The Insider

Engility reports quarterly loss
By Marjorie Censer
May 6, 2016 at 1:25 PM

Engility reported Thursday it lost $3.2 million in its most recent quarter, less than the $13.4 million loss the company recorded in the same three-month period a year earlier.

The contractor announced quarterly sales hit $523 million, up from $403 million in the same period the prior year.

Lynn Dugle, the company's new chief executive, laid out her plans, telling analysts in a late Thursday call the company will be focused on realizing sustainable organic growth, increasing and retaining its talent base and strengthening its balance sheet.

"Organic growth is our top priority and, to grow in this highly competitive industry, we must increase our win rate and total bookings," Dugle said.

In particular, she pointed to the intelligence and civil markets as "significant potential growth areas" for Engility.

Dugle also said that while Engility is seeing more best-value -- as opposed to lowest-priced, technically acceptable -- contracts, the company is watching closely to see if those competitions actually result in awards to bidders who don't offer the lowest price.

"The jury's a bit out on that, but I will say that we are not ever going to get only focused on price," she said.

Kendall's 'pet peeve'
By Tony Bertuca
May 6, 2016 at 12:00 PM

Pentagon acquisition chief Frank Kendall has a "pet peeve" when programs "go into the ditch."

Kendall told an audience at a Defense Acquisition University seminar April 27 that the term "'realized risk' is becoming a pet peeve of mine," according to slides he presented.

"There are a couple of formulations of this that I've seen fairly often over the last few years," the slides state. "When a program goes in the ditch, what I hear from the [program manager] or [program executive officer] is 'schedule is being adjusted to reduce risk,' or 'because risks that were accepted were realized the program is being restructured.'"

Kendall finds such characterizations demonstrate an abdication of responsibility.

"Frankly, I find this a little irritating," the slides state. "It seems like an attempt to say that we all agreed to roll the dice, and gee look what happened, guess we'll have to make some adjustments. I feel that this is basically a way to duck responsibility. The fact is that a program plan which was submitted for approval and justified as being executable wasn't executed. End of story. The reasons can be anything from poor planning to poor performance, to acts of god, but the formulation that 'risk was realized' strikes me as a way to 'spin' failure as something else."

Kendall acknowledges some aspects of program management cannot be controlled, but stressed that adjustments should be made continuously to manage risk.

"We are not, or should not be, spectators to our programs waiting to see what happens," the slides state. "Our job is to be on top of events and steer them to get where we need to go as efficiently as possible. Program management is not a spectator sport."

MARCORSYSCOM's new acquisition guidebook
By John Liang
May 6, 2016 at 11:56 AM

Marine Corps Systems Command recently issued an updated acquisition guidebook.

The document is the result of an Aug. 14, 2015 MARCORSYSCOM memo, which called on all command acquisition programs to use it "in the planning and execution of all" organizational acquisition programs. Further:

The MAG provides a consolidated overview of MARCORSYSCOM acquisition processes and procedures. It is a ready reference for identifying major reviews, approval levels, documentation requirements, tailoring guidance, affordability measures, and higher-level policy and references.

View the guidebook.

Inside the Air Force highlights
By Courtney Albon
May 6, 2016 at 11:27 AM

Highlights from this week's Inside the Air Force:

1. The Air Force Research Laboratory is moving forward with an effort to demonstrate a high-energy laser and is reaching out to industry for a podded system that will allow for more cost-effective laser integration.

Full Story: AFRL seeks podded system for fighter jet laser demonstration

2. The Senate Armed Services Committee will mark up its version of the fiscal year 2017 defense policy bill next week, which may include language that could impact the shape of key Air Force plans, including the service's strategy to replace the Russian-made RD-180 engine and its approach to contracting for the B-21 Long-Range Strike Bomber.

Full Story: Senate mark expected to impact Air Force's RD-180, B-21 plans

3. The Air Force is working closely with Boeing to ramp up Joint Direct Attack Munition production in order to meet continued demand for the precision-guided weapon.

Full Story: Air Force eyes additional JDAM production

House backs DOD classifying NMS
By Tony Bertuca
May 5, 2016 at 4:09 PM

The House Armed Services Committee supports the Pentagon's decision to classify the National Military Strategy, according to the panel's version of the fiscal year 2017 defense authorization bill.

"The committee believes that the NMS [National Military Strategy] should be re-focused to provide a strategic framework for the development of operational and contingency plans by the combatant commands, and to provide joint force and joint capability development guidance to guide resource investments by the military services," according to the bill. "To provide such guidance, the committee believes that the NMS should be a classified document."

Transparency advocate Steve Aftergood notes on his Secrecy News blog that the new bill demonstrates that, in some areas, "the arrow of transparency is pointed backwards and previously unclassified categories of records are becoming newly restricted or classified."

Joint Chiefs Chairman Joseph Dunford said during a May 29 appearance at the Center for Strategic and International Studies that the 2016 NMS, unlike previous years will be classified.

"The national military strategy will be a classified document," he said, noting that the NMS has "historically been written for the public."

Dunford, however, said the Pentagon "will certainly articulate to the public the guts of a national military strategy," despite plans to classify the NMS.

The INSIDER daily digest
By John Liang
May 5, 2016 at 3:33 PM

Readiness funding and THAAD's deployment to South Korea are some of the highlights in this Thursday INSIDER Daily Digest.

The Pentagon's readiness funding efforts aren't up to snuff, according to one House lawmaker:

Military readiness funding debated as Congress works defense policy bills

House Armed Services Committee Chairman Mac Thornberry (R-TX) is criticizing the White House and Defense Department for failing to properly fund military readiness in the fiscal year 2017 budget request, while simultaneously trying to advance a defense authorization bill that would shift billions from the DOD account that traditionally funds readiness in hopes the money will be added by an emergency supplemental from a new presidential administration.

Doesn't look like THAAD will be deployed to South Korea anytime soon:

State Dept. arms control official: THAAD deployment to Korea remains in limbo amid Chinese concerns

The United States remains in talks with South Korea over the potential deployment of a Terminal High Altitude Area Defense battery to counter North Korean ballistic missile threats, a discussion made complicated by China and its concerns that THAAD will become part of a larger "containment strategy" in the region, according to a State Department arms control official.

The head of Huntington Ingalls Industries spoke this morning about the Navy's newest aircraft carrier program:

HII CEO: Ford delivery delay due to complexity of lead ship testing

The Navy's multibillion-dollar megacarrier the Gerald R. Ford is experiencing a delivery delay due to the complexity of lead ship testing, according to Huntington Ingalls Industries chief executive officer.

Coverage of a couple recent Defense Business Board meetings:

Defense Business Board recommends another round of BRAC

An influential advisory panel is recommending another round of base realignments and closures to help the Defense Department reduce excess facilities and use the savings for readiness.

Document: DBB presentation on real property management

DBB: Pentagon needs to make it easier to attract top acquisition candidates

In order to attract and retain top acquisition talent, the Pentagon needs to loosen strict ethics regulations and make it simpler for potential officials to get through the confirmation process, an influential advisory panel found.

Document: DBB presentation on selecting senior acquisition officials

DARPA has space on its mind:

DARPA seeks industry input on controlled re-entry of LEO objects

The Pentagon's advanced research arm is seeking industry's input on the controlled re-entry of objects from low Earth orbit.

Statistical significance
By Jason Sherman
May 5, 2016 at 2:39 PM

The Pentagon's top weapons tester singled out three major programs -- the F-35, the Littoral Combat Ship and the Joint Light Tactical Vehicle -- in a keynote address last month on the importance of utilizing statistical analysis to support operational testing.

Director of Operational Test and Evaluation J. Micheal Gilmore presented this briefing -- on April 11, 2016 in Arlington, VA -- to a workshop organized by the Defense Department and NASA for professional testers from the military, NASA, national laboratories and across the federal government.

Army Maj. Roger Cabiness II, Gilmore's spokesman, provided additional background:

The briefing was the opening keynote for the Rigorous Test and Evaluation Workshop, which the DOD test and evaluation community planned collaboratively with the Statistical Engineering Group at NASA. The primary objective of the workshop was to provide a forum for the professional community to share and discuss statistical approaches to test design and evaluation, including the characterization of system capabilities. The workshop was a continuing part of the DOT&E and NASA Statistical Engineering Agreement, which we use to share best practices across organizations.

DOT&E has made it a top priority to ensure that operational tests are adequate, not only in terms of how much testing is conducted, but also under what conditions. Statistical thinking and the associated methods are an essential element in determining of test adequacy. DOT&E has advocated for the use of statistical methodologies, including Design of Experiments (DOE), reliability test planning, survey design, and rigorous statistical analyses. These methodologies not only provide a rigorous and defensible coverage of the operational space; they also allow us to quantify the trade-space between the amount of testing and the precision needed to answer the complex questions about system performance. They allow us to know, before conducting the test, which analyses we will be able to conduct with the data and therefore, what questions about system performance we will be able to answer. Finally, they provide the analytical tools to answer the question of how much testing is enough in the context of uncertainty.

Orbital ATK reports reduced sales in defense group
By Marjorie Censer
May 5, 2016 at 12:57 PM

Orbital ATK said today sales in its most recent quarter declined slightly, when adjusted for last year's merger between Orbital Sciences and ATK's aerospace and defense groups.

"From a financial standpoint, Orbital ATK reported somewhat mixed results for the first quarter," Dave Thompson, the contractor's chief executive, said during a morning call with analysts.

Total adjusted quarterly revenues were just shy of $1.1 billion, down nearly 5 percent from the same three-month period a year earlier. That decline was driven by a $65 million reduction in defense systems sales, the company said.

Quarterly adjusted profit rose to about $77 million, up from $67 million the prior year. The company said it was buoyed by improved profit in its flight systems and space systems groups, but the defense systems unit reported an $11.9 million decrease in profit.

Kratos reports quarterly loss
By Marjorie Censer
May 5, 2016 at 10:00 AM

Kratos Defense & Security Solutions said this week sales in its most recent quarter declined slightly to hit $153 million.

The contractor reported a loss of $22.2 million for the quarter, a larger amount than the $16.2 million it lost in the same three-month period a year earlier.

Kratos said in its earnings announcement that it "executed a significant restructuring, facility consolidation and cost reduction" during the quarter. As part of this effort, Kratos closed its Charleston Marine Container manufacturing plant and reduced its headcount by more than 120 people.

Huntington Ingalls reports sales, profit boosts
By
May 5, 2016 at 9:52 AM

Huntington Ingalls said today sales in its most recent quarter hit nearly $1.8 billion, up about 12 percent from the same three-month period the prior year.

Profit reached $136 million, up 56 percent from the prior year.

The company attributed much of the growth to its Ingalls Shipbuilding unit, which saw quarterly revenue increase about 25 percent from the same period in 2015 “due to higher revenues in Surface Combatants and Amphibious Assault Ships.”

Those improvements were partly offset by reduced sales in the Legend-class National Security Cutter program, HII said.

Inside the Pentagon highlights
By Tony Bertuca
May 5, 2016 at 9:00 AM

A few must-reads from the latest edition of Inside the Pentagon:

1. In order to attract and retain top acquisition talent, the Pentagon needs to loosen strict ethics regulations and make it simpler for potential officials to get through the confirmation process, an influential advisory panel found.

Full story: DBB: Pentagon needs to make it easier to attract top acquisition candidates

2. House Armed Services Committee Chairman Mac Thornberry (R-TX) is criticizing the White House and Defense Department for failing to properly fund military readiness in the fiscal year 2017 budget request, while simultaneously trying to advance a defense authorization bill that would shift billions from the DOD account that traditionally funds readiness in hopes the money will be added by an emergency supplemental from a new presidential administration.

Full story: Military readiness funding debated as Congress works defense policy bills

3. An influential advisory panel is recommending another round of base realignments and closures to help the Defense Department reduce excess facilities and use the savings for readiness.

Full story: Defense Business Board recommends another round of BRAC

The INSIDER daily digest
By John Liang
May 4, 2016 at 4:22 PM

A new Defense Science Board study and a chat with the head of Leidos highlight this Wednesday INSIDER Daily Digest.

A new DSB study is underway:

New DSB panel to evaluate military research and development enterprise

The Pentagon's acquisition executive has commissioned a new assessment of the defense research enterprise, a study launched in accordance with a statutory mandate to review the sprawling government complex that supports military research and development.

Document: DSB terms of reference memo on the defense research enterprise

Inside Defense sat down this week with the head of Leidos:

As Lockheed deal advances, Leidos prepares for new business units, larger corporate office

Leidos is laying the groundwork for its merger with Lockheed Martin's information systems and global solutions unit, readying for additional business units and a more sizeable corporate office.

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

An RFI for the future SBIRS program is out:

Air Force reveals architecture options for future SBIRS

The Air Force is considering options for a six- or eight-satellite constellation for the future Space-Based Infrared System program of record and anticipates the follow-on system could feature a mix of hosted payloads with disaggregated missions.

Document: Air Force RFI for SBIRS architecture options

The No. 2 officer at U.S. Pacific Command spoke at last week's "Quad-A" conference:

PACOM deputy chief touts need for rotary wing upgrade

Future rotary platforms are essential if the joint force is to tackle potential conflicts in the "expansive maritime environment" of the Pacific theater, according to the deputy commanding general for U.S. Pacific Command.

Keep an eye out for an upcoming industry day on CAC25:

Marines will host an industry day in May for the second phase of CAC2S

The Marine Corps plans to host an industry day in May for the second phase of the common aviation command and control system for full-rate production, according to the program manager.

House lawmakers want more info on unmanned combat vehicles:

House bill pushes for expansion of unmanned combat vehicles

Lawmakers are seeking an update on the Defense Department's progress toward further integration of unmanned ground and aerial vehicles into the joint force, according to the House Armed Services Committee's fiscal year 2017 defense policy bill.

Air Force One recap EIS planned
By John Liang
May 4, 2016 at 1:21 PM

The Air Force plans to prepare an environmental impact assessment on basing the Presidential Aircraft Recapitalization program at Joint Base Andrews near Washington, DC.

According to a Federal Register notice issued this morning:

The EIS will assess the potential environmental consequences of the proposal to beddown versions of the Boeing 747-8 passenger aircraft at JBA as replacements to the two existing VC-25A aircraft currently used to transport the President of the United States (POTUS).

The Air Force plans to hold a pair of "public scoping" meetings on May 23 and May 24, according to the notice.

In February, the Air Force awarded Boeing a $25.7 million contract to perform risk reduction for the program. As Inside Defense reported at the time:

While the initial contract is for risk-reduction activities, the Air Force will later issue modifications for the future purchase of the three jets, as well as to design, modify and test the aircraft to meet the mission, according to a Jan. 29 Air Force statement.

"These activities will include the definition of detailed requirements and design trade-offs required to support informed decisions that will lead to a lower risk engineering and manufacturing development program and lower life cycle costs," Col. Amy McCain, the Presidential Aircraft Recapitalization program manager, said in the statement.

Authorization bills
By Lee Hudson
May 4, 2016 at 10:57 AM

The fiscal year 2017 defense policy bill will be brought to the House floor the week of May 16, the House Armed Services Committee confirmed to Inside Defense May 4.

The Senate Armed Services Committee will begin to mark up its version of the FY-17 defense policy bill May 9. The full committee will meet to review the bill May 11, which is closed to the public.

Flynn joins Drone Aviation board
By Marjorie Censer
May 4, 2016 at 9:43 AM

Drone Aviation said today retired Lt. Gen. Michael Flynn, the former director of the Defense Intelligence Agency, has joined the company's board as vice chairman.

He has also been named to the company's strategic advisory board.

Drone Aviation has increasingly been seeking a foothold in the military market, as Inside Defense reported earlier this year:

To win more military work despite tight budgets, Drone Aviation has sought to participate in demonstrations, trying to break into the market by proving the system's worth to soldiers.

In an interview with Inside Defense last week, Dan Erdberg, Drone Aviation's president, said the company is convinced there's a need for this technology -- but has to get it in the hands of the right people.

"We just decided our best strategy was, we're going to support the warfighter," he said. "The further it gets . . . the use cases get proven, and it just continues to really excel at what it's designed to do. Eventually, people will see it."