The Insider

The Air Force on Monday awarded a $900 million contract to three companies for its Rocket Systems Launch Program.

Lockheed Martin, Orbital Sciences, and Space Exploration Technologies won the deal for RSLP, which will support ballistic missile testing and sub-orbital space launch initiatives. According to the contract announcement, work will take place in Utah, Arizona and California and is expected to conclude in November 2017.

RSLP, part of the Space and Missile Systems Center's Space Development and Test Wing, grew from the Advanced Ballistic Reentry Systems program, which was established in 1963 to manage reentry vehicle research and to reactivate ICBM assets.

The program also supports the Missile Defense Agency by launching inactive ICBMs to be used as targets during flight tests, and there are plans for RSLP to support additional tests for NASA, according to an Air Force fact sheet. The service considers RSLP to be a cost-effective launch option for small space vehicles and has to date conducted eight space missions using Minuteman and Peacekeeper rocket motors.

The Air Force notes in its fact sheet that “the program's primary goal is to be the provider of choice by offering highly reliable and cost-effective launch services in support of DOD and other government agencies.”

Four defense industry chiefs will discuss their views on the effects of budget cuts and the threat of sequestration on national security at the National Press Club on Monday.

According to a club statement released this morning, the participants include Northrop Grumman CEO Wes Bush; Pratt & Whitney President David Hess; Dawne Hickton, CEO of RTI International Metals Inc.; and TASC CEO David Langstaff.

Northrop's Bush painted a worst-case scenario during an Oct. 24 teleconference call with investors on his company's third-quarter 2012 earnings. As Defense:Next reported that day:

During a conference call on Northrop's 2012 third-quarter earnings, investors asked how the company planned to proceed under the shadow of sequestration and what the financial fallout would be from an across-the-board cut of about $500 billion from the Pentagon's budget. Sequestration, which was carved out in the 2011 Budget Control Act, was designed to motivate Congress to work with the White House on trimming the budget. Congress has so far been unable to chisel out a financial plan for how to curb the deficit, which means the policy could be implemented in less than 70 days.

Wes Bush, chairman, president and CEO of Northrop, and Jim Palmer, the company's corporate vice president and chief financial officer, told investors that while Northrop -- and the Defense Department -- would feel the effects of sequestration rather quickly, so would a broad range of government agencies.

"This is a broader set of national issues and national concerns than just the defense community," he said.

Northrop Grumman would be hit hard by sequestration because the contracting base of the military services has a higher turnaround rate, prompting those services to spend their obligated amounts within a set time frame, Bush said.

"Long-term, I don't think I have to speculate in saying the impacts would be profound and very, very negative," he said.

The uncertainty about whether sequestration will happen has made it difficult for Northrop to prepare the way ahead, Bush said. "We all know there is a substantial deficit situation and there are some tough decisions that lie ahead regarding the outcomes for each component of that budget," he said. "So it's a little unclear today from where we are to predict how that's going to go."

The White House Office of Management and Budget is threatening to recommend a presidential veto if portions of the Senate version of the fiscal year 2013 defense authorization bill remain unchanged.

In a statement of administration policy released this afternoon, OMB says:

While there are numerous areas of agreement with the Committee, the Administration has serious concerns with provisions that: (1) depart from the President's FY 2013 Budget request; (2) constrain the ability of the Armed Forces to carry out their missions consistent with the new defense strategy; and (3) limit key authorities of the Executive.  If the bill is presented to the President for approval in its current form, the President's senior advisers would recommend that the President veto the bill.

Some additional excerpts:

Structure of the Air Force: The Administration strongly objects to Title XVII, which would place limitations on funding to be used to divest, retire, or transfer units of the Air National Guard or Air Force Reserve, in addition to creating a commission to study the appropriate makeup of the Air Force.  These provisions would force DOD to operate, sustain, and maintain aircraft that are in excess to national security requirements, as defined by the new defense strategy, and are not affordable in an austere budget environment. They also would impair the ability of the Secretary to manage the Department and, by retaining large numbers of under-resourced aircraft in the fleet in today's fiscally constrained environment, could contribute to a hollow force. . . .

Alternative Fuels: The Administration strongly objects to sections 313 and 2823, which would limit DOD's ability to procure alternative fuels for military applications.  Section 313 is overly broad and has the potential to restrict investments by making price the sole factor in determining if DOD could use an alternative fuel, without any consideration of military capability, mission, or circumstances contributing to long-term energy security.  Section 2823 would limit DOD's ability to contribute to the development of a domestic capability to produce cost-competitive advanced drop-in biofuels at a commercial scale.  Such a capability, pursued in collaboration with the Departments of Agriculture and Energy, would help insulate the Nation, as well as the military, against potential supply disruptions.

Medium Extended Air Defense System (MEADS): The Administration strongly objects to section 236, which would prohibit the use of funds for the MEADS program.  If the Congress does not appropriate FY 2013 funding, there is a high likelihood that this action would be perceived by our partners, Italy and Germany, as breaking our commitment under the Memorandum of Understanding.  This could harm our relationship with our allies on a much broader basis, including future multinational cooperative projects.  It also could prevent the completion of the agreed Proof of Concept activities, which would provide data archiving, analysis of testing, and software development necessary to harvest technology from U.S. and partner investments in MEADS.

View the full statement.

The Senate voted yesterday to eliminate a measure in the pending fiscal year 2013 defense authorization bill that would have blocked the Defense Department from purchasing biofuels and other alternative fuels if they cost more than conventional fossil fuels, pushing back against an attempt to blunt the administration's high-profile initiative to bolster commercial deployment of cleaner fuels, according to a Clean Energy Report blog post:

With support from DOD, the Senate voted 62-37 to strike section 313 from the Fiscal Year 2013 National Defense Authorization Act, one of two controversial biofuels prohibitions in the bill.

Section 313, sponsored by Sen. James Inhofe (R-OK) during the Armed Services Committee mark-up of the bill, would have barred DOD from purchasing or producing alternative fuels if their cost exceeded the cost of producing or purchasing traditional fossil fuels, except in cases where DOD was purchasing limited quantities of alternative fuels to complete engine or fleet certification of 50/50 blends in research and development efforts.

But the provisions drew opposition from DOD, which has been a leader in the federal government in testing alternative fuels such as biofuels and moving toward their increased use. The Navy in particular has led the way, including among its priorities deployment of a "Great Green Fleet" in 2016.

Last month, DOD urged Congress to strip the language because it would "restrict the department's ability to contribute to the development of a domestic capability to produce cost-competitive advanced drop-in biofuels on a commercial scale, which is vitally important to our long-term national security." Its appeal added that "such a capability could increase the department's resilience against potential supply disruptions and price volatility of petroleum products."

In addition, a bipartisan group of 38 senators signed a Nov. 16 letter to Senate leadership, voicing their opposition to the two biofuels restrictions in the defense bill.

Sen. Mark Udall (D-CO), who led the effort on the Senate floor to strike section 313, echoed the DOD arguments, saying the department's biofuels program gives the military flexibility and aids in national security, military readiness, and helps wean the country off of foreign oil and aids in job growth.

"Our military is on the cutting edge technologically, but much of our fighting capability relies on foreign fossil fuels and decades-old power systems. That dependence has very real human and economic costs," Udall said in a press statement immediately following the vote. "Today's strong bipartisan vote affirms that we should allow our military leaders to continue to develop and use advanced alternative fuels in order to bring down costs and improve mission capabilities."

"Energy security and national security are inseparable, and our military is taking a necessary leadership role in developing and employing new technologies," Udall said earlier in a statement on the amendment.

Senate environment committee Chairwoman Barbara Boxer (D-CA) also sought to strike the prohibition, saying the military opposes the language and that it could even prevent DOD from purchasing commercial biofuels, such as E-85 ethanol.

"The Department of Defense has flex-fuel vehicles in its fleet that can run on E-85," she said. Further, "it would restrict DOD's efforts to develop technologies to generate fuel at tactical locations, including waste to energy. These are precisely the types of technologies the nation should be investing in."

But Inhofe and other supporters of section 313 argued that the department's biofuels plan is a misplaced and expensive clean energy agenda. "I fully support development and use of alternative fuels, including biofuels, but not at the expense of the military," said Inhofe, who is slated to become the ranking Republican on the Armed Services Committee.

He argued during the floor debate the Energy Department should be experimenting on biofuels, not the military. "With a military budget that continues to decrease, where is the Navy going to get additional funding to pay its biofuel bill?" he said, contending the cost of these fuels is four times or in some cases one hundred times the amount as other fuels.

And Sen. John McCain (R-AZ), who Inhofe is replacing as the military committee's ranking Republican, had argued in a July letter that it is inappropriate for the military to be using operations and maintenance funds provided by Congress to equip and train military personnel and operate and repair facilities to purchase costly biofuels for a "demonstration."

But Sen. Ron Wyden (D-OR), who is slated to become the new chair of the energy committee, rejected GOP concerns about the DOD fuels program's costs, saying that the defense biofuels initiative was not an "either/or proposition because my view is that an investment in energy efficiency and in energy self-sufficiency is hugely important to protecting our country’s national security in a dangerous time."

Senate Armed Services Committee Chairman Carl Levin (D-MI) has said the conference process with the House would start immediately following the Senate's passage of the defense bill.

For more military fuel news, check out InsideDefense.com's Defense Energy Alert.

Speaking in New York today, Northrop Grumman CEO Wes Bush suggested that the end of seemingly interminable negotiations between Lockheed Martin and the Defense Department on the fifth production lot of the Joint Strike Fighter aircraft may finally be in sight.

Northrop is a major supplier to prime contractor Lockheed on the F-35 program, and Bush, appearing at a conference put on by investment bank Credit Suisse this morning, said that Lockheed and Northrop have come to a deal on their own relationship during LRIP 5. Bush did not specify how recently that agreement was signed.

LRIP 5 negotiations began almost two years ago, in December 2010, and the government and industry's inability to complete that arrangement has prevented progress on LRIP 6. It also led the program's incoming leader, Maj. Gen. Christopher Bogdan, to criticize the relationship between the F-35 program office and Lockheed Martin.

Asked about contracting on the F-35 from a supplier's point of view, Bush said:

Lockheed is the prime obviously on F-35. We're a supplier to Lockheed, and just as when we are the prime, we like to make sure we've got our structure in place with our suppliers before we finalize the ultimate negotiations, and we want to be able to bring that full visibility to the extent we can to our customer community when we're finalizing negotiations.

We've reached agreement with Lockheeed on LRIP 5 and I think that was an important step to enable them to move forward in their process in reaching agreement with their customer community. I don't see anything unusual about that. I see that as sort of a typical process for this scale of activity.

InsideDefense.com has requested comment from Northrop Grumman and will provide more information as soon as it is available.

The Defense Department accounts for a large chunk of the government's purchasing, and most of those buys are subject to the Federal Acquisition Regulation. So it's handy that the Congressional Research Service this month completed a primer on the FAR:

In particular, Members, committees, and staff may find themselves (1) considering or drafting legislation that would amend the FAR to save money, promote transparency, or further other public policies; (2) conducting oversight of executive agencies' performance in procuring goods and services; and (3) responding to questions from constituents regarding executive branch procurement activities. In addition, certain commentators have recently suggested that some or all FAR provisions should be withdrawn.

The FAR is a regulation, codified in Parts 1 through 53 of Title 48 of the Code of Federal Regulations, which generally governs acquisitions of goods and services by executive branch agencies. It addresses various aspects of the acquisition process, from acquisition planning to contract formation, to contract management. Depending upon the topic, the FAR may provide contracting officers with (1) the government’s basic policy (e.g., small businesses are to be given the “maximum practicable opportunity” to participate in acquisitions); (2) any requirements agencies must meet (e.g., obtain full and open competition through the use of competitive procedures); (3) any exceptions to the requirements (e.g., when and how agencies may waive a contractor's exclusion); and (4) any required or optional clauses to be included, or incorporated by reference, in the solicitation or contract (e.g., termination for convenience). The FAR also articulates the guiding principles for the federal acquisition system, which include satisfying the customer in terms of cost, quality, and timeliness of the delivered goods and services; minimizing operating costs; conducting business with integrity, fairness, and openness; and fulfilling public policy objectives. In addition, the FAR identifies members and roles of the "acquisition team."

The FAR is the result of a 1979 statute directing the Office of Federal Procurement Policy (OFPP) within the Office of Management and Budget (OMB) to "issue polic[ies] … for the purpose of promoting the development and implementation of [a] uniform procurement system." Partly in response to this directive, the FAR was issued in 1983, and took effect in 1984. It has been revised frequently since then, in response to legislation, executive orders, litigation, and policy considerations. These revisions are generally made by the Administrator of General Services, the Secretary of Defense, and the Administrator of National Aeronautics and Space, acting on behalf of the Federal Acquisition Regulatory Council. However, the Administrator of OFPP also has the authority to amend the FAR in certain circumstances. FAR amendments generally apply only to contracts awarded after the effective date of the amendment.

While the FAR contains the principal rules of the federal acquisition system, it is not the only authority governing acquisitions of goods and services by executive branch agencies. Statutes, agency FAR supplements, other agency regulations, and guidance documents may also apply. In some cases, these sources cover topics not covered in the FAR, and sometimes the FAR addresses topics not expressly addressed in statute or elsewhere. In addition, it is the contract (not the FAR) that binds the contractor, although judicial and other tribunals may read terms required by the FAR into contracts which lack them.

Agencies subject to the FAR may deviate from it in certain circumstances, and agencies or transactions not subject to the FAR may be subject to similar requirements under other authority.

View the full CRS report -- originally obtained by Secrecy News.

The Defense Security Cooperation Agency notified Congress yesterday of a proposed $300 million Foreign Military Sale to Saudi Arabia "to provide funds for blanket order requisitions under the Cooperative Logistics Supply Support Arrangement, for spare parts in support of M1A2 Abrams Tanks, M2 Bradley Fighting Vehicles, High Mobility Multipurpose Wheeled Vehicles, equipment, support vehicles and other related logistics support."

Further, according to the DSCA statement:

This proposed sale will contribute to the foreign policy and national security of the United States by helping to improve the security of a friendly country that has been, and continues to be, an important force for political stability and economic progress in the Middle East.

This proposed sale will allow the Royal Saudi Land Forces Ordnance Corps to continue to purchase needed repair parts to maintain their fleet of M1A2S Abrams Tanks, M2 Bradley Fighting Vehicles, and High Mobility Multipurpose Wheeled Vehicles (HMMWVs), construction equipment, and support vehicles and equipment.

The proposed sale of this equipment and support will not alter the basic military balance in the region.

There are no prime contractors involved with this sale. There are no known offset agreements in connection with this potential sale.

Implementation of this proposed sale will not require the assignment of any additional U.S. Government or contractor representatives to Saudi Arabia.

There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.

This notice of a potential sale is required by law and does not mean the sale has been concluded.