The Insider

The INSIDER daily digest
By John Liang
March 1, 2016 at 2:20 PM

The Army's FY-17 unfunded priorities list, navy shipbuilding and more news are featured in this Tuesday INSIDER Daily Digest.

The Army has joined the Marine Corps in sending its FY-17 unfunded priorities list to Congress:

Army sends Congress $7.5 billion wish list

Less than a month after the fiscal year 2017 budget submission, the Army is seeking nearly $7.5 billion to address its unfunded requirements -- a number similar to the service's FY-16 request -- including over $1 billion for aviation.

Document: Army's FY-17 unfunded priorities list

The Navy is still hoping it gets all the Littoral Combat Ships it wants:

Mabus: Budget request 'preserves decision space' on LCS for next administration

The Navy's fiscal year 2017 budget request "preserves decision space" for the next administration to make the ultimate choice on the number of Littoral Combat Ships purchased, according to service Secretary Ray Mabus.

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

The Missile Defense Agency is looking to redesign the Ground-Based Interceptor:

MDA proposes revised $2 billion, five-year RKV project to execute new acquisition strategy

The Missile Defense Agency is proposing a new $2 billion, five-year plan to improve the Ground-Based Interceptor -- a 227 percent boost over last year's forecast -- to re-design the kill vehicle in an unorthodox arrangement that extends Boeing's role as prime contractor yet allows Raytheon and Lockheed Marin to both collaborate and bid on future production.

The Air Force awarded two rocket propulsion contracts on the same day it told Inside Defense that such contracts had been stalled:

Air Force lifts hold, awards rocket propulsion contracts to Aerojet, ULA

The Air Force on Monday entered into public-private partnership agreements with Aerojet Rocketdyne and the United Launch Alliance to develop propulsion prototypes to replace the Russian-made RD-180, lifting a hold on awards pending congressional clarification.

A chat with the incoming head of the Professional Services Council:

Berteau: PSC 'tackles the issues that I've wrestled with throughout my professional career'

After a career that's included jobs at the Pentagon, in industry and at a think tank, David Berteau is headed to the Professional Services Council, where he said services contracting is at a key moment.

A senior Pakistani government official spoke to reporters this morning:

Aziz: Proposed sale of F-16s to Pakistan 'very critical part' of nation's counterterrorism efforts

Pakistan wants to use the eight F-16 fighter jets it intends to purchase from the United States for counterterrorism operations in the nation's tribal regions, Sartaj Aziz, the adviser on foreign affairs to Pakistan's prime minister, said Tuesday.

SBA urges DOD to ease contractor burdens for cybersecurity
By John Liang
March 1, 2016 at 12:25 PM

The Small Business Administration is urging the Defense Department to provide a one-time subsidy to small businesses to address some of the costs of complying with new cybersecurity requirements for the handling of sensitive unclassified information by contractors.

As Inside Cybersecurity reports this week:

In its public comments, issued Feb. 29, the agency's Office of Advocacy recommends DOD "consider significant alternatives, such as collaborating with universities or other organizations to provide low-cost cybersecurity services to small businesses, or providing a one-time subsidy to small businesses to help cover the cost of initial consultations with third-party vendors," among other measures to ease the burden of the new requirements.

SBA issued its recommendations in response to a DOD interim rule issued on Dec. 30, 2015. The DOD rule is intended to apply standards by the National Institute of Standards and Technology for "protecting controlled unclassified information in nonfederal information systems and organizations" to the Defense Federal Acquisition Regulation Supplement (DFARS).

SBA is "concerned that the cost of compliance with DOD's interim rule will be a significant barrier to small businesses engaging in the federal acquisition process."

The agency also argues that DOD "has not included both small business prime contractors and small business subcontractors when estimating the number of small businesses impacted by the interim regulation."

Orbital ATK reports flat sales
By Marjorie Censer
March 1, 2016 at 10:10 AM

Orbital ATK, adjusting to reflect the merger that took place last year, said today that 2015 sales hit $4.5 billion, up about 2 percent from the prior year.

Adjusted profit for the year reached $298.9 million, up from $249.3 million in 2014.

The company was buoyed by its space systems group, which saw bolstered sales and revenue. The defense systems group, on the other hand, saw sales for the year decline about 4 percent.

 

Engility names new CEO
By Marjorie Censer
March 1, 2016 at 9:20 AM

Engility said today its board has appointed former Raytheon executive Lynn Dugle to lead the company, beginning March 21. John Hynes, the contractor's chief operating officer, has been promoted to president and COO.

Dugle replaces Tony Smeraglinolo, who the company said is stepping down.

Dugle spent more than a decade in senior management roles at Raytheon, including serving as president of Raytheon Intelligence, Information and Services, Engility said. Hynes was CEO of TASC when it was purchased by Engility.

The company did not offer an explanation for Smeraglinolo's departure, but said he would step down from the board immediately. Engility has faced questions about its financial results. Last November, it reported profit of $3.4 million for the nine-month period ending Sept. 30, 2015, down nearly $30 million from the same period a year earlier.

Navy will host industry day for EMALS, AAG
By Lee Hudson
February 29, 2016 at 5:09 PM

The Navy will host an industry day for the Electromagnetic Aircraft Launch System and Advanced Arresting Gear production program for the third Ford-class aircraft carrier at the end of March in New Jersey, according to a Federal Business Opportunities notice.

The Enterprise (CVN-80) is the third aircraft carrier in its class and Naval Air Systems Command intends to host an industry day March 22-24 for build-to-print production, manufacture, assembly, test, installation support and management of EMALS and AAG, the Feb. 29 special notice reads.

"This general session will address an overview of the EMALS and AAG systems, and some of the subsystems and components that may be procured under separate contracts, including Motor Generators, Launch Motor Modules, PCS Inverter Enclosures, Transformer/Rectifiers, Electric Motors, Water Twisters, Purchase Cable Drums, Mechanical Brakes, Cable Shock Absorbers, and/or HealthMAP," the notice reads.

Inside the Navy reported earlier this month the Navy has developed a software solution for the General Atomics-built EMALS on the service's new super carrier, the Gerald R. Ford.

In fiscal year 2014 the service discovered excessive airframe stress during launches of F/A-18E/F Super Hornets and EA-18G Growlers with wing-mounted 480-gallon external fuel tanks due to EMALS, which is largely a software-based system, according to the latest report from the Pentagon's chief weapon tester J. Michael Gilmore.

"This discovery, until corrected, will preclude the Navy from conducting normal operations of the F/A-18E/F and EA-18G from CVN 78," the report reads.

The software solution was verified with dead-load testing at the Joint Base McGuire-Dix-Lakehurst System Functional Demonstration test site. The service will conduct aircraft verification in the summer of 2016, Naval Sea Systems Command spokeswoman Colleen O'Rourke wrote in a Feb. 8 email to ITN.

The INSIDER daily digest
By John Liang
February 29, 2016 at 2:13 PM

The Marine Corps' FY-17 unfunded priorities list, Navy mine warfare and Army Manpack radios lead off this Monday INSIDER Daily Digest.

The Marine Corps has submitted its fiscal year 2017 unfunded priorities list to Congress:

Marines outline $2.7 billion worth of unfunded priorities to Congress

The Marine Corps has sent Congress an unfunded priorities list for fiscal year 2017 totaling $2.7 billion, the bulk of which would go toward aviation procurement including more Joint Strike Fighters, according to a document obtained by Inside the Navy.

Document: Marine Corps' FY-17 unfunded priorities list

The Navy is looking at alternatives to Lockheed Martin's Remote Multimission Vehicle:

Navy resetting approach to mine warfare, looking at alternatives to RMMV

The Navy is canceling the next production round on Lockheed Martin's Remote Multimission Vehicle and instead adopting recommendations to explore alternative systems for the Littoral Combat Ship's mine countermeasures mission package.

The Army has awarded three JTRS Manpack radio contracts:

Army taps three vendors for Manpack radio testing phase

The Army on Feb. 26 awarded contracts to General Dynamics, Harris Corp. and Rockwell Collins for the delivery of Manpack radios, as the service moves toward narrowing the field of vendors for a full-rate production decision in fiscal year 2018.

The National Commission on the Future of the Army's recommendations could be met with a warmer reception than originally expected:

Milley signals cordial reception of panel's force-structure proposals

Army Chief of Staff Gen. Mark Milley last week signaled that recommendations by the National Commission on the Future of the Army may receive a warmer reception than expected by many military watchers.

If JLENS is to go aloft once again, more money will be needed:

Pentagon plan for JLENS says money needed soon to send blimp airborne

As defense officials are moving to continue a controversial demonstration with a pair of giant, sensor-packed blimps after one aerostat blew away and crashed during bad weather, money fresh from Congress is needed soon to implement the plan, according to officials and documents.

Keep an eye out for an East Coast version of DIUx:

Pentagon to stand up East Coast version of Silicon Valley outreach unit in June

The Pentagon intends to establish an East Coast version of Defense Secretary Ash Carter's new Silicon Valley outreach team in June.

The top uniformed Marine wants to see an expeditionary mobile base in the Mediterranean Sea:

Neller: New Expeditionary Mobile Base should go to the Mediterranean

The commandant of the Marine Corps wants the newest expeditionary mobile base to be deployed to the Mediterranean Sea to help support operations in West Africa and the European theater.

Thales seeks growth in cybersecurity business
By Marjorie Censer
February 29, 2016 at 1:47 PM

As it prepares to close an acquisition that will nearly double its U.S. cybersecurity sales, Thales is seeking more growth in the cyber market.

Speaking to reporters today, Alan Pellegrini, chief executive of Thales USA, said the company's pending acquisition of Vormetric will complement its existing work.

Thales' cybersecurity business, known as e-Security, already encrypts data moving across networks, while Vormetric specializes in software-based protection for data at rest, he said.

Thales' cyber business in the U.S. has surpassed $100 million per year in sales, he said. With the addition of Vormetric -- the deal is anticipated to close in March -- the company expects to have about $175 million in 2016 sales, according to Pellegrini.

He noted that Vormetric is based in Silicon Valley, an area where "we want to increase our footprint."

Thales is set to pay $400 million for the acquisition, an amount Pellegrini said was justified.

"We paid a substantive price for Vormetric because it's an attractive market and they were an attractive company. They demand a premium," he said, adding: "We felt for us it was a very fair price, and we will certainly realize the value on it."

Pellegrini said both Thales and Vormetric provide cybersecurity to commerical companies and government agencies. He told reporters Thales sees cybersecurity as one of the areas "growing most rapidly in the U.S."

Lockheed to pay $5 million settlement
By Marjorie Censer
February 29, 2016 at 12:00 PM

Lockheed Martin and its Energy Systems and Utility Services subsidiaries have agreed to pay the U.S. government $5 million to resolve allegations they violated the Resource Conservation and Recovery Act and the False Claims Act, the Justice Department announced today.

The government's lawsuit alleged the contractor failed to identify and report hazardous waste produced and stored at the Paducah Gaseous Diffusion Plant in Paducah, KY, the Justice Department said. It also alleged the company failed to properly dispose of the waste and knowingly submitted false claims for payment under contracts with the Energy Department.

Lockheed operated the plant from 1984 to 1999 and was responsible for its uranium enrichment operations as well as environmental restoration, waste management and custodial care at the 3,500-acre site, according to DOJ.

The settlement resolves two whistleblower lawsuits, filed by the National Resources Defense Council and several former Lockheed employees. The whistleblowers will receive $920,000 from the settlement, DOJ says.

The claims resolved by the settlement remain allegations, and there was no determination of liability.

Lockheed declined to comment.

The week ahead
By Tony Bertuca
February 29, 2016 at 11:47 AM

The week ahead features a wide array of Capitol Hill budget hearings. Additionally, Defense Secretary Ash Carter is traveling to the West Coast to meet with major U.S. technology companies and continue his push for innovation in the defense sector.

Tuesday

The House Armed Services Committee will hold a member day to hear from non-committee members about their fiscal year 2017 defense priorities.

The House Armed Services seapower and force projection subcommittee will hear from the Air Force on FY-17 aviation capabilities.

The House Armed Services emerging threats and capabilities subcommittee is scheduled to hear from U.S. Special Operations Command on its FY-17 budget.

The Senate Armed Services Committee will hold a closed meeting with Air Force officials to discuss the Long-Range Strike Bomber program.

The Senate Armed Services Committee will hear from the chief of U.S. European Command.

Orbital ATK will hold a 9 a.m. call to discuss its quarterly earnings.

http://phx.corporate-ir.net/phoenix.zhtml?c=81036&p=irol-newsArticle&ID=2139576

Wednesday

The House Armed Services Committee will hear from DOD's top intelligence officials on worldwide threats.

The House Armed Services tactical air and land forces subcommittee will hear from Army officials on FY-17 ground force modernization.

The House Armed Services strategic forces subcommittee will hold a hearing on the FY-17 nuclear budget.

The Senate Armed Services Committee will hear from Air Force officials on the service's FY-17 budget.

The Center for Strategic and International Studies hosts an event to discuss the effect of bid protests on the acquisition system. Set to participate are Sean O'Keefe, the former chief executive of EADS North America; Dick Ginman, the former director of defense procurement and acquisition policy; and Elliott Branch, deputy assistant secretary of the Navy for acquisition and procurement.

http://csis.org/event/whos-fairest-them-all-effects-bid-protests-acquisition-system

Thursday

Engility is set to discuss its quarterly earnings in an 8 a.m. call.

http://investors.engilitycorp.com/phoenix.zhtml?c=251345&p=irol-irhome

The House Armed Services readiness subcommittee will hold a hearing to discuss the Marine Corps' FY-17 budget request.

Link to House Armed Services Committee hearings: http://1.usa.gov/1nbUs4N

Link to Senate Armed Services Committee hearings: http://1.usa.gov/RmEbep

Harris to divest aerostructures business
By Marjorie Censer
February 29, 2016 at 11:17 AM

Harris Corp. announced today it has agreed to sell its aerostructures business to Albany International for $210 million, including $187 million in cash and the assumption of a $23 million capitalized lease.

Harris acquired the unit as part of its purchase of Exelis last year. The aerostructures business, part of its electronic systems segment, posted $77 million in sales last year and operates in two facilities in Salt Lake City, UT, Harris said.

Albany International is a textiles and materials processing company. The deal is expected to close by the end of this quarter, which concludes in March, or early in the next quarter.

Lockheed promotes Rood
By Marjorie Censer
February 29, 2016 at 11:13 AM

Lockheed Martin said today that John Rood will lead Lockheed Martin International, effective March 7.

Rood succeeds Pat Dewar, who has been named senior vice president for international strategic initiatives and is slated to retire in August.

Rood is vice president of Lockheed Martin Government Affairs and joined the company in 2014. He spent 20 years in government, working at the State Department, Defense Department, National Security Council, CIA and as a Senate staffer.

Cyberwar on ISIL accelerating
By Tony Bertuca
February 29, 2016 at 11:10 AM

Defense Secretary Ash Carter made it clear today that the United States is now fully engaged in cyberattacks against the Islamic State of Iraq and the Levant.

"We are accelerating this as we are accelerating everything," he told reporters during a Pentagon news conference.

Moments earlier, Carter and Chairman of the Joint Chiefs of Staff Gen. Joseph Dunford announced that U.S. forces were in the process of isolating the Iraqi city of Mosul in preparation to "increase the quality and quantity" of counter-ISIL operations.

Carter said the Pentagon could not disclose many details on its cyber efforts against ISIL, but noted that they went "beyond" typical electronic warfare that jams communication signals. He noted that U.S. Cyber Command was involved.

"This is the reason Cyber Command was created in the first place," he said.

Dunford said the cyber operations against ISIL represented a new type of warfare that would provide a variety of lessons learned for other combatant commanders.

"I think what we're building is an inventory of tools," he said.

Inside the Army highlights
By John Liang
February 29, 2016 at 9:05 AM

The National Commission on the Future of the Army, JLENS and countering Russia in Europe highlight the front page of this week's Inside the Army:

1. Army Chief of Staff Gen. Mark Milley last week signaled that recommendations by the National Commission on the Future of the Army may receive a warmer reception than expected by many military watchers.

Full story: Milley signals cordial reception of panel's force-structure proposals

2. As defense officials are moving to continue a controversial demonstration with a pair of giant, sensor-packed blimps after one aerostat blew away and crashed during bad weather, fresh money from Congress is needed soon to implement the plan, according to officials and documents.

Full story: Pentagon plan for JLENS says money is needed soon to send blimp airborne

3. Tasked with keeping a resurgent Russia impressed enough to deter any military moves against its neighbors, Army forces in Europe are lacking key capabilities ranging from aviation to artillery, according to their commander.

Full story: U.S. Army Europe chief says he's short on aviation, artillery

Inside the Navy highlights
By Lee Hudson
February 29, 2016 at 9:00 AM

Marine Corps unfunded priorities, future training and testing against anti-ship cruise missiles highlight the front page of this week's Inside the Navy:

1. The Marine Corps has sent Congress an unfunded priorities list for fiscal year 2017 totaling $2.7 billion, the bulk of which would go toward aviation procurement including more Joint Strike Fighters, according to a document obtained by Inside the Navy.

Full Story: Marines outline $2.7 billion worth of unfunded priorities to Congress

2. Officials from across the Marine Corps are convening in March to discuss how the service should be organized, trained and equipped in the future.

Full Story: Marine components meeting in March to debate 'Force 2025'

3. The Navy will use a modeling and simulation program to test against supersonic, anti-ship cruise missiles after a program to develop a real target was canceled last year.

Full Story: Navy to use simulation in place of canceled cruise-missile target program

Arsenal Plane = 'Alternative Strike'
By Jason Sherman
February 26, 2016 at 3:14 PM

Take it to the bank: Arsenal Plane is the "Alternative Strike" platform in the fiscal year 2017 budget that the Pentagon wants up and flying by 2018.

"They are the same," said a Pentagon official who asked not to be named.

On Feb. 24, we moved a story noting a resemblance between the budget request for the "Alternative Strike" project and Defense Secretary Ash Carter's description of an Arsenal Plane. But a Defense Department spokesman at the time declined to link the two.

We are making that story -- which details DOD's plan for the Arsenal Plane, technically called "Alternative Strike" -- free to all:

Where is the "Arsenal Plane"? The Defense Department won't say. But the secretive Strategic Capabilities Office has kicked off a program called "Alternative Strike" that sounds strikingly similar, would have a "launch platform" ready for testing as soon as 2018, and is seeking a $200 million down payment in the fiscal year 2017 budget request.

The budget proposal seeks $198 million in advanced component development and prototypes funding for an "Alternative Strike" effort and plans to commence long-lead acquisition next year and conduct demonstrations between 2018 and 2020.

The project description make no explicit reference to an "Arsenal Plane." However, the "Alternative Strike" project is the only item in the Strategic Capabilities Office's budget request that comes close to matching Defense Secretary Ash Carter's description of the Arsenal Plane. On Feb. 2, Carter said the project "takes one of our oldest aircraft platform and turns it into a flying launchpad for all sorts of different conventional payloads."

Click here for the full story.