The Insider

By John Liang
October 31, 2018 at 4:06 PM

Senior U.S. and South Korean officials this week pledged to have a structure set up beginning in 2019 whereby a South Korean four-star general would be in charge of responding to a North Korean attack, with a U.S. four-star as his deputy.

In a joint communique released after a meeting between Defense Secretary James Mattis and his South Korean counterpart, the two countries said:

The Secretary and the Minister signed the Alliance Guiding Principles which were jointly developed to ensure a strong combined defense posture following [wartime operational control] transition. The Secretary and the Minister also signed the revision of the 2015 [Conditions-based OPCON Transition Plan], and committed to cooperate closely to meet the necessary conditions for OPCON transition at an early date. The Secretary and the Minister endorsed the Future Command Memorandum for Record (MFR) updating the 2013 MFR as well as the Terms of Reference for Relationships between the Republic of Korea Joint Chiefs of Staff, United Nations Command, and ROK-U.S. Combined Forces Command. The Secretary and the Minister decided to maintain the current CFC structure and reaffirmed the mutual commitment that the future CFC is to have an ROK four-star general as the Commander and a U.S. four-star general as the Deputy Commander. The two sides are to work toward initial operational capability (IOC) certification of the ROK-led combined defense posture in 2019. In addition, the Secretary and the Minister pledged to determine the specific timing of OPCON transition through regular evaluation and review of progress at the annual SCM and MCM.

Those Alliance Guiding Principles include the following:

As a symbol of the commitment pursuant to the Mutual Defense Treaty, U.S. Forces Korea (USFK) is to continue to be stationed on the Korean Peninsula and firmly fulfill the security commitment to the ROK.

The ROK-U.S. post-OPCON transition Combined Forces Command and its subordinate combined component commands are to be established to deter external aggression and, if deterrence fails, to defend the ROK.

The post-OPCON transition Combined Forces Command is to operate as a separate standing entity, and receive strategic direction and operational guidance from a Military Consultative Committee which receives bilateral guidance from the ROK and the U.S. national command authorities.

The national authorities of the ROK are to appoint a General or an Admiral to serve as the Commander of the post-OPCON transition Combined Forces Command, and the national authorities of the United States are to appoint a General or an Admiral to serve as the deputy commander of the post-OPCON transition Combined Forces Command.

The ROK MND and U.S. DOD are to continue to maintain and support the United Nations Command, which has served the function of preventing armed conflict on the Korean Peninsula, and develop the mutual relationships between the ROK Joint Chiefs of Staff, the post-OPCON transition Combined Forces Command, USFK, and the United Nations Command.

The ROK MND is to continue to develop capabilities to lead the combined defense, while the U.S. DOD provides bridging and enduring capabilities for the defense of the ROK.

The ROK MND is to expand its responsibilities in deterring external aggression, while the U.S. DOD continues to provide extended deterrence.

The ROK MND and U.S. DOD are to engage regularly in consultations even after the transition of wartime operational control in order to strengthen the combined defense posture.

By John Liang
October 31, 2018 at 2:12 PM

This Wednesday INSIDER has news on the Army's Synthetic Training Environment, the Pentagon's cyber strategy and more.

We start off with a look at the Army's Synthetic Training Environment, as the service's cross-functional team receives more soldier feedback:

Army Synthetic Training Environment to reach IOC by 2021

Requirements for the Army's Synthetic Training Environment should be completed over the next two months with the program reaching initial operational capability in 2021, according to a spokesman for the STE cross-functional team.

At this week's Symantec Government Symposium, a Pentagon official said DOD has shifted out of a "reactionary mode":

U.S. officials tout Pentagon's more 'assertive' actions in cyberspace

U.S. officials are touting the Defense Department's more "assertive" posture in cyberspace following the release of a new Pentagon cyber strategy and the repeal of an Obama-era directive governing military cyber operations.

More coverage from the symposium:

Methods for assessing cyber risks need to be tailored to each program, Air Force officials say

Military software development programs need more flexibility when it comes to judging their level of cyber risk, the Air Force's cybersecurity innovation director said Tuesday.

Senior DHS, Air Force officials warn that risk aversion may harm cyber defenses

Senior cybersecurity officials at the Department of Homeland Security and the Air Force are warning that overly cautious system mangers could undermine protecting data and networks from foreign and other adversaries.

The Army will oversee the contract for an Air Force airborne laser prototype:

Airborne laser prototyping program to speed contracting with Army-led OTA

A fast-tracked Air Force initiative to build an airborne laser prototype will proceed under an Army-sponsored other transaction agreement vehicle that moves from solicitation to contract within three months.

The Defense Advanced Research Projects Agency and Sikorsky recently tested a removable kit, called the Aircrew Labor In-Cockpit Automation System, in a military setting at Ft. Eustis, VA:

DARPA, Army working on automated flight program

The Defense Advanced Research Projects Agency is working closely with the Army on a program to partially automate aircraft and has planned a demonstration in a UH-60 Black Hawk helicopter next year, according to the project's program manager.

By Marjorie Censer
October 31, 2018 at 1:35 PM

Maxar Technologies said today it is actively talking with potential buyers for its geostationary communications satellite business.

"There has been a step down in total number and dollar value of geostationary communication satellite awards compared to historical averages prior to 2015," the company said. "Revenues have decreased year-over-year as programs awarded prior to 2015 have been completed and have been replaced by a lower level of award value since 2015.

"Many satellite operators in the communications industry have continued to defer new satellite construction awards to evaluate geostationary and other competing satellite system architectures and other market factors," Maxar continued.

Howard Lance, Maxar's chief executive, said in a call with analysts this morning the company's "primary path" is to sell the business.

"We're still hopeful to have an answer that we can announce between now and the end of the year," he said.

Meanwhile, Maxar said sales in its most recent quarter hit $508 million, up from $337 million in the same three-month period a year earlier. The company attributed the sales gains to its acquisition of DigitalGlobe.

Maxar said it recorded a $432.5 million loss in the quarter, down from $12.3 million in profit the prior year.

The company's space systems segment reported sales of $263 million, down from $298 million the prior year.

"The decrease in revenue is primarily due to a significant increase in estimated costs to complete programs as a result of supplier performance issues and delays experienced during the third quarter of 2018, as well as unanticipated impacts of lower volume in our Palo Alto factory, which resulted in higher overhead burden on existing programs and reduced labor productivity," Maxar said.

By Marjorie Censer
October 31, 2018 at 10:02 AM

Engility said today sales in its most recent quarter reached $471 million, down about 3 percent from the same three-month period a year earlier.

The contractor's quarterly profit hit $4.3 million, down about 56 percent from the prior year.

Lynn Dugle, Engility's chief executive, said during a call with analysts today the company has virtually completely moved away from lowest-price, technically acceptable work. About 3 percent of the company's backlog is LPTA work, she said.

Meanwhile, Aerojet Rocketdyne said Tuesday sales in its most recent quarter reached $497 million, up about 3 percent from the same period the prior year.

The contractor said quarterly profit hit $65 million, up from $12.6 million a year earlier.

Aerojet said its sales boost was driven by "increased deliveries on the Standard Missile, Guided Multiple Launch Rocket System (GMLRS), Terminal High Altitude Area Defense (THAAD), and Patriot Advanced Capability-3 (PAC-3) programs."

By Marjorie Censer
October 31, 2018 at 8:56 AM

Aerojet Rocketdyne said Tuesday retired Air Force Gen. Kevin Chilton has been appointed to its board of directors, growing the board to nine members.

Chilton, who retired in 2011 after 34 years with the Air Force, was chief of U.S. Strategic Command. He also served as head of Air Force Space Command.

Chilton sits on the CenturyLink board of directors and, until June, was on the Orbital ATK board.

By Marjorie Censer
October 30, 2018 at 2:58 PM

The defense industry might be too cautious to fully take advantage of the improving budget environment, Pierre Chao said today.

Speaking at a Professional Services Council conference, Chao, founding partner at Renaissance Strategic Advisors, said the industry may be too skeptical about the budget boost to prepare for it.

"If you're having your foot on the brake all the way up because you're afraid about when it's going to turn . . . and you're not positioned for that upturn, you're going to leave a percentage of that growth on the table," he said.

"This industry knows how to handle downturns," Chao continued. "Everybody knows how to cut costs . . . and you could do that in your sleep. Ironically enough, I think we have harder issues on up-ramps in terms of capacity."

He also said the Pentagon, which has been touting innovation, will have to clarify what it will give up for lower-cost products.

"Innovation is being used as a shorthand," Chao argued. "It really means I'm looking for something that's lower-cost."

However, he said the government's balancing act -- between cost and meeting certain standards -- will eventually be settled.

"That line gets settled out . . . when there's less money and push comes to shove and you really end up deciding: What is more important? Something cheap or something extremely secure," Chao said. "Because they are at diametrically opposite ends of reality. Period, full stop. There's no way around it. I want something absolutely secure, absolutely known, absolutely trusted -- it will cost me."

"On the core military equipment, we've made that choice, which is why we have a $700 billion budget," he added. "We're going to keep going around on this debate."

By John Liang
October 30, 2018 at 2:14 PM

This Tuesday INSIDER Daily Digest has continuing coverage of the president's proposed $33 billion defense budget cut, a new DOD rapid prototyping oversight structure, the F-35 Joint Strike Fighter and more.

The military-industrial complex is still coming to terms with a proposed $33 billion defense budget cut:

Washington adjusting to new budget conversation after White House orders defense cuts

The Washington defense community returned to work Monday morning after a weekend spent digesting the potential impact of a White House-directed $33 billion cut to the Pentagon's budget in fiscal year 2020, a reduction Deputy Defense Secretary Pat Shanahan confirmed Friday.

Here's the news that started the hand-wringing last week:

Shanahan: DOD is building two budgets and one is $33B less than planned

Deputy Defense Secretary Pat Shanahan said Friday the Pentagon is building two budgets: one that accounts for total defense spending of $733 billion and one for $700 billion, the amount President Trump has said the he will "probably" seek in fiscal year 2020.

Assistant Secretary of Defense for Acquisition Kevin Fahey spoke recently at a Professional Services Council conference in Falls Church, VA:

Senior acquisition official says DOD working on new rapid prototyping oversight structure

Congress has given the military a new tool to sidestep traditional acquisition system requirements while rapidly prototyping and fielding promising technologies, but the Defense Department is still wrestling with how best to manage the new authority, according to a senior Pentagon official.

News on the F-35 Joint Strike Fighter's Autonomic Logistics Information System:

Next ALIS update will enable connecting to Navy legacy IT systems

The Navy expects the next update to the F-35's logistics information system in "mid-2019" to enable it to connect to its legacy information technology systems, according to a service spokeswoman.

The Army this week published a special notice announcing a Lower Tier Air Missile Defense Sensor "sense-off" between May and June:

Army sets 2022 fielding date for LTAMDS, plans radar 'sense-off' competition for next year

The Army is accelerating fielding of the Lower Tier Air Missile Defense Sensor by five years and planning a radar competition next year at White Sands Missile Range, NM, as part of a new acquisition strategy for the Patriot radar modernization project.

China's new cybersecurity inspection rule comes amid heightened tensions between the United States and China over hacking and other economic espionage activities:

China's new cyber rule grants law enforcement broad authority to inspect private companies

China's Ministry of Public Security has issued a new cybersecurity regulation -- taking effect on Nov. 1 -- that will grant regional law enforcement broad authority to inspect companies to ensure they register as a "network-using entity," among other measures laid out in China's landmark cybersecurity law enacted last year.

By John Liang
October 30, 2018 at 11:45 AM

The Defense Department said today its fiscal year 2018 Military Intelligence Program topline budget was $22.1 billion, $3.7 billion higher than the previous fiscal year.

The total MIP budget included both the base budget and Overseas Contingency Operations appropriations, according to a DOD statement.

"The department has determined that releasing this topline figure does not jeopardize any classified activities within the MIP. No other MIP budget figures or program details will be released, as they remain classified for national security reasons," the statement reads.

DOD said last year its FY-17 MIP budget topline was $18.4 billion.

By Thomas Duffy
October 30, 2018 at 9:59 AM

The Army will issue a contract modification to AM General to recapitalize approximately 160 humvees for the National Guard.

In an Oct. 29 notice, the Army said the contractor would refurbish two variants of the humvee reliability enhancement vehicle. Each refurbished vehicle will have a new production rolling chassis.

"The new vehicle chassis will include a new engine, engine cooling system, transmission, suspension system, making the Recap vehicle like a new vehicle," the Army said.

"The variants include an updated armor package, air conditioning system, and REV components that improve engine cooling and vehicle suspension for increased vehicle reliability and performance," the notice states. "These integrated upgrades are proprietary to AM General."

By Marjorie Censer
October 30, 2018 at 9:37 AM

KBR said today sales in its government services group in the most recent quarter reached $928 million, up 59 percent from the same three-month period a year earlier.

The unit's quarterly profit hit $81 million, more than double the $39 million in quarterly profit recorded in the same time frame the prior year.

KBR said the government unit, which has made multiple acquisitions in recent years, saw 12 percent organic growth in revenue in the quarter.

In a call with analysts this morning, Stuart Bradie, KBR's chief executive, said the company is seeing the government consolidate awards.

"There's more bundling of procurements, there's more best-value awards and that really plays to our breadth of capability and scale," he said.

By Justin Doubleday
October 29, 2018 at 5:18 PM

The Pentagon will publish a forthcoming annual report on operational weapons testing in unclassified format only, according to a spokeswoman, after a prominent congressional Democrat claimed the Defense Department planned to shroud the document in secrecy.

In a Defense One op-ed published over the weekend, House Armed Services Committee Ranking Member Adam Smith (D-WA) summarized how the Pentagon under the Trump administration has rolled back transparency by, among other things, restricting media access, classifying once-public documents and directing service members to talk less about readiness.

Furthermore, Smith wrote, the Pentagon is planning to send Congress the full version of this year's annual weapons testing report in a classified format. The report, which details whether the Pentagon's costliest weapons are working in realistic testing, has been unclassified and released to the public since the office of the director of operational test and evaluation was established in the 1980's.

"For the upcoming annual report, DOD is planning to only provide a complete report to Congress as a classified document, even if most of the details about why a system isn't working have not been considered classified in the past and have been safely released to the public for decades," Smith wrote.

However, Pentagon spokeswoman Lt. Col. Michelle Baldanza told Inside Defense today there are no plans to issue a separate, classified report to Congress for fiscal year 2018.

"As it has done in previous years, DOT&E will be publishing only an unclassified annual report for FY-18," she wrote in an email. "In developing the Annual Report in accordance with Title 10 requirements, attention is being paid to assure Operations Security (OPSEC) is maintained for our warfighters. DOT&E is always prepared to provide detailed classified responses to requests from the Congress regarding OT&E of DOD acquisition programs."

She also said the OPSEC risks being considered for the FY-18 report are no different than in past years.

"There are no additional OPSEC risks as compared to past years," Baldanza said. "While we provide an annual report to Congress as required, we always pay special attention that the information provided in our unclassified report does not place the warfighters at risk."

Asked about the Pentagon's statement, Smith told Inside Defense, "I am pleased if the Pentagon has reversed itself and is interested in providing a full, complete, and unclassified DOT&E annual report. I look forward to reading it."

The DOT&E report is typically released in January.

By Tony Bertuca
October 29, 2018 at 5:09 PM

The Pentagon will deploy 5,200 active-duty troops to assist the Department of Homeland Security in "hardening" the U.S.-Mexico border by the end of the week to help stop a migrant "caravan" of about 3,500 people, according to senior government officials.

Air Force Gen. Terrence O'Shaughnessy, head of North American Aerospace Defense Command and U.S. Northern Command, told reporters at a press conference today that some of the troops will be armed, but will be operating in line with federal laws barring military personnel from directly conducting law enforcement activities.

"The units that are normally assigned weapons, they are in fact deploying with weapons," he said.

The Pentagon has not yet announced the cost of the operation. For comparison, Operation Jump Start, which lasted from May 2006 to July 2008 under former President George W. Bush, cost $1.2 billion and involved approximately 6,000 Guard troops, according to the Government Accountability Office.

O'Shaughnessy said the troops will provide logistical, operational, engineering and medical support to U.S. Customs and Border Patrol forces, such as rapid transportation via C-130 and C-17 aircraft and using military-grade sensor equipment to spot unidentified groups of people crossing the border.

O'Shaughnessy's forces, which will be deployed in addition to the 2,092 National Guard personnel already at the border, will be laying 22 miles of concertina wire and setting up other fencing and temporary vehicle barriers.

CBP Commissioner Kevin McAleenan said the caravan of migrants seeking asylum is currently moving across southern Mexico, while a second large group is massing at the Mexico-Guatemala border.

"The caravan has already been offered protections in Mexico," he said, adding that the group should seek asylum there.

The caravan has become a political live-wire before congressional mid-term elections, with Democrats claiming President Trump has sought to stoke fear around the issue to energize the GOP voting base.

Trump, meanwhile, has made unsubstantiated claims about the dangers posed by the caravan, which he has labeled an "invasion," though it remains weeks away from the U.S. border.

By John Liang
October 29, 2018 at 2:03 PM

This Monday INSIDER Daily Digest has news on the Air Force's Compass Bright program as well as the Army's electronic warfare efforts.

The Air Force's Compass Bright program develops, demonstrates and rapidly transitions advanced signals-intelligence capabilities tailored to the service's needs:

'Compass Bright' program could entice new applicants with fast cash

The Air Force's program executive office for intelligence, surveillance, reconnaissance and special-operations forces could turn to the service's new "cash for ideas" initiative to bolster a small-dollar electronic-warfare technology development program.

Army Col. Kevin Finch of the program executive office for intelligence, electronic warfare and sensors told Inside Defense at this month's AUSA annual meeting that two programs are making progress and future projects are on the drawing board:

Army electronic warfare programs integrating cyber move forward

The Army's newest electronic warfare systems will include cyber capabilities as they are developed over the next couple of years, according to the EW and cyber project manager.

In case you missed this budget news from last week:

Shanahan: DOD is building two budgets and one is $33B less than planned

Deputy Defense Secretary Pat Shanahan said Friday the Pentagon is building two budgets: one that accounts for total defense spending of $733 billion and one for $700 billion, the amount President Trump has said the he will "probably" seek in fiscal year 2020.

Some missile defense news from last week, in case you missed it:

SM-3 Block IIA, a $1 billion development project, hits target on second attempt

The Navy's newest Aegis Ballistic Missile Defense interceptor -- Raytheon's Standard Missile-3 Block IIA -- notched a success during a high-stakes flight test over the Pacific Ocean Friday, intercepting a medium-range ballistic missile target in what was billed as a do-over event for a failed January test that is pivotal to plans for bolstering European defense and crucial for a pending production decision.

The head of Air Mobility Command spoke to the media on Friday:

AMC chief: AMC could gain three new C-17s as part of 'Air Force We Need' campaign

The general in charge of the Air Force's mobility forces said Friday her command could gain three new C-17 squadrons as part of the service's campaign to add 74 new squadrons by 2030.

By Marjorie Censer
October 29, 2018 at 9:34 AM

Booz Allen Hamilton said today sales in its most recent quarter hit nearly $1.7 billion, up 8 percent from the same three-month period a year earlier.

The contractor's quarterly profit reached $104 million, up about 48 percent from the prior year.

During a call with analysts this morning, Lloyd Howell, Booz Allen's chief financial officer, told analysts the company "couldn't be happier with the environment today."

"It's been many years since we've seen as positive an environment," he said.

Horacio Rozanski, Booz Allen's chief executive, said during the same call he expects an on-time budget might lead to more evenly spaced contracting activity throughout the fiscal year, rather than a fourth-quarter rush.

"I'm not entirely certain that it will play out exactly that way," he said. But "we're seeing good activity on awards, we're seeing good activity on proposals and we're bullish about the next few months."

By Tony Bertuca
October 29, 2018 at 5:15 AM

Senior Pentagon officials are scheduled to speak around the Washington area this week, while several defense companies host quarterly earnings calls.

Monday

The Professional Services Council hosts its annual, two-day Vision Conference in Falls Church, VA, featuring senior Pentagon officials.

Booz Allen Hamilton executives are slated to discuss the company's quarterly earnings.

Tuesday

The Center for Strategic and International Studies hosts an event on protecting civilians in partner nations.

The Carnegie Endowment for International Peace hosts a conversation with senior government officials about cybersecurity cooperation between the Defense Department and the Department of Homeland Security.

Symantec hosts its Government Symposium in Washington.

KBR executives are set to discuss quarterly earnings.

Wednesday

Engility and Maxar Technologies executives are set to review quarterly earnings.

Thursday

The Cybercon 2018 Conference takes place in Arlington, VA.

CACI International, ManTech International and Oshkosh executives are slated to discuss quarterly earnings.

Friday

The Brookings Institution hosts a discussion on assessing the readiness of the U. S. military.

The Air Force Association hosts a breakfast in Washington with the vice commander of the Air Force Warfare Center.