The Insider

By John Liang
May 19, 2016 at 9:39 AM

The full House passed the fiscal year 2017 defense authorization bill last night by a 277-147 vote.

The vote count is not enough to override a presidential veto, which the administration has theatened to do if a certain provision isn't removed.

That provision calls for shifting $18 billion in the Defense Department's overseas contingency operations account to the base budget in the hopes that a new administration will add emergency supplemental funds before the OCO budget runs dry next April. The OCO account is the primary source of funding for troop operations in the Middle East and elsewhere. As Inside Defense previously reported:

If presented with the bill, President Obama's senior advisers would recommend that he veto it, according to a White House statement of administration policy issued May 17.

"The bill's funding approach attempts to unravel the dollar-for-dollar balance of defense and non-defense funding increases provided by the Bipartisan Budget Act (BBA) of 2015, threatening future steps needed to reverse over $100 billion of future sequestration cuts to DOD," the statement reads, adding: "By gambling with warfighting funds, the bill risks the safety of our men and women fighting to keep America safe, undercuts stable planning and efficient use of taxpayer dollars, dispirits troops and their families, baffles our allies, and emboldens our enemies.”

The OCO-to-base funding shift also has the support of House appropriators. Senate authorizers, however, did not adopt the same funding scheme in their approach.

"Not only is this approach dangerous, but it is also wasteful," according to the White House. "The bill would buy excess force structure without the money to sustain it, effectively creating hollow force structure that would undermine DOD's efforts to restore readiness."

The bill's support among House Democrats has been tenuous at best, with many worried about the OCO provision, according to a congressional aide:

"It's a Ponzi scheme which will have to be paid next year with a supplemental," the aide said. "And that is incredibly problematic especially considering the new administration, and it's very risky given the return of the [Budget Control Act of 2011] and the sequester in the years that follow."

Smith is also concerned about language that could make it more difficult to transfer detainees out of Guantanamo Bay, the aide said, noting that the bill does a number of good things as well.

Smith has been "supportive of the bill because he sees the need to push the bill forward," the aide said, noting that if the committee did not pass the bill then there is a bigger problem. "He is right now still supportive of the bill, but we will not know where he finally stands until we get off the floor because the floor could make this bill much more difficult for him."

By Tony Bertuca
May 19, 2016 at 9:00 AM

Here's a few must-reads from this week's edition of Inside the Pentagon:

1. The House Appropriations Committee seeks to provide $500 million to an intelligence, surveillance and reconnaissance fund to help the combatant commands enhance their ISR needs.

Full story: House appropriators provide $500M for ISR fund

2. The newest version of the Navy's Aegis Ballistic Missile Defense System demonstrated for the first time the ability to detect and track a medium-range ballistic missile target flying within the Earth's atmosphere during a test over the Pacific Ocean, the Missile Defense Agency said in a statement.

Full story: Aegis BMD tracks ballistic missile target within Earth's atmosphere

3. Expressing concern over recent findings that the Pentagon failed to establish a standard cloud computing definition and an integrated repository for cloud computing contracts, House appropriators are calling for the Pentagon's chief information officer to provide details on how these efforts are going.

Full story: House panel seeks details on DOD's plans to define cloud computing

By John Liang
May 18, 2016 at 4:48 PM

It's time to lift the decades-old ban on selling weapons to Vietnam, according to a U.S. senator who spent years as a prisoner of war in that country.

President Obama is scheduled to visit Vietnam this week, and Senate Armed Services Committee Chairman John McCain (R-AZ) says in a statement that the trip "represents another positive development in the partnership between our two countries. Today, Vietnam is an important emerging regional partner that is committed to upholding the principles of the ruled-based order in the Asia-Pacific: freedom of the seas, open trade, and peaceful resolution of international disputes."

McCain wants the United States to pursue three lines of effort in the years ahead to encourage a greater role for Vietnam in promoting stability and security in the region:

* "First, the United States must continue to work with partners like Vietnam to enhance maritime information sharing and response capabilities throughout the South China Sea. Over the last year, the Senate Armed Services Committee has led the way in creating the Maritime Security Initiative (MSI), a half-billion dollar effort that will work alongside the State Department’s Foreign Military Financing program to enhance the capabilities of countries like Vietnam and the Philippines as they seek to respond to increased maritime coercion.

* "Second, we will need to enable Vietnam’s ability to contribute to the maritime space by finally removing the prohibition on the sale of lethal military equipment to the Government of Vietnam. This symbolic ban of weapon sales is a product of our past history and an inhibitor of our future relationship. Vietnam should be allowed to purchase land and sea-based platforms that facilitate the Vietnamese armed forces' ability to operate more effectively on, above, and within its territorial waters. We cannot ask our partners to contribute more while continuing to take steps to directly limit the level of their contribution. The time has come for a full lifting of this prohibition.

* "Third, the United States Pacific Fleet and Vietnam People’s Navy (VPN) must move to expand their relationship, including increased port visits by U.S. naval vessels to Vietnamese ports and participation of the VPN in bilateral and even multilateral naval exercises."

By John Liang
May 18, 2016 at 3:47 PM

Women in the defense industry and the Huey helicopter are among the highlights in this Wednesday INSIDER Daily Digest.

The CEO of General Dynamics talked about her upbringing as well as her company earlier today:

Novakovic: 'The way wars have been won . . . is boots on the ground'

In a rare public conversation, General Dynamics chief executive Phebe Novakovic on Wednesday predicted that defense spending will increase because of continued dangers around the world.

The Air Force could have more leeway in replacing its ageing Huey helos:

House pushes back Huey fielding time, calls for contract by 2018

The House has granted the Air Force more leeway to field a replacement for its aging fleet of Huey helicopters, following adoption of an amendment to its defense authorization bill that would satisfy open competition advocates.

Looks like the Aegis BMD system can now track targets inside the Earth's atmosphere:

Aegis BMD notches a first: tracking ballistic missile target within Earth's atmosphere

The newest version of the Navy's Aegis Ballistic Missile Defense System demonstrated for the first time the ability to detect and track a medium-range ballistic missile target flying within the Earth's atmosphere during a test over the Pacific Ocean, the Missile Defense Agency said in a statement.

DARPA wants to be able to do hypersonic technology testing within the next four years:

DARPA aims to complete hypersonic demonstrations by 2020

The Defense Advanced Research Projects Agency could demonstrate technologies by 2020 that would enable the future launch of hypersonic vehicles, according to the agency's Tactical Boost Glide program manager.

Keep an eye out for a revamped Army readiness model:

Army readying 'revolutionary' changes to readiness model

The Army is in the midst of revamping its approach to measuring readiness, and a formal plan to that end could be submitted to Chief of Staff Gen. Mark Milley as soon as this month, according to the director of operations, readiness and mobilization in the service's G-3/5/7 directorate.

The Navy wants to finish installing its new tactical afloat network by 2020:

Navy aiming to accelerate installations of new tactical afloat network

The Navy is trying to complete the installations of its new tactical afloat network on ships and submarines by as soon as 2020, according to a service official.

By Marjorie Censer
May 18, 2016 at 3:08 PM

In Booz Allen Hamilton’s fiscal year 2016, which ended March 31, the company saw sales rise nearly 3 percent from the prior year to hit $5.4 billion.

Profit increased about 26 percent to reach $294 million.

“Without a doubt, FY-16 was a turning point in that our revenue began to grow after three years of contraction,” Horacio Rozanski, Booz Allen’s chief executive, said during a Wednesday call with analysts.

He said the contractor has sought to increase the technical content of its work and move closer to its customers, ensuring it’s managing projects important to government agencies.

“The market out there is still very uncertain. We’re heading into an election cycle,” Rozanski said. “But our clients have gotten particularly adroit at making sure the key priorities in their mission get funded first.”

Booz Allen also noted that its backlog hit $11.8 billion, up from $9.4 billion at the same time last year. “The majority of the growth is in priced options,” the company said. “The improvement in total backlog was due to greater investments in bid and proposal activity in a more stable government contracting environment.”

By Tony Bertuca
May 18, 2016 at 10:01 AM

The Senate Armed Services Committee is countering criticisms from Defense Secretary Ash Carter, who said Tuesday that a provision in the panel's version of the fiscal year 2017 defense authorization bill to eliminate the post of under secretary for acquisition, technology and logistics would have negative consequences.

Under the bill, all of AT&L's current responsibilities would be transferred to a new under secretary of defense for research and engineering and the renamed under secretary of management and support. Carter said the committee's plan to divvy up AT&L's current responsibilities among two other positions could cause trouble for acquisition programs transitioning from development to production.

“I share the view of SASC that over time, the acquisition executive's position has become so preoccupied with program management, including a lot of unnecessary bureaucracy associated with it, that it perhaps takes some management attention from the research and engineering function," he said. "I do, however, have one caution: separating research and engineering from manufacturing could introduce problems in the transition from the former to the latter, which is a frequent stumbling block for programs."

A staff member for the committee, however, released a statement to the press seeking to correct Carter's interpretation of the bill.

“Unfortunately, Secretary Carter's statement was wrong,” the staffer said. “In reforming AT&L, the SASC does not split oversight of development and manufacturing. The new undersecretary for research and engineering would set defense-wide acquisition and industrial base policy and oversee the development and production of weapons and national security systems.

“Much of this work would be done by a new assistant secretary for acquisition policy and oversight, which would report to the undersecretary and enable that leader to prioritize technological innovation,” the staffer continued. “What would shift to the new undersecretary for management and support is oversight of purchases of goods and services that are not national security systems and line management of defense agencies that perform these and other core business functions."

By John Liang
May 17, 2016 at 4:22 PM

The FY-17 defense policy bill, the Navy League's Sea-Air-Space expo and more highlight this Tuesday INSIDER Daily Digest.

The FY-17 defense policy bill has drawn the ire of the Pentagon and White House. Our coverage:

Carter slams lawmakers' plans to eliminate AT&L; threatens to support veto

Defense Secretary Ash Carter opposes the plans of Senate lawmakers to eliminate the post of under secretary of defense for acquisition, technology and logistics and threatens to recommend President Obama veto a House defense policy bill over "budget gimmickry."

White House threatens to veto House defense bill over budget 'gimmick'

The White House is threatening to veto the House version of the defense authorization bill as it heads to the floor for debate Tuesday, citing a funding "gimmick" that gambles with the Pentagon's warfighting budget.

Coverage from this week's Sea-Air-Space expo:

Electric Boat will submit Ohio-class replacement proposal next week

General Dynamics Electric Boat on May 20 will submit its proposal to the Navy for detailed design of the multimillion-dollar Ohio-class ballistic missile submarine program, according to a service official.

Newport News' first 'drawing-less' ship expected to yield 15 percent cost savings

Newport News Shipbuilding plans to have the first "drawing-less" ship by CVN-80, which will yield about a 15 percent cost savings for the multibillion-dollar aircraft carrier, according to the company president.

Germany asks U.S. for pricing on CH-53K heavy-lift helicopters

The German government has sent the United States a request for pricing on 41 CH-53K "King Stallion" heavy-lift helicopters, according to a program official.

Navy recently completed Ford-class aircraft carrier EMALS testing

The Navy recently completed dead-load testing for the Electromagnetic Aircraft Launch System that will be aboard its new class of supercarriers, according to a service official.

Delays in the FMS process aren't that bad:

Rixey: FMS system 'is burdened, but it's not broken'

The head of the Defense Security Cooperation Agency on Tuesday downplayed reported delays in the foreign military sales process -- but said the agency is working toward improved speed and transparency.

Document: House hearing on FMS

News on the Air Force's unmanned systems strategy:

Air Force answers third offset strategy with small unmanned aerial system flight plan

The Air Force laid out its plan to use small, low-cost unmanned aircraft to complete missions currently executed by medium-altitude, unmanned aircraft in its Small Unmanned Aircraft System Flight Plan released May 17.

Document: Air Force's 2016-2036 small UAS flight plan

(Want more unmanned system news? Check out our Notification Center, where you can sign up to receive alerts whenever a related story is posted.)

Some Army cyber news to keep tabs on:

House lawmakers beef up Army cybersecurity spending

House defense appropriators have recommended adding $384 million to the Army and its reserve components to strengthen cybersecurity programs, compared with spending in the current fiscal year.

By Marjorie Censer
May 17, 2016 at 12:45 PM

L-3 Communications said this week it plans to close its 314-employee electron devices facility in San Carlos, CA, in late 2017. The contractor will transition its manufacturing operations to North Central Pennsylvania and Los Angeles.

"The consolidation initiative, which is part of the company's ongoing strategic effort to increase efficiencies across its operations, will take place throughout 2017," L-3 said. "Employees at the affected L-3 Electron Devices location in San Carlos will be offered employment at one of the two L-3 locations or given appropriate notice and severance assistance."

Read more about L-3's reshaping.

By
May 17, 2016 at 8:30 AM

The Defense Department and General Services Administration are formally releasing the text of a final rule on cybersecurity acquisition requirements for federal contractors to assure "basic safeguarding" of contractor information systems that process, store, or transmit federal contract information.

DOD and GSA announced in a May 16 Federal Register notice that the final rule will go into effect in 30 days. NASA also contributed to the rulemaking.

As Inside Cybersecurity reports:

The minimum security control standards will apply to any contractor system containing federal information, according to the final rule, and is "just one step in a series of coordinated regulatory actions being taken or planned to strengthen protections of information systems."

The new acquisition requirements will be complemented by acquisition guidance being developed by the Office of Management and Budget, as well as guidance from the National Archives and Records Administration.

The final rule covers controls to safeguard entire contractor information systems, rather than just specific information contained in such systems. Further it clarifies that the acquisition requirements do not relieve contractors from complying with other specific safeguard requirements established by other federal agencies.

DOD and GSA in 2014 issued a report recommending the development of baseline cybersecurity requirements as a condition of defense contract awards. It also recommended addressing cybersecurity in training, developing common definitions for cybersecurity for acquisitions, and instituting federal acquisition cyber risk management strategies.

The release of the DOD-GSA rules comes as the Office of Management and Budget has fallen behind on its own cyber guidance for federal contractors. In March, Inside Cybersecurity reported that OMB was several months behind its self-imposed deadline for issuing a final version of its own contractor cyber guidance.

DOD is also working on cyber incident reporting requirements, which have raised many concerns among industry stakeholders, who have cited that the proposed rule contains "overly broad and unworkable" requirements for reporting cyber incidents.

By Jordana Mishory
May 16, 2016 at 10:34 PM

Democrats on the House Armed Services Committee tentatively intend to support the fiscal year 2017 defense policy bill as it heads to the floor this week, but could change their minds depending on what comes out of the amendment process, according to a congressional aide.

House Armed Services Committee Ranking Member Adam Smith (D-WA) and other Democrats have a number of problems with the bill they helped pass out of committee 60-2, including the language that shifts $18 billion from overseas contingency operations funding to the base budget, the aide said during a May 16 press briefing.

"It's a Ponzi scheme which will have to be paid next year with a supplemental," the aide said. "And that is incredibly problematic especially considering the new administration, and it's very risky given the return of the [Budget Control Act of 2011] and the sequester in the years that follow."

Smith is also concerned about language that could make it more difficult to transfer detainees out of Guantanamo Bay, the aide said, noting that the bill does a number of good things as well.

Smith has been "supportive of the bill because he sees the need to push the bill forward," the aide said, noting that if the committee did not pass the bill then there is a bigger problem. "He is right now still supportive of the bill, but we will not know where he finally stands until we get off the floor because the floor could make this bill much more difficult for him."

"There are so many problematic amendments that hang out there. So he is taking a wait and see approach," the aide continued.

The aide said the plan is for the House to pass the FY-17 bill by 7 p.m. Wednesday night.

However, the aide said the fact that the Senate Armed Services Committee opposes the $18 billion OCO-to-base shift creates a conference issue that the Democrats could use to their advantage to alter the more problematic portions of the bill during the conference process.

"This is a multistage process and sometimes we stay with this process to try to get it to good and then ultimately if it's not good in the end we can vote against it," the aide said, noting that getting the bill to a place where the members can support it could sometimes mean pushing it forward to the next round.

However, the aide noted that if the amendment process or conference process kicks out a bill that "reeks," then Democrats could vote against it, or vote for it but help hold up a potential presidential veto.

"As I often say, what goes in the front of the mule is not what comes out the back," the aide said. "And in this particular case sometimes it's very different. And that may be the reason why members vote for or against it at any point in the process."

By Courtney Albon
May 16, 2016 at 4:40 PM

House appropriators favor maintaining F-35 Block 4 follow-on modernization efforts as part of the larger Joint Strike Fighter program of record rather than make it its own major defense acquisition program -- a move some lawmakers and the Defense Department say is necessary to avoid added bureaucracy.

In a draft report  accompanying its version of the fiscal year 2017 defense appropriations bill, the House Appropriations defense subcommittee states: "The quality of information provided to the Congress is more important than the formal designation of follow-on development as an MDAP or the bureaucratic function that would be required to support its management as such, as long as the department is able to provide the information needed for congressional oversight."

The subcommittee requires a detailed report -- similar to the department's annual Selected Acquisition Reports -- on Block 4 to be submitted in early 2017.

The language runs counter to Senate authorizers' calls for the additional Block 4 oversight that would come with an MDAP designation. House authorizers did not include language on the issue in their version of the bill.

The Government Accountability Office in March recommended the MDAP designation due to the program's $8 billion scope, but the F-35 joint program office has been adamant that the move would only add cost and time constraints to the program. Program Executive Officer Lt. Gen. Christopher Bogdan told reporters March 23 the "administrative burden" could trigger a six-month delay to follow-on execution.

Bogdan has assured lawmakers his office will provide all the cost, schedule and performance reporting required.

By John Liang
May 16, 2016 at 4:22 PM

The Defense Department on May 16 released its latest Financial Improvement and Audit Readiness report.

The report states that "over 90 percent of the Department's $673 billion in current-year budgetary resources and 78 percent of total budgetary resources are under audit, and work to prepare the remaining statements has intensified."

The report reiterates DOD's commitment "to improving business processes and systems so that it can begin an audit of the Department's financial statements by September 30, 2017."

While all the services have stated their readiness for an audit by the end of this fiscal year, "DOD leaders are aware there is a long way to go before the Department achieves the same level of excellence in its business operations as it has in its mission operations," the report states, adding:

Initial audits are providing insight into how well functional managers follow DOD policies and procedures, assessing the effectiveness of controls, and spotlighting areas that still need more work. Senior leadership will continue to review the Department's audit readiness status to ensure audit remains a visible, Department-wide priority and progress remains on track.

By John Liang
May 16, 2016 at 3:20 PM

Coverage of the report accompanying the House Appropriations defense subcommittee's FY-17 military spending bill -- which we obtained this morning -- forms a good chunk of the highlights in this Monday INSIDER Daily Digest.

Our coverage from the draft report accompanying the FY-17 defense appropriations bill:

New details emerge on Senate bill's major impact on defense contractors

Contractors can expect to see some significant changes to the way they do business with the Pentagon on everything from bid protests to accounting compliance should the Senate Armed Services Committee's fiscal year 2017 defense authorization bill become law.

House appropriators seek details on life-cycle costs of DOD's nuke modernization plans

In light of the looming fiscal bow wave in the nuclear modernization budget, House appropriators want the defense secretary to provide details on the estimated life-cycle costs associated with the Pentagon's plan to replace and sustain the nuclear triad.

House appropriators seek more information about background investigations reform

The House Appropriations defense subcommittee is seeking more details about planned changes to the federal background investigations process, according to its report accompanying the fiscal year 2017 spending bill.

House appropriators 'adamant' Navy will not continue with proposed cruiser mod plan

House appropriators are "disappointed" the Navy is attempting to renegotiate its cruiser modernization plan and remain "adamant" the service will not lay up half of the cruiser fleet.

The Army recently shot down a small drone with a laser:

Army hails high-energy laser integration test

Army Space and Missile Defense Command recently completed an "extremely successful" experiment to test the integration of its high-energy laser prototype into a command-and-control environment, according to a service scientist leading the effort.

The JLTV will serve as the Army's Light Reconnaissance Vehicle:

Officials: JLTV to fill role of light recon vehicle 'for the foreseeable future'

The Army plans to use the Joint Light Tactical Vehicle, slated to begin deliveries late this year, to serve as its Light Reconnaissance Vehicle on an interim basis, according to two generals with knowledge of the situation.

(Want more JLTV news? Check out our Notification Center, where you can sign up to receive alerts whenever a related story is posted.)

General Dynamics Bath Iron Works will soon be delivering the first DDG-1000 destroyer:

Navy to accept Zumwalt ahead of lengthy combat systems activation period

The Navy is preparing to accept the first-in-class guided missile destroyer Zumwalt from General Dynamics Bath Iron Works this month, but the next-generation ship still has years of combat systems installations and testing before it's ready to deploy.

The Air Force wants ideas from industry on how commercially hosted payloads might make its future satellite architectures more resilient:

Air Force predicts application for hosted payloads despite lack of momentum

As the Air Force considers how, and whether, commercially hosted payloads might make its future satellite architectures more resilient, the service is looking to industry to develop a key enabling technology meant to help protect sensitive information contained in some military payloads.

By Tony Bertuca
May 16, 2016 at 2:57 PM

Congress is considering both defense authorization and appropriations legislation this week, while defense officials head to the annual Sea-Air-Space Exposition.

Monday

The Navy League's three-day Sea-Air-Space Exposition kicks off at Gaylord National Convention Center. Defense Secretary Ash Carter, Pentagon acquisition chief Frank Kendall and Chief of Naval Operations Adm. John Richardson are among those set to speak at the conference.

Tuesday

The House Appropriations Committee marks up the fiscal year 2017 defense spending bill.

The House version of the fiscal year 2017 defense authorization bill is scheduled to be debated on the floor.

Wednesday

Booz Allen Hamilton is set to host a call with analysts to discuss its quarterly earnings.