The Insider

Up In The Air
By Gabe Starosta
July 15, 2013 at 1:42 PM

A variety of Air Force combat units will be allowed to resume flying today, three months after being grounded because of sequestration-driven budget cuts, Air Combat Command announced this morning.

Congress' approval of a $1.8 billion reprogramming request, $208 million of which is targeted toward funding Air Force flying hours, means ACC units like the Thunderbirds demonstration team, the service's Weapons School and its F-16 Aggressors will have the money to fly from now until the end of the fiscal year. That short-term funding does not account for flying hours beyond the end of fiscal year 2013, and sequestration will continue into FY-14 unless Congress passes alternate legislation.

"This decision gets us through the next several months but not the next several years," Gen. Mike Hostage, ACC's commander, said in the release. "While this paints a clearer picture for the remainder of FY-13, important questions remain about FY-14 and beyond. Budget uncertainly makes it difficult to determine whether we'll be able to sustain a fully combat-ready force."

Air Force Chief of Staff Gen. Mark Welsh said late last month that money-saving actions the service is taking this year, such as furloughing its civilian employees, would raise enough funds to allow some flying groups to resume normal operations. Inside the Air Force reported at the time that seven combat squadrons flying at minimal readiness levels would be funded to spin up to full mission readiness.

Hagel Visit To China
By Christopher J. Castelli
July 12, 2013 at 6:45 PM

Defense Secretary Chuck Hagel, who will host China's defense minister at the Pentagon next month, will travel to China in 2014, the Obama administration announced today following bilateral talks between China and the U.S.

Hagel's trip, which is not unexpected, is the latest in a string of high-level bilateral visits intended to boost military-to-military ties. The State Department announced the trip in a list of decisions stemming from this week's Strategic and Economic Dialogue, the related Strategic Security Dialogue and the first meeting of the Cyber Working Group, all of which were held in Washington.

Beyond agreeing to strengthen military-to-military ties, U.S. and Chinese officials also decided to "actively explore a notification mechanism for major military activities," the State Department's statement notes without elaborating. Also, the two sides decided to hold an informal round of the Strategic Security Dialogue later this year.

"On Monday, at the first meeting of the U.S.-China cyber working group, we raised directly our concerns with respect to the theft of intellectual property, trade secrets, and confidential business information for economic gain," White House Press Secretary Jay Carney said Thursday. "And we stressed the need to address these concerns, including through the working group, and are continuing to discuss these issues at the Strategic and Economic Dialogue."

The Cyber Working Group talks included "candid, in-depth, and constructive dialogue," including "in-depth discussion on issues of mutual concern," the State Department said. The two sides agreed to "take practical measures to enhance dialogue on international norms and principles" to guide actions in cyberspace and to strengthen ties between computer emergency response teams, the statement adds. U.S. and Chinese officials decided to hold the next cyber meeting by the end of the year.

Meanwhile, Hagel and China's State Councilor Yang Jiechi met at the Pentagon today to discuss the U.S.-China military relationship. The defense secretary, who has known Yang for years, said he looks forward to hosting Minister of National Defense Gen. Chang Wanquan next month.

Hagel was "pleased that the day-long security dialogue expanded this year to include nuclear policy and missile defense issues," DOD said in a statement, and he "affirmed the importance of the inaugural cyber discussion, which will serve as a platform to build better understanding and increase practical cooperation in cyberspace, and enhanced cooperation on regional security issues of concern to both of us, including North Korea."

During this week's talks, U.S. and Chinese officials "affirmed their intention to enhance communication and cooperation on nonproliferation, arms control, and other major international security issues on the basis of mutual respect, equality, and mutual benefit," the State Department noted. The two sides agreed to hold U.S.-China Counter-Terrorism Consultations at the vice ministerial level "in due course."

'Enduring Challenge'
By Christopher J. Castelli
July 12, 2013 at 4:56 PM

Afghan forces have capability gaps and will face an "enduring challenge" attempting to maintain security in all parts of the country, including remote, mountainous areas threatened by insurgents, Peter Lavoy, acting assistant secretary of defense for Asian and Pacific security affairs said Thursday in testimony before the Senate Foreign Relations Committee.

"Yes, there are gaps," Lavoy said. "Today, the Afghan national army and the police are not totally self-sustainable entities capable of doing everything." NATO forces are "providing critical support and assistance," he added. Although the Afghan army and police are becoming more self sufficient, the "biggest gaps today" are in the defense and interior ministries. "They need a human capital strategy. They need to manage contracts, payrolls, food, fuel, other logistics, planning intelligence, surveillance, reconnaissance, etc.," he said.

Earnings Outlook
By John Liang
July 12, 2013 at 3:07 PM

"Earnings week" for the big five U.S. defense contractors is fast approaching, with Lockheed Martin scheduled to present its second-quarter earnings on July 23. Boeing, General Dynamics, Northrop Grumman and Raytheon are all scheduled for July 24.

Wall Street investment bank Credit Suisse this morning put out its second-quarter earnings forecast for the aerospace and defense industry, authored by equity analyst Robert Spingarn:

In the coming earnings season, we expect Commercial OE to once more be the growth driver with Commercial Aftermarket results mixed. In Defense, it remains too early for Sequester to have much effect on EPS, though we expect poor bookings, particularly in short-cycle businesses where the impact of constrained order activity should be felt first. . . .

Defense: 2014 Sequester, Bookings & Pension Likely to Dominate Discussions: Defense primes will likely report solid EPS numbers once more this season as margins offset some sales softness, but given the ~14% move in the group intra-quarter, and ~5% move since the quarter-end, we do not see much scope for these stocks to outperform further unless the beats are substantial. We also expect the Street to focus more on bookings, which will likely be soft owing to Sequester. Given that the preponderance of GFY13 Sequester cuts . . . are likely to be more impactful next year than this year, investors will be keen to see if 2014 consensus is too high. Bulls will hope to learn if rising interest rates and further buybacks can provide sufficient pension and share count tailwinds to offset budget pressure.

Missile Missive
By John Liang
July 12, 2013 at 12:00 PM

House and Senate Republicans are calling on the Pentagon to figure out as quickly as possible what went wrong with last Friday's failed intercept test of the current version of the Ground-based Midcourse Defense system and conduct a new shoot-down attempt before the end of this calendar year.

In a letter sent today to Defense Secretary Chuck Hagel, House Armed Services Committee Chairman Buck McKeon (R-CA) and strategic forces subcommittee Chairman Mike Rogers (R-AL) as well as Senate Armed Services Committee Ranking Member Jim Inhofe (R-OK) and strategic forces subcommittee Ranking Member Jeff Sessions (R- AL) note that last week's attempt was "the third intercept test failure in a row -- and now involves both capability enhancement versions of the Exo-Atmospheric Kill Vehicle (EKV) -- since the system was last successfully tested in December 2008." Further:

While it may take some time to reach a final diagnosis of the cause of the July 5th test failure, it is already clear that President Obama's decision to drastically cut funding for the GMD program since he came to office and to 'curtail addition GMD development,' has drained funding available to conduct needed tests of this system. . . .

Regardless of the causes of the recent flight test failures, we encourage you to make the development and deployment of a new kill vehicle one of your highest priorities, especially in light of your recent announcement to deploy an additional 14 ground-based interceptors to Alaska to address the growing threat from North Korea. We must continue to advance the national missile defense capability, even as we ensure the existing capability meets the highest levels of reliability.

Additionally, we believe it is imperative that the Missile Defense Agency conduct, as soon as practicable, a new intercept test of the CE-1 Enhanced Kill Vehicle [Ground-Based Interceptor].  We believe such a test should occur in 2013 to ensure there is no question about the capability and credibility of the GMD system -- our only national missile defense capability. We are in agreement with LTC Richard Formica, the head of Army Space and Missile Defense Command and the Joint Functional Command for Integrated Missile Defense who recently stated that it is important to "re-test as soon as feasible."

Formica made that assertion in a statement provided to InsideDefense.com earlier this week, in which he also said he remains confident the 30 missile interceptors currently deployed could defend the nation against a limited ballistic missile attack from North Korean or Iran. As InsideDefense.com reported on July 9:

At a May 9 hearing, Formica was asked by Senate Armed Services strategic forces subcommittee Chairman Mark Udall (D-CO) if he had confidence in the GMD system's ability to protect the nation. Formica answered yes. "I'm confident in the systems that have been provided to us," he added.

Asked about that statement in light of Friday's test failure, Formica told InsideDefense.com: "I stand by my response in the testimony I presented on May 9."

Significantly, the test of the interceptor with a CE-I kill vehicle was the second of three planned risk-reduction flights for the GMD return-to-intercept program -- an effort that was due to culminate this fall with an intercept test of a GBI carrying a next-generation Capability Enhancement-II (CE-II) kill vehicle. DOD has previously called the pair of planned GBI intercept tests this year "key flight tests in support of the Homeland Hedge strategy."

Rocky Iraq
By John Liang
July 11, 2013 at 9:02 PM

Inside the Pentagon reports today that Stuart Bowen, the special inspector general for Iraq reconstruction this week cited lessons learned during the rocky rebuilding of Iraq in making the case for a new agency devoted to such a task in future conflicts:

Testifying before the House Foreign Affairs Middle East and North Africa subcommittee, Bowen put his support behind new legislation in the House that would create a United States Office for Contingency Operations. Establishing USOCO is a key goal of the Stabilization and Reconstruction Integration Act of 2013, introduced by Rep. Steve Stockman (R-TX) in late June.

Citing "serious imbalances and insufficient interagency coordination," the bill would integrate disparate U.S. government players in post-conflict reconstruction, a deficiency that is now widely acknowledged as having hobbled and perhaps prolonged the Iraq war.

"[T]he most important lesson [is] that these issues can be resolved by establishing an entity that would ensure civil-military integration of planning, execution and oversight for future stabilization and reconstruction operations," Bowen said. "And [Stockman's legislation] would do that. It provides a structure. It addresses the contracting problem. It addresses the personnel problem. Indeed, it puts somebody in charge," he added.

The final report from Bowen's office -- published in March 2013 -- "brings together a wealth of information and analysis to identify important lessons learned from the rebuilding program in Iraq -- lessons that could help improve significantly the U.S. approach to future stabilization and reconstruction operations (SROs)," it states.

Top Gun
By Lee Hudson
July 10, 2013 at 6:41 PM

The Navy's X-47B Unmanned Combat Air System completed its first-ever carrier arrested landing today on the George H.W. Bush (CVN-77) off the coast of Virginia.

The demonstration was the first time a tailless, unmanned autonomous aircraft landed on an aircraft carrier.

“By evolving and integrating new technology like the X-47B and the unmanned aircraft to follow, carriers will remain relevant throughout their 50-year lifespan,” Navy Secretary Ray Mabus said in a service statement.

In May, the Northrop Grumman-built X-47B completed carrier deck operations aboard the Bush, including a catapult launch and touch-and-gos. Next year, the Navy's plans to carry out aerial refueling demonstrations with the X-47B.

On The Range
By John Liang
July 10, 2013 at 4:51 PM

The Government Accountability Office issued an assessment this week of the Defense Department's latest report to Congress on sustainable ranges:

The 2013 Sustainable Ranges Report of the Department of Defense (DOD) met the annual statutory reporting requirements for the department to describe its progress in implementing its sustainable ranges plan and any additional actions taken or planned for addressing training constraints caused by limitations on the use of military lands, marine areas, or airspace. DOD's 2013 report provides updates to several elements of the plan that the act required it to include in its annual progress reports, including (1) proposals to enhance training range capabilities and address any shortfalls; (2) goals and milestones for tracking progress in the implementation of its sustainment plan; and (3) projected funding requirements for each of the military services to implement their planned actions.

Jammer News
By John Liang
July 9, 2013 at 11:44 PM

Raytheon's win of a three-year, multimillion-dollar Next Generation Jammer contract sets the company up well for lucrative future work, InsideDefense.com reported today:

"It kind of catapults them to the head of the [electronic warfare] market," Byron Callan, industry analyst for Capital Alpha Partners, told Inside the Navy today.

The Pentagon announced the deal last night, noting that the objective of the technology development phase "is to develop a cost-effective electronic attack system that will provide significantly improved airborne electronic attack capabilities against advanced threats through enhanced agility and precision within jamming assignments, increased interoperability, and expanded broadband capability for greater threat coverage against a wide variety of radio frequency emitters."

Left unsaid by the Defense Department is what the future holds. The Lexington Institution's Loren Thompson, also a defense consultant, wrote on Forbes.com today that Raytheon, if it "performs as expected," will "dominate the arcane world of electronic warfare for decades to come, generating many billions of dollars in revenues."

While Callan noted that there are a number of other companies well-positioned with legacies of electronic warfare capabilities and more exportable capabilities, he said the win "puts them in a position to dominate that market."

"It's a pretty important program, not just for the Navy, but for DOD in general," he added of the Next Generation Jammer.

Earlier this week, InsideDefense.com reported that the Navy is planning next month to solicit industry for new ideas on a second iteration:

On July 3, the Naval Surface Warfare Center Crane in Indiana announced plans to solicit proposals for studies on technologies necessary for one of the defining capabilities of the Next Generation Jammer Increment 2 -- the ability to disrupt low-band frequencies. . . .

In support of the Navy's airborne electronic attack program manager (PMA-234), the Navy warfare center "intends to issue a solicitation for concept exploration studies for key subsystems related to the Next Generation Jammer Increment II Low Band capability," a notice posted in Federal Business Opportunities states.

French Reapers
By John Liang
July 8, 2013 at 3:55 PM

France could be in line to make a billion-dollar purchase of MQ-9 Reaper unmanned aerial systems, according to the Defense Security Cooperation Agency.

In a June 27 statement, DSCA announced it has notified Congress "of a possible Foreign Military Sale to France of 16 MQ-9 Reaper Remotely Piloted Aircraft and associated equipment, parts, training and logistical support for an estimated cost of $1.5 billion."

DSCA further states:

France is one of the major political and economic powers in Europe and the North Atlantic Treaty Organization (NATO) and an ally of the United States in the pursuit of peace and stability. It is vital to the U.S. national interest to assist France to develop and maintain a strong and ready self-defense capability. This potential sale will enhance the intelligence, surveillance, and reconnaissance (ISR) capability of the French military in support of national, NATO, United Nation[s]-mandated, and other coalition operations. Commonality of ISR capabilities will greatly increase interoperability between the U.S and French military and peacekeeping forces.

France requests these capabilities to provide for the defense of its deployed troops, regional security, and interoperability with the U.S. The proposed sale will improve France's capability to meet current and future threats by providing improved ISR coverage that promotes increased battlefield situational awareness, anticipates enemy intent, augments combat search and rescue, and provides ground troop support. France, which already has remotely piloted aircraft in its inventory, will have no difficulty absorbing this additional capability.

GMD Intercept Test Fails
By John Liang
July 5, 2013 at 10:22 PM

An intercept test of the Ground-based Midcourse Defense system ended in failure today, the Pentagon just announced:

The Missile Defense Agency, U.S. Air Force 30th Space Wing, Joint Functional Component Command, Integrated Missile Defense (JFCC IMD) and U.S. Northern Command conducted an integrated exercise and flight test today of the Ground-based Midcourse Defense (GMD) element of the nation's Ballistic Missile Defense System. Although a primary objective was the intercept of a long-range ballistic missile target launched from the U.S. Army's Reagan Test Site on Kwajalein Atoll, Republic of the Marshall Islands, an intercept was not achieved. The interceptor missile was launched from Vandenberg AFB, Calif.

Program officials will conduct an extensive review to determine the cause or causes of any anomalies which may have prevented a successful intercept.

Philip Coyle, senior science fellow at the Center for Arms Control and Non-Proliferation, had this to say:

This is another big setback for the MDA and means that there have been NO successful GMD flight intercept test in the last five years, that is, since the end of 2008.  Two tests failed in 2010 and then, until today, MDA hadn't tried again, only to have another failure.  Zero successes out of three tries is Zero percent.

Since early December 2002, a little over 10 years, 10 GMD flight intercept tests have been attempted.  The record is six failures, three successes, and one unsuccessful test because the target failed to reach the defended area.  Three successes in 10 attempts is 30 percent.

Whether you count the performance over the past five years or the last ten, clearly the GMD system is something the U.S. military, and the American people, cannot depend upon. The idea of deploying 14 more of these same flawed interceptors at Fort Greely in Alaska would be throwing good money after bad. And building yet another missile defense site on the U.S. East Coast and deploying more of these same flawed interceptors there would take U.S. taxpayers to the cleaners again.

In their report last year, the National Research Council warned against deploying more of these flawed interceptors at an East Coast site. Congress should heed this warning and not waste any more money on poor performance.

The test was intended to evaluate improvements made to the operational weapon -- which includes a first-generation exoatmospheric kill vehicle last tested in 2008 -- and bolster confidence in its effectiveness, InsideDefense.com reported earlier this week:

The intercept test -- Flight Test Ground-Based Interceptor-07 (FTG-07) -- is the second of three GBI flight tests scheduled for this year, and the only one for the Capability Enhancement I Exoatmospheric Kill Vehicle. In January, MDA conducted a non-intercept flight test of a GBI with a CE-II, a second-generation kill vehicle that is still in development. A third GBI test, this one an intercept attempt, is planned for the CE-II this fall.

"We have made numerous improvements to the CE-I fleet through refurbishments since the last successful CE-I test in 2008, and this test will demonstrate the reliability of those refurbished GBIs," Missile Defense Agency Director Vice Adm. James Syring told the Senate Armed Services strategic forces subcommittee in written testimony prepared for a May 9 hearing.

Lt. Gen. Richard Formica, commander of Army Space and Missile Defense Command, who is also charged with operationally integrating joint missile defense capabilities for U.S. Strategic Command, told lawmakers at the same Senate hearing the upcoming test is important "so we can retain confidence" in the GBI missiles armed with CE-I kill vehicles.

Iraq Hearing
By John Liang
July 5, 2013 at 7:04 PM

Special Inspector General for Iraq Reconstruction Stuart Bowen is scheduled to testify next week on his organization's final report before the House Foreign Affairs Middle East and North Africa subcommittee, according to a panel statement.

The hearing will take place at 10 a.m. on July 9.

John Herbst, director of National Defense University's Center for Complex Operations, is also scheduled to testify, according to the statement.

Subcommittee Chairwoman Ileana Ros-Lehtinen (R-FL) said in the statement:

This hearing will focus on the important lessons learned from the stabilization and reconstruction operations (SRO) undertaken by the United States in Iraq and the hope is to apply those to our other reconstruction efforts moving forward, most notably as our mission in Afghanistan shifts to a post-conflict emphasis. The critical bottom line of the Special Inspector General for Iraq Reconstruction (SIGIR) report underscores the need for a drastic change in how the United States conducts SRO efforts. SIGIR’s report highlights our inability in Iraq to organize, plan or execute a post-conflict strategy and the lack of accountability over the millions of American taxpayer dollars that were wasted. It’s important to cull from those lessons a best practices approach so the our nation can avoid the substantial human and financial costs associated with the rebuilding efforts in Iraq, and apply them to any similar role in the future.

Cyber Lobbying
By John Liang
July 3, 2013 at 10:49 AM

The Information Technology Industry Council (ITI) and other U.S. business groups, in a June 21 letter to Senate Armed Services Committee Chairman Carl Levin (D-MO) and several other senators, say they want assurances that a cyber bill -- which could lead the United States to block imports from companies that engage in, or benefit from, economic espionage against U.S. companies -- does not make its way into the final fiscal year 2014 defense authorization bill.

China Trade Extra reported Monday that Levin, the main proponent of the cyber bill, appears eager to include it in the Senate version of the FY-14 defense policy bill. The Senate will likely vote on the bill in September, and it may be sent to the president's desk sometime in the fall, according to industry sources. The House approved its version of the bill last month.

From the story:

The letter outlines "significant" problems with the bill as introduced, "particularly the impact the legislation may have on international commerce and trade." In fact, the groups suggest that the bill could end up hurting U.S. exports, impede international talks on cybersecurity issues and perhaps even violate U.S. commitments under the World Trade Organization.

On substance, business groups want a major overhaul. "I don't think minor tweaks are going to entirely fix the bill," an industry source said. "So our hope is that the co-sponsors are open to significant, overarching changes, or potentially a different strategy." When asked if business groups could support any version of the bill, this source said it depends on "how open the co-sponsors are to a rewrite." Levin's office declined to comment for this article.

Business groups also want the bill to be considered in the Finance Committee first -- not simply inserted into the Senate [defense authorization bill] -- in order to give all stakeholders more of a chance to weigh in. "[W]e urge the cosponsors to engage in a thorough review of this and similar legislation through hearings and markup in the Senate Finance Committee, where S.884 is currently pending," they wrote in their letter.

These business groups are particularly keen to "get out in front" of this issue after being surprised by the inclusion of cyber and trade provisions in past spending measures. For instance, many groups were surprised by provisions included in a continuous resolution (CR) earlier this year, signed by the president on March 26, that restricts government purchases of certain goods from entities that are owned, directed or subsidized by the Chinese government.

Change Of Hart
By Christopher J. Castelli
July 2, 2013 at 7:50 PM

Former Sen. Gary Hart (D-CO) will succeed former Defense Secretary William Perry as chairman of the State Department's International Security Advisory Board, Secretary of State John Kerry recently announced. The panel provides independent advice and insight on scientific, technical and policy aspects of arms control, disarmament, nonproliferation, international security and related aspects of public diplomacy. The board is sponsored and overseen by acting Under Secretary of State for Arms Control and International Security Rose Gottemoeller and provides its recommendations through Gottemoeller to Kerry and other department officials. Perry will remain a board member.

"Bill Perry and Gary Hart are two brilliant strategic thinkers whose guidance and insight I’ve been privileged to lean on for many years," Kerry said in a statement late last week. "I greatly appreciate Dr. Perry's skillful and superb leadership of the [board] over two very productive years, and I am looking forward to similarly impressive results under Senator Hart, who is rightly regarded as an ahead of the curve leader on international security issues."

Hart previously co-chaired the Hart-Rudman commission, which predicted in 1999 that terrorism would bloody American soil in the 21st century.

InsideDefense.com reported on June 28 that Perry and retired Gen. John Abizaid would lead an independent panel tasked with assessing the upcoming Quadrennial Defense Review.

Iran's Nukes
By John Liang
July 1, 2013 at 4:37 PM

The House Foreign Affairs Committee is calling on President Obama to increase the pressure on Iran to dismantle its nuclear weapons program.

In a June 28 letter, committee Chairman Ed Royce (R-CA), Ranking Member Eliot Engel (D-NY) and the rest of the panel state that Iran's recent elections have "done nothing to suggest a reversal of Iran's pursuit of a nuclear weapons capacity." Further:

President-elect Rouhani, who served as a nuclear negotiator for Iran at a time its illicit program was well underway, indicated his support for Iran's nuclear ambitions in his first post-election press conference. Indeed, there appears nothing "moderate" about his nuclear policies, which are a continuation of the policies that have been roundly opposed by the international community. Moreover, decisions about Iran's nuclear program and foreign policy rest mainly in the hands of Iran's Supreme Leader Khamene'i. Khamene'i has recently reiterated his view that Iran has no reason to normalize relations with the United States.