The Insider

By Marjorie Censer
February 19, 2016 at 4:18 PM

Kratos Defense & Security Solutions said today it is consolidating certain facilities used by its modular systems division and will close its Charleston Marine Container manufacturing plant.

"The facility consolidation is being driven by the need to improve MSD manufacturing efficiencies, operational performance, profit margins and cash flow," the company said.

In a statement, Eric DeMarco, Kratos' chief executive, said the company will retain the plant so that it can be reopened when there is enough new business.

For more on Kratos, check out Inside Defense's latest story on the company: http://insidedefense.com/daily-news/seeking-growth-kratos-chief-says-company-investing-new-technology

By Justin Doubleday
February 19, 2016 at 3:11 PM

A top Democrat on the House Armed Services Committee says increasing fiscal year 2017 overseas contingency operations funding above the $59 billion requested by the Obama administration may not be a total non-starter for members of his party on the panel.

In a Feb. 19 interview with Inside Defense, Rep. Joe Courtney (D-CT), the ranking member on the House Armed Services seapower subcommittee, said Democrats on the full committee have yet to caucus to discuss the Pentagon's budget request released Feb. 9.

But Courtney said he believes Democrats may not be completely opposed to an OCO increase. The issue thus far has pitted the administration against House Armed Services Committee Chairman Mac Thornberry (R-TX), who argues the budget agreement reached last year set $59 billion as a floor for OCO, not a ceiling. Thornberry wants to increase OCO funding by as much as $23 billion above the administration's request.

“I haven't talked to people explicitly yet, but to me, the take-away is I think people are going to be very cautious and recognize that this issue is very fluid in terms of how it actually plays out,” Courtney said of committee Democrats. “I don't think people are going to be digging in with a staunch position in opposition to looking at OCO, more OCO, as this thing unfolds.”

Some of the most pressing questions borne from the Navy's budget request, Courtney noted, hinge on the final OCO number. Read about the rest of the interview with the Connecticut lawmaker in the Feb. 22 issue of Inside the Navy.

By
February 19, 2016 at 1:24 PM

Kicking off this Friday INSIDER Daily Digest with important developments in key missile defense and space programs.

MDA scraps plan for $1.8B block buy of Raytheon missile, slashes procurement

The Missile Defense Agency has shelved plans for a block buy of Raytheon's Standard Missile-3 Block IB interceptor -- a potential $1.8 billion deal -- in an apparent change of course underscored by a procurement cut in fiscal year 2017 that slashes quantities well below the objective annual production rate.

GAO: Claims of GMD effectiveness shaky, future acquisition plans questionable

Despite claims of progress in developing a missile defense system capable of intercepting North Korean and Iranian intercontinental ballistic missiles, the Missile Defense Agency has not yet proved the Ground-based Midcourse Defense system can defend the homeland, according to a government watchdog.

Lt. Gen. Greaves: GPS OCX is DOD's most troubled program

The commander of the Air Force's space acquisition office on Friday declared the ground system for the next-generation of Global Positioning System satellites the Defense Department's most troubled program.

More daily news:

Vectrus expands focus on IT and network communications work

Seeking growth, Vectrus is zeroing in on IT and network communication services, opening a new office in Reston and hiring a Harris executive to lead its efforts in that market.

GAO pushes Pentagon to provide increased visibility into future services spending

The military must improve how it plans future spending on services contracts, given that they make up more than half of the Pentagon's contract obligations, a new Government Accountability Office report says.

Air Force Research Laboratory continues CHAMP miniaturization plans

Despite calls from Congress to field the Counter-electronics High Power Microwave Advanced Missile, the Air Force's proposed fiscal year 2017 budget outlines plans to prolong research efforts for the program.

New in the document library:

Navy's cyberspace instruction

The Feb. 10, 2016, Navy instruction "establishes policy and assigns responsibilities . . . for management and qualification of the Department of the Navy (DON) Cyberspace Information Technology and Cybersecurity Workforce (Cyber IT/CSWF)."

CRS report on the Navy's Virginia-class submarine procurement effort

The Feb. 12, 2016, Congressional Research Service report -- originally obtained by Secrecy News -- discusses the Navy's Virginia-class submarine procurement effort.

GAO report on services contracting

The Feb. 18, 2016, Government Accountability Office report finds that Pentagon leadership and Congress have “limited” insight into future spending on contracted services, even though these services make up more than half of total obligations.

By Courtney Albon
February 19, 2016 at 12:24 PM

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

The Air Force said this week it is already investing in many of the technology areas highlighted as part of the Defense Department's “Third Offset” planning.

Full story: Air Force FY-17 investments align with 'Third Offset' strategy

The F-22 program office says it has the funding it needs to upgrade a key testing simulator -- despite recent concerns from the Pentagon's top weapons tester that the program would not complete the needed improvements on time.

Full story: F-22 program office confident it can complete near-term ACS upgrades

The Air Force's FY-17 budget continues its efforts to shore up depleted supplies of key munitions -- both for near-term operations and future air-to-air conflicts.

Full story: USAF budget works to address munitions gaps, future competitors

By Marjorie Censer
February 19, 2016 at 10:15 AM

Booz Allen Hamilton said today that Kevin Cook, its chief financial officer, will retire, and Lloyd Howell, a longtime company executive who leads the contractor's civil commercial group, will succeed him, starting July 1.

Cook spent 23 years at Booz Allen, the company said.

Howell, 49, joined Booz Allen in 1988 as a consultant. He left in 1991 to earn his MBA, worked for Goldman Sachs and then returned to Booz Allen in 1995. He was named a partner in 2000 and has led the civil commercial group since 2013.

By Tony Bertuca
February 18, 2016 at 4:56 PM

The Pentagon has released its justification books for defense-wide procurement and research, development, test and evaluation programs.

The documents include funding for all agencies and programs overseen by the Office of the Secretary of Defense.

By Marjorie Censer
February 18, 2016 at 3:07 PM

As other prime contractors divest their IT services businesses, General Dynamics sees "no compelling reason" to do the same, the contractor's chief financial officer said at a conference today.

"It's clearly been a dynamic sector of the environment," Jason Aiken said of IT services at a Barclays conference in Miami Beach, FL.

Lockheed Martin, for instance, announced earlier this year it would spin off its IT services unit and combine it with Leidos, while L-3 Communications sold its services business to CACI International.

But General Dynamics, Aiken said, sees the company's information systems and technology unit as a business "that's of scale" and as "lean as they can be."

"It's a tremendous cash-generation engine," he said. "And it's a low level [of] invested capital."

"We like what it does to our portfolio," Aiken added. "We like where we are right now."

By Lee Hudson
February 18, 2016 at 12:40 PM

The Navy's fiscal year 2017 budget request is a “great indication” the Ohio-class replacement ballistic missile submarine program is on track and discussion will continue this year on how to fund the program, according to Huntington Ingalls Industries Chief Executive Officer Mike Petters.

The service in its FY-17 request set aside $773 million in advanced procurement to pay for the lead ship that will be built in FY-21 and $11.7 billion over the future years defense plan, according to budget documents.

Petters said during a Feb. 18 quarterly earnings call the discussion will continue this year on whether the next-generation ballistic submarine will be built using funds in the Navy's shipbuilding budget or using other monies within the Defense Department by using the National Sea-based Deterrence Fund congressional authorizers created.

In the years the Navy builds the Ohio-class replacement sub the service will also build one Virginia-class attack submarine per year. Petters said it is more of a  “complex challenge” for the industrial base to build one Ohio-class replacement sub and one Virginia-class sub than building two Virginia-class subs per year. -- Lee Hudson

By John Liang
February 18, 2016 at 11:35 AM

We kick off this Thursday INSIDER with news on Pentagon services contracts and more.

Keep an eye out for an upcoming DOD review of its services contracts:

Pentagon reviewing services contracts for savings

The Pentagon has launched a new review of all services contracts to ensure they are still required, according to Defense Department Comptroller Mike McCord.

(Need more DOD services contracts news? Check out our Notification Center, where you can sign up to receive email alerts whenever a related story is posted.)

The Pentagon will be holding a meeting within the next few months to talk about rare earth materials:

DOD eyes meeting to discuss critical rare earth materials, develop strategy

The Pentagon intends to hold a meeting of its Strategic Materials Protection Board by this summer to discuss critical rare earth materials and their impact on national security with an eye toward putting together a strategy, the Defense Department's assistant secretary of defense for logistics and materiel readiness has told the Government Accountability Office.

Document: GAO report on rare earth materials management

An overview of DOD's latest operational energy strategy:

DOD's operational energy strategy targets long-term warfighting capability

The Defense Department's recently released 2016 operational energy strategy states that "first and foremost, the department's use of operational energy needs to focus on increasing long-term warfighting capability."

Document: DOD's 2016 operational energy strategy

Expect DOD to issue a new instruction on counterfeit parts soon:

DOD planning new instruction on reporting suspect counterfeit parts

The Pentagon is planning to release a new instruction laying out details for how acquisition officials should report suspect counterfeit parts into a government and industry database.

Document: GAO report on DOD counterfeit parts

Air Force and Navy next-generation fighter plans appear to be moving at different paces:

Air Force scraps FY-18 sixth-gen fighter launch; Navy dials back F/A-XX funding

Two parallel Pentagon programs -- one Air Force, one Navy -- exploring future air dominance needs that top Defense Department brass want in sync appear to be moving at different paces, according to the fiscal year 2017 budget request.

A look at defense contractor SOS International's expansion plans:

With first acquisition under its belt, SOS International seeks more growth

SOS International, which skyrocketed in size following the Sept. 11, 2001 terrorist attacks, is seeking to continue to grow, this time through a mix of organic growth and new acquisitions.

By Marjorie Censer
February 18, 2016 at 9:49 AM

Huntington Ingalls said today that sales in 2015 hit $7 billion, up about 1 percent from the prior year. Profit for the year reached $404 million, up close to 20 percent from 2014.

However, the contractor reported that in its most recent quarter it took a non-cash goodwill impairment charge of $16 million as a result of "continued deterioration of market fundamentals" in the oil and gas services industry. Additionally, Huntington Ingalls recorded a non-cash intangible asset impairment charge of $27 million in the quarter related to customer relationships as well as trade names and developed technology.

In 2014, Huntington Ingalls bought UniversalPegasus International, which provides engineering and project management services to the energy industry.

Mike Petters, chief executive, said during a call with analysts this morning the company is seeking to ensure that UPI is positioned for the future -- despite the continued slide in the price of oil.

"Our commitment here is to maintain the relationships we have with those critical customers out there that are in that space, and that means that we've got to preserve capabilities that those customers are going to need," he said.

However, he acknowledged the market is less than ideal.

"The dynamics in that marketplace have been pretty volatile," Petters told analysts. "I wish it were different."

 

By Marjorie Censer
February 18, 2016 at 9:08 AM

Leidos said today that sales in 2015 hit $5.09 billion, up from $5.06 billion the prior year, while annual profit reached $254 million, up from a loss of $323 million in 2014.

Last year's loss was related to a goodwill impairment charge.

The contractor said its national security solutions unit saw sales decline about 4 percent, which the company attributed primarily to reduced work associated with overseas contingency operations contracts. OCO contracts provided about $195 million in sales in 2015, down from $382 million the prior year.

Leidos' health and engineering segment saw sales grow about 9 percent, partly related to the company's electronic health record system modernization program.

By Tony Bertuca
February 18, 2016 at 9:00 AM

Here are some must-reads from this week's edition of Inside the Pentagon:

1. The Pentagon is planning to release a new instruction laying out details for how acquisition officials should report suspect counterfeit parts into a government and industry database.

Full story: DOD planning new instruction on reporting suspect counterfeit parts

2. The Defense Department's recently released 2016 operational energy strategy states that "first and foremost, the department's use of operational energy needs to focus on increasing long-term warfighting capability."

Full story: DOD's operational energy strategy targets long-term warfighting capability

3. SOS International, which skyrocketed in size following the Sept. 11, 2001 terrorist attacks, is seeking to continue to grow, this time through a mix of organic growth and new acquisitions.

Full story: With first acquisition under its belt, SOS International seeks more growth

By Sebastian Sprenger
February 17, 2016 at 10:18 PM

Lockheed Martin announced on Wednesday it had withdrawn its protest against the Army's contract award to Oshkosh for production of the Joint Light Tactical Vehicle.

The decision comes days after a judge on the Court of Federal Claims denied a request by Lockheed to have all work on the program halt until the case is resolved.

That decision apparently was enough of a sign for the company to withdraw its protest altogether.

The move came after "careful deliberation," a statement notes.

By John Liang
February 17, 2016 at 4:38 PM

Inside Defense's Tony Bertuca reported this week that the Pentagon is requesting $3.6 billion in fiscal year 2017 and $18 billion over the next five years to invest in the so-called "Third Offset" strategy meant to stem the erosion of U.S. superiority on 21st century battlefields:

Though more than $6 billion in Third Offset capabilities being developed are classified, the Defense Department provided a breakdown of broad areas where the money would be spent over the course of the future years defense program.

Firstly, DOD seeks to invest more than $3 billion over the FYDP for "weapons and concepts for surface-strike and air-to-air combat to negate" the anti-access/area-denial investments being made by Russia and China, according to a statement from DOD spokesman Lt. Cmdr. Courtney Hillson.

"These include upgrades to a number of existing weapons and enhancements to ongoing efforts to develop new weapons," she continued.

Inside Defense's Jason Sherman drew up a chart that pretty much sums it all up:

By Marjorie Censer
February 17, 2016 at 4:21 PM

ManTech International said today that sales in 2015 hit nearly $1.6 billion, down about 13 percent from the prior year. But profit reached $51.1 million, up from $47.3 million in 2014.

The contractor partly attributed the sales decline to reduced requirements supporting Mine Resistant Ambush Protected vehicle field sustainment to the Army.

ManTech said it expects slightly improved results in fiscal year 2016, providing guidance that the company expects to produce $1.575 billion to $1.675 billion in annual revenue and $52.5 million to $55.9 million in profit.