearly exhausted all the $3.5 billion in presidential "drawdown authority" being used to replenish the transfer of U.S. weapons directly to the Ukrainian military to defend against an ongoing Russian invasion.

McCord also told lawmakers about the need to add money for fuel:

DOD likely needs another $1.8B to address spiking fuel costs in FY-22

Pentagon Comptroller Mike McCord said although Congress provided the Defense Department with a $1.5 billion funding increase in fiscal year 2022 to cover an ongoing spike in global fuel prices, DOD will need an additional $1.8 billion for FY-22 to make up the final funding shortfall.

By Michael Marrow
April 28, 2022 at 1:37 PM

Boeing unveiled its first T-7A Red Hawk in St. Louis today, the newest trainer jet designed by the company that will replace the aging T-38, according to a company press release.

Boeing was awarded the $9.2 billion T-7A contract in 2018 to build 351 aircraft, with $860 million reserved for a fixed-price engineering and manufacturing development phase that includes five aircraft and seven simulators. The first T-7A announced today is part of the EMD stage, according to a Boeing spokesman.

The exhibition of the first T-7A comes after the program has struggled with supply chain woes and cost overruns. Boeing attributed a seven-month delay in the program to shortages of parts caused by the pandemic, which has also driven up charges.

According to Boeing’s first-quarter earnings report released yesterday, the company recorded a $67 million charge in the EMD phase, and the total estimated loss for the program climbed to $700 million due to supply constraints and inflation. Risk of future additional losses remain, the earnings summary stated.

The T-7A is expected to meet milestone C for the program in July 2023, with initial operational capability anticipated sometime in fiscal year 2024.

By Tony Bertuca
April 28, 2022 at 10:43 AM

The White House is requesting Congress provide more than $33 billion to fund an emergency aid package to Ukraine, which includes $16.4 billion for the Defense Department, $14.1 billion for the State Department and the rest of the funding divided among other executive branch agencies.

The DOD portion of the request, which among other things would establish a new “Critical Munitions Acquisition Fund,” includes $11.6 billion in funding to provide additional weapons and capabilities to the Ukrainian military as it attempts to fight off an ongoing Russian invasion, according to a White House fact sheet.

The DOD funding includes $6 billion for the Ukraine Security Assistance Initiative, which directly supports Ukraine by funding the acquisition of weapons, and $5.4 billion to replenish U.S. stocks provided to Ukraine under presidential drawdown authority.

Key weapon systems include additional artillery, armored vehicles, anti-armor and anti-air capabilities, as well as cyber capabilities and advanced air defense systems.

Additionally, the DOD funding would put $2.6 billion toward the deployment of U.S. military units to support the U.S. European Command and NATO.

A further $1.9 billion would be spent on “cybersecurity, intelligence and other support,” the fact sheet states.

“This funding supports ongoing operational surges across multiple national defense components, including accelerated cyber capabilities, weapons systems upgrades, increased intelligence support, improving industrial base production capabilities for missiles and strategic minerals, and classified programs,” the fact sheet states.

Another $550 million in the DOD portion of the request would be spent on critical munitions and defense exports.

“This includes $500 million to establish a Critical Munitions Acquisition Fund to procure high-demand munitions for the U.S. and approved coalition partners, build critical war reserves, and expedite availability of munition systems,” the fact sheet states.

An additional $50 million would be used to establish a “Defense Exportability Transfer Account” to enable DOD to make more systems “exportable and coalition interoperable,” according to the fact sheet.

The State Department portion of the request would be used to “bolster U.S. economic and security assistance to Ukraine as well as regional allies and partners (e.g. Poland, Lithuania, the Baltics, and Eastern flank countries),” the fact sheet states.

The request also includes $1.2 billion for the Department of Health and Human Services to support Ukrainians entering the United States through a special assistance program.

The Treasury Department request for $650 million would allow the United States to “work through the international financial institutions to support Ukraine and other countries impacted by the crisis,” according to the fact sheet.

The request also includes $620 million for the Agriculture Department to mitigate global food disruptions, as well as $67 million for the Justice Department to support a task force aimed at pursuing “high value asset seizures of sanctioned individuals related to Russian actions in Ukraine,” the fact sheet states.

By Ethan Sterenfeld
April 27, 2022 at 3:54 PM

The Army has pushed back the due date for companies to bid on the Joint Light Tactical Vehicle follow-on contract to July 15, from a previous deadline earlier this month, according to a service spokeswoman.

“Our program office extended the submission date at the request of industry,” the spokeswoman wrote in an email. The Army now expects to announce the winner of the re-compete on December 22.

Bids were scheduled to be due April 12 when the final solicitation was released in February for the follow-on production contract, which is estimated to be worth up to $7.3 billion over a decade.

The re-compete will decide which company will build the JLTV, the partial humvee replacement, for the next five to 10 years. Because the Army owns the technical data for the vehicle, it can run a competition to see whether any manufacturers can build a nearly identical vehicle at a lower price than the incumbent.

Oshkosh Defense, which has produced the JLTV since it won the original production contract in 2015, has said it will participate in the re-compete. AM General, the humvee manufacturer, has pledged to compete for the follow-on contract, and GM Defense has shown interest but has not publicly said whether it will bid.

“We continue to execute the JLTV program well and are actively engaged in the re-compete process,” Oshkosh Corporation CEO John Pfeiffer said on an earnings call today. “We won the JLTV competition seven years ago knowing that it would be re-competed, and we believe we’re well positioned to retain this significant program.”

By Ethan Sterenfeld
April 27, 2022 at 3:52 PM

Cuts to the military’s tactical wheeled vehicle budgets, especially in the Army’s medium and heavy wheeled vehicles, led to a decline in Oshkosh Defense’s revenue for the quarter that ended March 31, the company’s chief executive said today.

These cuts were expected in advance, so the lower revenue was not a surprise to the company, Oshkosh CEO John Pfeiffer said on an earnings call. Revenue should recover by the end of next year, as the Army’s Medium Caliber Weapon System and other programs ramp up production.

“Defense is a growth segment for us,” Pfeiffer said. “It doesn’t feel like that in 2022, but we’ve been talking about that for a long time, knowing what the presidential budgets were, that 2022 would be a lull year for tactical wheeled vehicles.”

Increasing commodity costs hurt Oshkosh’s margins in the defense segment, he said.

“Our operating margin in the quarter was lower than expected, as a result of unfavorable cumulative catch-up adjustments due to increased input cost expectations,” Pfeiffer said. “We do not expect margins to be notably lower on a prospective basis at this time.”

Price increases across the company’s segments should start bringing margins back to more typical levels throughout the rest of the year, he said.

“As expected, we experienced peak-level price cost headwinds during the quarter, which challenged margins throughout the company,” Pfeiffer said. “We expect price cost dynamics to improve in the second quarter and into the second half of the year as we begin to more fully realize the benefits of higher pricing levels.”

Oshkosh Corporation’s net sales for the quarter were $1.9 billion, a 3% increase from the same period a year earlier. Adjusted operating income fell by 79.6%, to $29.3 million.

Sales in the defense segment, which includes defense products and Postal Service delivery vehicles, grew by 19.6% in the quarter, to $883 million. Adjusted operating income was $7.5 million, a decline of 90.9% from a year earlier.

By Thomas Duffy
April 27, 2022 at 2:53 PM

This midweek INSIDER Daily Digest starts off with news about the Marine Corps’ amphibious ship program, Lockheed sees the Army buying more radars, the Air Force has chosen an AWACS follow-on aircraft, the Navy has explained a ship counting anomaly in its budget, and news from the DISA director.

A Marine Corps official told Congress the service is struggling with its amphibious ship program:

Heckl: Marine Corps ‘already struggling’ to meet its amphibious requirements

The Marine Corps is struggling to meet its requirement to be the crisis response force for the nation due to a lack of LPD-class amphibious warships, according to a senior service official.

Looks like the Army may be buying more battlefield radars from Lockheed:

Lockheed expects to build up to 14 more Q-53s under new contract

SYRACUSE, NY -- Lockheed Martin expects the Army to buy between four and 14 additional AN/TPQ-53 counterfire radars through a multibillion-dollar contract that was announced last month, company officials said April 25.

The Air Force has made a choice of which aircraft will replace the venerable AWACS platform:

Air Force selects Boeing’s E-7 as AWACS follow-on

The Air Force plans to move forward with Boeing’s E-7 as the service’s replacement for its aging E-3 Sentry Airborne Warning and Control System fleet.

The Wedgetail, originally developed by Australia for its Defence Forces, is the “only platform capable of meeting requirements for the Defense Department’s tactical battle management, command and control and moving target identification capabilities within the timeframe needed to replace the aging E-3,” the service said in its news release Tuesday.

A Navy official told Congress how the service double counted a ship in its budget:

Stefany: double counting of LHA-9 ship was not ‘purposeful’

The Navy, after weeks of questions, has provided insight into why it double counted the LHA-9 amphibious assault ship in its fiscal year 2023 budget request, explaining it happened because of poor communication and the “change in administration.”

The DISA director made news in Baltimore:

DISA director seeks new technologies to solve IT challenges

BALTIMORE, MD -- The head of the Defense Information Systems Agency is looking for industry help to create secure software development pipelines for legacy applications, bolster battlespace visualization by leveraging emerging technologies, and improve the acquisition process for minimum viable products to allow for quicker delivery.

By Shelley K. Mesch
April 27, 2022 at 1:31 PM

The fixed-price development contract for Air Force One negotiated during the Trump administration created risks that Boeing shouldn’t have taken, President and CEO David Calhoun said today, which have resulted in a $660 million charge.

The COVID-19 pandemic and high inflation rates of the past two years have led Boeing to incur unanticipated losses, Calhoun said during the company’s first-quarter earnings call Wednesday. The VC-25B accounted for some of the biggest financial hits, he said.

“Air Force One I’m just going to call a very unique moment, a very unique negotiation, a very unique set of risks that Boeing probably shouldn’t have taken,” Calhoun said. “But we are where we are, and we’re going to deliver great airplanes.”

The contract for the two aircraft was signed before Calhoun took the helm of Boeing in January 2020 and was negotiated between former President Trump and former Boeing Chairman Dennis Muilenberg.

VC-25B has been plagued by delays, and the Air Force is now expecting the aircraft won’t be delivered until the end of 2026, two years later than expected, service spokeswoman Ann Stefanek has said.

The delays stem from an array of factors, Stefanek said, including a financially insolvent interiors supplier, GDC Technics, and the transition to a new provider. “Manpower limitations, wiring design timelines and test execution rates” also played a role in the timeline shift, she said.

By Ethan Sterenfeld
April 27, 2022 at 12:27 PM

General Dynamics could see higher combat vehicle revenue as European and American leaders react to threats in Eastern Europe, but that will take time to materialize, the company’s chief executive said today.

“I think it’s premature to bake in any assumptions about growth until you really see some of that,” Phebe Novakovic said on the company’s quarterly earnings call. “I would say that one of the interesting things, that we have not quite seen at the same level, is the Abrams interest from multiple U.S. allies.”

The perception of an elevated Russian threat will not immediately lead to increased defense budgets, and then there will be another wait until contract awards increase company revenues, she said.

“It takes time to get from the threat to full funding to allocation of awards,” Novakovic said. “I think you’ll hear that from a lot of folks, not just us.”

General Dynamics would receive much of a $6 billion weapons sale to Poland that the State Department approved in February, which includes 250 of the company’s M1 Abrams main battle tank.

The company’s ordnance business could also benefit from higher defense spending, Novakovic said.

“Should the recent threat environment drive increased funding in re-arming and recapitalizing land forces, we will see an increase in demand,” she said. “I expect it to be aligned along our ordnance business as well as our vehicle business, both in the United States and at [European Land Systems], but I’m careful not to get ahead of our customers here.”

The company has been able to manage increasing commodity prices without harm to operating margins, including through price increases and “contract architecture,” Novakovic said.

General Dynamics reported $9.4 billion in revenue for the quarter that ended March 31, a marginal increase over revenue in the same period a year earlier. Net earnings were $730 million, up 3.1%.

The combat systems segment, which builds the Abrams and other ground vehicles, saw $1.7 billion in revenue for the quarter, down 8% from last year. Operating earnings for the segment fell by 7%, to $227 million.

The marine systems segment, which builds submarines and destroyers for the Navy, made $2.7 billion in revenue, up 6.8% from a year earlier. Operating earnings rose by 5.5%, to $211 million.

By Briana Reilly
April 26, 2022 at 5:07 PM

BALTIMORE, MD -- Though the Army is still in the early stages of implementing its new approach to cyber risk management, the service’s deputy chief of staff (G-6) said today the effort “significantly changes” how officials will confront the bureaucratic components of the process.

Lt. General John Morrison told an audience at the TechNet Cyber conference here the Risk Management Framework 2.0, published earlier this year, seeks to ensure those involved can “spend the vast majority of our time” focusing on the cybersecurity of operations, systems and networks, rather than waiting for authority to operate.

As part of the overhaul, which the Army has referred to previously as Project Sentinel, the framework realigns the service’s posture toward the authorizing officials who provide operational oversight, while creating an Army Risk Management Council to allow for service-level, threat-informed cyberspace risk decisions.

“If you pull the string, it’s not that we’re just blowing off bureaucracy; we are doing the right level of bureaucracy we need to do the initial assessment of risk . . . and then when we identify risk, because intelligence is absolutely critical here, we now have a mechanism to adjudicate that risk at the Army level that will help us move forward much more rapidly than we have in the past,” Morrison explained.

That council, Morrison said, is currently in final staffing, and officials anticipate it will be approved “in the next month or so.”

The panel will be headed by the G3 and chief information officer, he said. The G6 -- which up until nearly two years ago was part of a combined office with the CIO -- will occupy what Morrison called a “gatekeeper” role “to make sure the appropriate issues go” before the body to strike a balance between technical and operational risk.

Among the council’s “key stakeholders” are authorizing officials, system owners, and the Army’s acquisition executive, according to slides Nancy Kreidler, the director of cybersecurity and information assurance for the Army’s chief information officer (G-6), presented on the framework during a DC summit last week. The slides also note the Army’s principal cyber advisor will serve in an independent advising role to the body.

By Thomas Duffy
April 26, 2022 at 3:41 PM

This Tuesday INSIDER Daily Digest has news on the Navy’s rationale for compiling its unfunded priorities list, the Government Accountability’s Office further review of the Joint Strike Fighter program, a cruise missile defense radar demonstration, and the Defense Department adding money to its European defense program.

If Congress provides more money the Navy says industry can build more E-2D Hawkeye aircraft in 2023:

Navy: Contractor can support building additional E-2Ds in FY-23, more aircraft needed

After being informed that industry can build more E-2D Advanced Hawkeyes in fiscal year 2023, the Navy is asking Congress for $400 million in its unfunded priorities list for two additional aircraft.

The GAO sees more problems for the F-35 program:

GAO: F-35 Block 4 development, delivery to extend into FY-29

The Pentagon’s efforts to develop and deliver advanced Block 4 software capabilities to the F-35 Joint Strike Fighter have risen by more than half a billion dollars and are expected to extend into fiscal year 2029, a Government Accountability Office report released today shows.

DOD thinks it may have a way to protect the National Capitol region from a cruise missile attack:

Homeland cruise missile defense radar demo in FY-23 could link with Aegis interceptors

The Defense Department is looking to defend Washington, DC, as well as other unspecified domestic locations against Russian and Chinese cruise missiles by pairing a new variant of an elevated X-band radar with advanced systems that guide missile interceptors, such as Aegis cruisers or destroyers.

With war raging in Ukraine, the Pentagon is adding money to its European defense effort:

Pentagon boosts European Deterrence Initiative by $300M

The Defense Department is proposing a $4.2 billion European Deterrence Initiative for fiscal year 2023, a $300 million increase over what Congress enacted for FY-22, with much of the funding being directed toward Army operations and maintenance spending, according to a newly released budget justification document.

By Ethan Sterenfeld
April 26, 2022 at 1:52 PM

Raytheon Technologies does not expect to produce new Stinger air-defense missiles in large quantities to replenish Defense Department stockpiles until at least next year, CEO Greg Hayes said Tuesday.

The United States has sent or plans to send 1,400 Stingers and 5,500 Javelin missiles to help Ukraine defend itself against Russia, according to Pentagon a fact sheet released April 22. But the U.S. military has not bought a new Stinger missile in 18 years, and some of the components are no longer available, Hayes said on Raytheon’s quarterly earnings call.

Production continues at low levels for a foreign customer, but there is “a very limited stock” of components, he said. Raytheon will have to redesign some of the components before it can produce significant quantities of the missile.

“We’re going to have to go out and redesign some of the electronics in the missile and in the seeker head,” Hayes said. “We’ll ramp up production what we can this year, but I would expect, again, this is going to be in ’23, ’24 where we actually see orders come in for the larger replenishments, both on Stinger as well as for the Javelin, which has also been very successful in theater.”

Raytheon builds the Javelin antitank guided missile through a joint venture with Lockheed Martin. The Javelin, which is decades newer than the Stinger, has remained in production and retains significant surge capacity, although it can take two and a half years to produce and deliver missiles after an order is placed.

Doug Bush, the Army acquisition executive, said last month that the service would “soon” send Congress a plan to restore stockpiles of the missiles. The Stinger remains a “key enabler” to the Army’s modernization plan, and new short-range air defense vehicles use it.

A Stinger replacement would be fielded by fiscal year 2027 under current Army plans. But $60 million that the program needs to stay on schedule was pushed onto an unfunded priorities list after the service did not include the money in its FY-23 budget request

The budget request included $7.2 million for the Stinger replacement, which is also known as Maneuver Short-Range Air Defense Increment 3.

By Audrey Decker
April 26, 2022 at 1:43 PM

The Navy is seeking information from industry about the Mining Expendable Delivery Unmanned Submarine Asset that would meet future submarine payload requirements.

The system will consist of the MEDUSA unmanned underwater vehicle, supporting equipment and payloads, according to a notice released yesterday.

“MEDUSA will be a tactical clandestine mining system, with an expendable Unmanned Underwater Vehicle capable of being torpedo tube-launched from U.S. Navy submarines,” the notice states.

In the fourth quarter of fiscal year 2023, there will be a Risk Reduction, Prototype Design, Fabrication and Test Award, leading to the delivery of four prototype units in FY-26, according to the notice.

Additionally, MEDUSA UUV will conform to the Unmanned Maritime Autonomy Architecture, the Navy’s effort to standardize different compartments of unmanned maritime vehicle technology to ensure they easily interface with one another.

The Navy completed a prototyping effort for MEDUSA in 2021 but declined to provide further information on where and when the demonstration took place.

"Lessons learned from the prototype and demonstration will inform a program start in FY-22 and potential contract award in FY-23," Navy spokesman Alan Baribeau told Inside Defense last summer.