The Insider

Virginia Payload Module
By John Liang
November 13, 2014 at 7:42 PM

Inside the Navy recently reported on the Navy's acquisition chief describing steps the service is taking to minimize costs on the Virginia Payload Module as directed by the most recent appropriations act:

Sean Stackley, assistant secretary of the Navy for research, development and acquisition, sent a report to the four defense committees on Sept. 14 outlining a cost containment strategy for the Block V VPM design. Inside the Navy reviewed the report.

"The act directs the Navy secretary to create a separate budget line item to enable additional congressional oversight and increase transparency into the costs of the VPM," the report reads.

The 2014 Appropriations Act provided $59.1 million for VPM development. If the Navy fails to submit a bi-annual report to Congress the agreement fences $20 million of that money.

Cost projections for non-recurring engineering are about $744 million in calendar year 2010 dollars, which is below the service's objective cost of $750 million. The current estimate for the VPM for the lead ship is about $423 million in CY-10 dollars, a figure that is below the $425 million objective cost. The $318 million cost of the VPM for follow-on ships is below the objective cost estimate of $325 million in CY-10 dollars.

We now have that report.

Introducing Defense Business Alert
By John Liang
November 13, 2014 at 4:20 PM

Check out InsideDefense.com's newest topic area, Defense Business Alert. Subscribers can bookmark this page for all the latest news on defense industry deals, trends and people, spearheaded by Defense Business Editor Marjorie Censer.

Here is a sample of the coverage you can expect to see on this page:

As Budgets Shrink, Defense Industry Thinks Global

A more global marketplace would help the defense industry better weather shrinking budgets and preserve competition, industry executives argued Wednesday, but it will not be easy to fully accomplish.

Defense Industry Observers Predict Change Following Election

With a Republican-controlled Congress set to take over early next year, government contractors are readying for change -- but are less certain of the details.

CRGT Set To Grow Under New Ownership

A contractor that got its start designing and operating the web portal Army Knowledge Online is poised to get a lot bigger.

Following Vectrus Spinoff, Exelis Promises Focus On Growth

In the three years since Exelis split from ITT, there have been plenty of changes, including a new name and logo. But the most significant change came in September, when Exelis spun off its mission systems unit into a new company called Vectrus.

Hale: Booz Allen Job Offers Opportunity To Continue Public Service

Months after retiring as Pentagon comptroller, Robert Hale has joined Booz Allen Hamilton as a fellow who will serve as an adviser to the contracting giant.

Analysts: Engility Deal Could Provide M&A Momentum

Defense industry analysts and consultants agree that Engility's $1.1 billion deal to purchase TASC is a significant move -- but it's not yet clear whether it could trigger more large acquisitions in the near future.

Fighting Ebola
By John Liang
November 12, 2014 at 9:33 PM

The Senate Appropriations Committee earlier today held a hearing on the U.S. government's efforts to fight the Ebola epidemic in West Africa.

Among the witnesses was Assistant Defense Secretary for Special Operations and Low-Intensity Conflict Michael Lumpkin, who in his prepared testimony thanked lawmakers for approving the obligation of up to $750 million of the $1 billion reprogrammed from overseas contingency operations funding to the Pentagon's Overseas Humanitarian, Disaster, and Civic Aid Program, and outlined additional money he said the Defense Department needs to continue the fight:

This obligation authority has provided DoD the ability to deploy a joint task force to the region and rapidly undertake logistical, engineering, training, laboratory testing, and other support missions that are helping to turn the tide of this terrible epidemic.

I would also like to highlight the necessity and urgency of the resources sought by the President in his Emergency Appropriations Request for Ebola of last week. Of the $4.64 billion for immediate needs to combat this epidemic, the Department seeks $112 million that will provide immediate funding for Defense Advanced Research Projects Agency (DARPA) initiatives to develop technologies aimed at providing immediate, temporary immunity against Ebola while vaccines are developed. Additional initiatives are working to foster technologies to curtail the development timelines of these same vaccines.

Vectrus' Sales Drop
By Marjorie Censer
November 11, 2014 at 2:25 PM

Reporting for the first time as a separate company, Vectrus, which spun off from Exelis earlier this year, said sales in its most recent quarter dropped to $301 million, down nearly 14 percent from the same period a year ago.

The company said declining troop levels in Afghanistan took a toll on its sales. Quarterly profit fell to $2 million, down from $19 million in the same three-month period in 2013.

Ken Hunzeker, the contractor's chief executive, said the results were anticipated given the military drawdown of operations in Afghanistan. The company has recently won a contract to provide IT support services to the Army Corps of Engineers -- though the award is now under protest -- and a contract to support day-to-day base operations and maintenance at bases in Turkey and Spain.

DynCorp Sales Sink
By Marjorie Censer
November 10, 2014 at 3:09 PM

DynCorp International's parent company on Monday reported that the contractor's sales in its most recent quarter plummeted nearly 30 percent to hit $540 million, a decline the company said was driven by the "continued drawdown of U.S. forces in Afghanistan and delays in new business awards."

The company reported a quarterly loss of $71.5 million, steeper than the $33.1 million it lost in the same three-month period a year earlier. DynCorp attributed the loss to revenue declines, impairment charges and a charge related to a contract dispute.

The greatest decline in revenue was in the company's DynLogistics segment, which the company said was a result of lower sales on a logistics program because of troops departing Afghanistan.

Contractors Sentenced
By Marjorie Censer
November 10, 2014 at 3:07 PM

A former Navy Military Sealift Command contractor was sentenced to 96 months in prison and ordered to forfeit $212,000 late last week for his role in a bribery scheme to win military contracts, according to the Justice Department.

Scott Miserendino earlier this year pleaded guilty to one count of conspiracy to commit bribery and one count of bribery. Starting in November 2004, the Justice Department alleged, he and a former program manager started a bribery scheme that lasted five years and netted more than $265,000 in cash.

Also sentenced late last week was Timothy Miller, the co-founder of a government contracting company that won business through the scheme, the Justice Department alleged. Miller was sentenced to 24 months in prison, ordered to forfeit $167,000 and fined $25,000. He pleaded guilty earlier this year to providing illegal gratuities to Miserendino and the program manager, Kenny Toy.

Kratos Rating Lowered
By Marjorie Censer
November 7, 2014 at 9:29 PM

With multiple contract awards delayed or under protest, Kratos Defense & Security Solutions is facing reduced sales projections and a lowered credit rating.

The company said Thursday that its business was "adversely impacted by an increased number of competitor protests of new contracts awarded to Kratos" as well as delays in contract awards and work starts.

For instance, the company said, in the third quarter, it was awarded a $46 million contract by a U.S. government customer that was protested. It was also anticipating a $9.5 million award, but the procurement was canceled after a competitor protest (a new procurement was eventually awarded to Kratos). A $30 million international order for unmanned drone systems was anticipated in the fourth quarter but has been delayed.

The company said it now expects sales of $870 million to $890 million for fiscal 2014, down significantly from the $920 million to $960 million it forecast in August. In its most recent quarter, Kratos reported a loss of $10.9 million, up from the $9.9 million loss it reported in the same three-month period a year earlier.

Standard & Poor's said Friday that it has lowered its corporate credit rating for Kratos to B-, down from B. The ratings service said it has also lowered its earning forecast for the company "because of a higher number of competitor protests and intense price competition for new awards, which are hurting revenues and profits."

"The developing outlook reflects the possibility that we could raise the rating if the recently announced strategic review results in material debt reduction but also the possibility that we could lower the ratings further if conditions worsen such that we no longer believe the company's capital structure is sustainable in the long term or its liquidity profile deteriorates," S&P added.

HII Earnings Jump
By Marjorie Censer
November 6, 2014 at 2:59 PM

Shipbuilder Huntington Ingalls said today that its profit soared nearly 40 percent in its most recent quarter, hitting $96 million.

Though most contractors have been reporting lower sales -- if stable profits -- Huntington Ingalls saw its quarterly revenue grow. The company said sales for the three-month period hit $1.7 billion, up nearly 5 percent from the same period a year earlier.

The company attributed the boost in its profit to performance improvement and risk retirement.

New AUMF Debate?
By Tony Bertuca
November 5, 2014 at 9:20 PM

President Obama said today that he would "begin engaging Congress over a new authorization for military force against" the Islamic State of Iraq and the Levant, noting that Gen. Lloyd Austin, chief of U.S. Central Command, would soon head to Capitol Hill to brief Congress on the ongoing campaign against ISIL.

Austin told reporters at the Pentagon on Oct. 17 that he expects ISIL to be "much degraded" over the next eight to 12 months.

Raytheon Buys Blackbird
By Marjorie Censer
November 5, 2014 at 2:45 PM

Defense contractor Raytheon today announced that it had purchased cybersecurity company Blackbird Technologies for about $420 million.

Blackbird, which is based in Herndon, VA, will become part of Raytheon's intelligence, information and services business. The company specializes in cybersecurity, secure communications and intelligence, surveillance and reconnaissance for intelligence agencies and U.S. Special Operations Command.

F-35 Carrier Landing
By Lee Hudson
November 4, 2014 at 3:45 PM

The Navy's Joint Strike Fighter made its first-ever arrested landing on an aircraft carrier, according to a spokesman.

On Nov. 3, Navy test pilot Cmdr. Tony Wilson landed the F-35C test aircraft (CF-03) aboard the Nimitz (CVN-68).

"This important milestone is yet another indicator of Naval Aviation's ongoing evolution to meet future threats and remain central to our future Navy and National Defense Strategy," Naval Air Forces Commander Vice Adm. David Buss, who was aboard the Nimitz to witness the landing, said in a statement.

This is the first of three developmental at-sea testing phases for the program. In this first test phase the F-35C is to perform catapult takeoffs and arrested landings, the statement reads.

"As with the initial testing of any new aircraft, the goal is to collect environmental data through added instrumentation to measure the F-35C's integration to flight deck operations and to further define the F-35C's operating parameters aboard the aircraft carrier," the statement adds.

Leiter Joins Leidos
By
November 4, 2014 at 12:30 PM

Contractor Leidos said today that Michael Leiter, the former director of the National Counterterrorism Center, has been named executive vice president for business development and strategy. He starts Nov. 17.

Leiter, who will be based in the company’s Reston headquarters, will manage the company’s business and strategy development, government affairs and mergers and acquisition work.

He joins Leidos from Palantir Technologies, where he served as counselor to the chief executive. He was director of the National Counterterrorism Center from 2008 through 2011, serving under both the George W. Bush and Barack Obama administrations.

In July, Roger Krone, previously a Boeing executive, became chief executive of Leidos -- which was created in last year’s split of Science Applications International Corp.

PIM Contract Modification
By Ellen Mitchell
November 3, 2014 at 8:48 PM

The Army has awarded BAE Systems a $141.8 million contract modification for 18 Self-Propelled Howitzers and 18 tracked ammunition carriers as part of the Paladin Integrated Management system, according to a recent government notice.

The Oct. 31 Defense Department announcement states the full $141.8 million in fiscal year 2014 and FY-15 "other procurement funds" was obligated at the time of the award, with an estimated work completion date of Feb. 28, 2017. Approximately 18 percent of work will be performed in Elgin, OK, and the remaining 82 percent in York, PA, according to the notice.

BAE, the Army's contractor for PIM, first announced in October 2013 that it received a low-rate initial production contract for PIM that could be worth as much as $688 million.

The PIM program is intended as an upgrade to the Army's Paladin Self-Propelled Howitzer in ways that "buy back" space, weight and power that have been lost with age. PIMs are purchased in two vehicle sets -- the self-propelled howitzer and the tracked ammunition carrier.

LRIP began this year with a cost of $195 million for 18.5 vehicle sets -- 19 PIM howitzers and 18 tracked ammunition carriers, according to BAE. With the newest modification, the cumulative total of the contract is $386.7 million, the announcement states.

Full-rate production is expected to begin in 2017 with the service planning to purchase a total of 66.5 vehicle sets -- or 133 vehicles -- for a total contract value of $688 million.

The Army had once sought next-generation howitzers in the Crusader and the Future Combat Systems programs, but both efforts were ultimately canceled and billions of dollars were spent before the service threw all of its weight behind PIM.

Hale To Booz Allen
By Marjorie Censer
November 3, 2014 at 3:37 PM

Contractor Booz Allen Hamilton said today that it has named Robert Hale, who recently retired as the Pentagon's comptroller, as a fellow who will serve as an adviser to the company.

The contractor said its fellows program "recognizes the highest level of achievement and impact, denoting the absolute best in industry and at Booz Allen."

Hale spent about five years as comptroller.

Noisy Data
By Courtney Albon
October 31, 2014 at 7:06 PM

The F-35 Joint Program Office released today the most recent noise data for the Joint Strike Fighter, finding that the aircraft's noise volume while on the ground is comparable with other legacy fighter platforms.

According to the executive summary of the report, the F-35A, when in the air, is almost equal in noise level to an F-16 with a new-model engine and is at least 10 decibels (dB) lower than the aircraft on two of the three low-altitude flight conditions. It is, however, louder under all conditions than F-16s powered by older-model engines.

Using the F-35A as a stand-in for the C-model, the JPO found the aircraft is slightly louder than the F/A-18C/D on takeoff but has lower noise levels on approach. It's slightly quieter than the F/A-18E/F on takeoff and much quieter on all three approach flight profiles.

The B-variant's noise level is comparable with the AV-8B on approach and is about 5 dB louder on takeoff, according to the report. The aircraft is quieter than the legacy F/A-18C/D during all approaches and is slightly louder on takeoff.