The Insider

Implementing Arrangements
By John Liang
June 29, 2012 at 11:01 PM

U.S. and Romanian defense officials have signed "implementing arrangements" related to the planned construction and operation of the Aegis Ashore missile defense facility, according to a U.S. European Command statement issued today.

Romanian State Secretary for Defense Policy and Planning Sebastian Hulaban and Air Force Maj. Gen. Mark Schissler, director of plans and policy at EUCOM, "signed two implementing arrangements and three amendments to existing implementing arrangements related to the construction and operation of the planned missile defense facility in Deveselu," the command statement reads. It further states:

One implementing arrangement is for the use of land areas surrounding Deveselu Base, which is located near Caracal, Romania. The other implementing arrangement is for the use of airspace over Deveselu Base.

The two governments also signed three amendments to existing implementing arrangements regarding security, real estate and the functioning of the joint committee.  Each of these implementing arrangements supports Phase II of the European Phased Adaptive Approach.

The Ballistic Missile Defense Agreement between U.S. and Romania was signed Sept 13, 2011 and entered into force on Dec. 23, 2011.

The signing of these implementing arrangements is another step forward toward making the missile defense facility in Deveselu a reality.

Rear Admiral Randall M. Hendrickson, the Deputy Director of the Missile Defense Agency, and Brigadier General Thomas J. Sharpy, Director of Plans, Programs and Analyses, U.S. Air Forces in Europe, also attended the signing.

Required Reading
By Christopher J. Castelli
June 29, 2012 at 8:58 PM

Defense Secretary Leon Panetta said today that he had not yet seen a recently completed Joint Staff report on lessons from the last decade of war. Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey, appearing with Panetta at the Pentagon, told reporters that officials are just beginning to review the lengthy report, which draws lessons from many other reviews conducted in recent years.

In the last 10 years, the Pentagon failed to understand the operational environment, learned the hard way that conventional military methods were ineffective and initially ignored the need to influence perceptions in order to achieve objective, according to a draft of the study first reported by Inside the Pentagon.

The assessment says the Pentagon must craft a strategy for intelligence gathering and pursue major improvements in interagency coordination to avoid repeating mistakes made since 9/11.

Sequestration Pressure
By John Liang
June 29, 2012 at 4:13 PM

House Armed Services Committee Republicans sent a letter to Senate Majority Leader Harry Reid (D-NV) today calling on him to immediately bring a plan to the Senate floor to resolve sequestration.

According to the letter:

The time for rhetoric has passed. Resolution cannot wait until next month, or a lame duck session, or even the next Congress. News reports indicate that you are waiting for a "better" proposal. If you have a solution in mind, it is incumbent upon you to bring it to the floor of your own chamber, pass it, and allow us to move into a conference. Further cuts to the military don't affect some faceless bureaucracy. The White House has determined that sequestration will arbitrarily gut the funding to our troops who are putting their lives on the line for our country every day. Unless you allow a plan to resolve sequestration to come to the Senate floor, you will not only force the automatic cuts to your domestic agenda, but you will bear responsibility for a morally unconscionable outcome that breaks faith with our service members and their families. We must resolve sequestration now.

V-22 Move
By Christopher J. Castelli
June 29, 2012 at 1:01 PM

The Defense Department, in coordination with Japan’s government, is proceeding with the introduction of MV-22 Ospreys to III Marine Expeditionary Force in Japan, DOD announced in a statement released shortly after midnight. DOD today formally notified Japanese officials in Tokyo that it will replace CH-46 helicopters in Japan with MV-22s. The Ospreys will arrive at Marine Corps Air Station Iwakuni for unloading in late July, but they will not conduct flight operations for the time being, according to the statement.

DOD maintains that the investigations into a fatal April 11 MV-22 crash in Morocco and a separate June 13 crash of an Air Force CV-22 have so far revealed nothing that should impede the deployment of the aircraft to Japan. DOD officials held a June 22 meeting at the Pentagon with officials from the Japanese defense and foreign-affairs ministries to provide an update on preliminary conclusions related to the recent V-22 crashes.

“In recognition of the remaining concerns of the Japanese government about the safety of the aircraft, the DOD will refrain from any flight operations of the MV-22 in Japan until the results of the investigations are presented to the Japanese government and the safety of flight operations is confirmed,” the department said in the statement, adding that DOD anticipates presenting this information to the Japanese government in August.

“During this period, Japan will be the only location worldwide where the United States will suspend MV-22 flight operations,” reads the statement. MV-22s and CV-22s will continue flight operations elsewhere in the world, including over the continental United States. The Pentagon maintains the Osprey has an excellent safety record.

“Basing the Osprey in Okinawa will significantly strengthen the United States' ability to provide for the defense of Japan, perform humanitarian assistance and disaster relief operations and fulfill other alliance roles," the statement adds.

Veto Threat
By Christopher J. Castelli
June 28, 2012 at 8:18 PM

The White House strongly opposes House passage of H.R. 5856, the House's fiscal year 2013 defense appropriations bill, according to a statement of administration policy issued today.

"If the president were presented with H.R. 5856, his senior advisers would recommend that he veto the bill," according to the statement. By adding unrequested funding for defense, lawmakers have crafted a bill that would require "significant and harmful cuts to critical national priorities such as education, research and development, job training and health care," the statement notes.

The legislation also "undermines key investments in high-priority programs," impeding the ability of the defense secretary to carry out the Defense Strategic Guidance issued earlier this year, and hindering the ability of the U.S. military to carry out missions consistent with the new strategy, the White House writes.

Additionally, the statement complains about proposed limitations on the retirement of aircraft, as well as cuts to the Medium Extended Air Defense System, the MQ-8 Fire Scout drone and the Defense Acquisition Workforce Development Fund, among other priorities.

New Army G-8
By Jen Judson
June 28, 2012 at 6:29 PM

The president has picked Army Maj. Gen. James Barclay to become the service's new programming chief, according to a Defense Department statement issued today. Barclay is in line for a third star if his nomination is approved by the Senate.

The Army G-8 deputy chief of staff position has been vacant since Lt. Gen. Robert Lennox left the job earlier this year, when he took over as chief of the Pentagon's cost assessment and program evaluation office.

Barclay is the assistant deputy chief of staff of the Army's G-3/5/7 branch.

GAO On NNSA
By John Liang
June 28, 2012 at 4:34 PM

The agency responsible for managing the U.S. nuclear weapons complex still has lots of room for improvement, according to the Government Accountability Office.

In prepared testimony for a House Armed Services strategic forces subcommittee hearing held yesterday, GAO had this to say about the National Nuclear Security Administration:

NNSA has made considerable progress resolving some of its long-standing management deficiencies, but significant improvement is still needed especially in NNSA's management of its major projects and contracts. GAO reported in June 2004 that NNSA has better delineated lines of authority and has improved communication between its headquarters and site offices. In addition, NNSA's establishment of an effective headquarters security organization has made significant progress resolving many of the security weaknesses GAO has identified. Nevertheless, NNSA continues to experience major cost and schedule overruns on its projects, such as research and production facilities and nuclear weapons refurbishments, principally because of ineffective oversight and poor contractor management. In some areas, NNSA can be viewed as a success. Importantly, NNSA has continued to ensure that the nuclear weapons stockpile remains safe and reliable in the absence of underground nuclear testing. At the same time, NNSA's struggles in defining itself as a separately organized agency within DOE, and the considerable management problems that remain have led to calls in Congress and other organizations to increase NNSA's independence from DOE. However, senior DOE and NNSA officials have committed to continuing reform, and DOE’s and NNSA's efforts have led to some management improvements. As a result, GAO continues to believe, as it concluded in its January 2007 report, that drastic organizational change to increase independence is unnecessary and questions whether such change would solve the agency's remaining management problems.

Sequestration Request
By Christopher J. Castelli
June 27, 2012 at 8:35 PM

House Armed Services Committee Chairman Buck McKeon (R-CA) has issued a formal request for acting Office of Management and Budget chief Jeffrey Zeints to testify on July 18 about the mechanics and impact of automatic defense cuts known as “sequestration.”

In a letter issued today, McKeon writes that the House has acted to resolve sequestration through the reconciliation process. “Given the apparent impasse, it is appropriate to provide information to members of Congress, industry, and the public about the administration's interpretation of the law and how sequestration would be implemented mechanically," he writes. "At a minimum, this information is critical for planning, and perhaps the additional insight into the realities of sequestration will incentivize all parties to offer alternative deficit reduction plans. I was pleased to note the statement by your spokesperson earlier this week that indicated your staff was conducting the analysis necessary to implant sequester if need be."

The committee has also invited representatives from the defense industry as well as senior defense officials to participate in the hearing.

Stalled
By Gabe Starosta
June 27, 2012 at 3:46 PM

Seven months after Rolls-Royce and General Electric stopped self-funding the Joint Strike Fighter's second engine -- and more than a year after the Defense Department issued the contractors a stop-work order on the F136 engine -- termination proceedings are still not complete, Rolls-Royce officials said today.

The GE-Rolls-Royce team developing the F136 engine formally ended its work at the end of calendar year 2011. At that point, it was unclear where F136-related property, such as spare and test engines, would end up. At a media briefing today, Tom Hartmann, Rolls-Royce's senior vice president of U.S. government programs, said the status of those items remains undecided.

“We are currently in the termination process for the F136 with the U.S. government, and so it is premature to say how that worked out until that process is complete,” Hartmann said. “There's a legal time frame -- I think we have up to a year -- to complete that work.”

The parts developed under the F136 program are property of the Defense Department, so the two companies are awaiting direction on the final disposition of those items, Hartmann said. Rolls spokesman George McLaren added that the parts have remained where they were at the time the F136 team received its termination notice -- namely, at a Rolls-Royce facility in Indianapolis, a General Electric facility in Evendale, OH, in the possession of some suppliers, and possibly at some government sites.

DOD issued the GE-Rolls team a stop-work order on the F136 on March 24, 2011. The companies then self-funded development on the motor until early December, at which point they announced plans to wind down the program at the end of the year.

TRANSCOM Strategy
By John Liang
June 27, 2012 at 12:01 PM

A U.S. Transportation Command "cross-directorate team" is scheduled to complete work on a new command strategy by the end of July. According to excerpts from a June 20 command statement:

Representatives from across the command as well as peers from components and subordinate commands have worked to establish a framework for the plan.

The group began by assessing the current and future strategic environment and then analyzed the command's Department of Defense-assigned missions and critical tasks. The team distilled the command's core responsibilities into three strategic priorities:

* Transportation services and enabling capabilities

* transportation-related information

* transportation billing and financial transactions

"This strategic plan will address what we've been hearing from our internal staff and partners from a variety of avenues," said Air Force Gen. William M. Fraser, III, commander, USTRANSCOM. "We are working to show folks that there is a rationale behind what we do, and I will be taking the opportunity in the future to talk with people about how we're knitting together our strategic plan, stakeholder input, and command initiatives."

Air Force Brig. Gen. John Michel, deputy director, strategy, policy, programs and logistics, is leading the cross-stakeholder strategic planning effort on behalf of Gen. Fraser. Brig. Gen. Michel plans to visit partners in the coming weeks to provide a progress report. In addition, he will hold town hall meetings at the end of the month to share information with staff and gather input.

"We are including as many people in this process as possible," said Michel. "We want to be transparent about why the command is moving in a particular direction. The next part of this process involves better aligning ourselves to meet our nation's needs in the coming years and we want to help everyone to be supportive of these efforts." . . .

Next steps will be to define strategic objectives that support and advance the three command priorities and make the related resourcing recommendations. The team will deliver this framework to Fraser on July 31. Implementation of the approved plan will take place this fall.

Early Adopter
By John Liang
June 26, 2012 at 3:20 PM

The Pentagon is prepared to be an "early adopter" of some technologies in ways that other departments cannot be, according to Deputy Defense Secretary Ashton Carter. In an April 16 speech on energy security at the Georgia Institute of Technology, Carter said:

First, there's some areas where we are cost insensitive in a way that the rest of the economy won't and can't be. We're prepared to invest and adopt before the rest of the economy and, sometimes, after we do -- sometimes but not always -- sometimes, that leads to a more economical version of the same product down the line as technology improves, a product that can be adopted and accommodated by the rest of the economy.

In the meantime, we both benefit on our own terms.

Secondly, unlike so many in the economy, we in the Department of Defense take the long view. We're going to be around a long time. Our cost of capital compares extremely favorably to anyone else's in the economy.

We're prepared to make investments that are sure to pay off, but won't pay off for a while, whereas others can't afford to place those kinds of bets as easily. We're prepared to do so. It’s in the national interest. It's in the warfighters' interest. It's in the taxpayers' interest. We can justify it as a larger value and a larger meaning over time to society as a whole.

Covering the Base
By Tony Bertuca
June 25, 2012 at 4:48 PM

Two Ohio lawmakers announced last week that the Marine Corps plans to keep vital vehicle machinery stationed at the Joint Services Manufacturing Center in Lima, OH, thereby abandoning plans to move the gear to a service-run facility and protecting the combat vehicle industrial base.

Sen. Rob Portman (R-OH) and Rep. Mike Turner (R-OH), members of the House and Senate armed services committees, released a statement on June 22 heralding the Marines' decision to maintain their hull machining line located at the Lima plant.

“Following the Obama Administration’s cancellation of the Expeditionary Fighting Vehicle (EFV) Program, the Marine Corps' program manager began reviewing the future use of all EFV-associated equipment procured as part of that program,” the statement reads. “Although there was a preliminary determination to relocate that equipment to a Marine Corps facility, further consideration determined that this was not a time-sensitive decision and the disposition of this equipment will not happen until after the issue can be more thoroughly studied.”

The Marines are also scheduled to conduct a business-case analysis that will allow them to compile a cost/benefit analysis focused on maintaining the defense industrial base, according to the statement.

Portman and Turner have been lobbied hard by General Dynamics, which runs the government-owned and contractor-operated JSMC, to keep the facility's production lines warm in spite of Army plans to pause spending on the Abrams tank, which is built there.

According to the statement, Portman and Turner “worked with the Marine Corps to ensure proper consideration was given” to the matter before a final decision was made to relocate the hull machining line.

“We’d like to thank Senator Portman, Congressman Turner, and the entire Ohio delegation for their constant work on behalf of the Joint Services Manufacturing Center at Lima,” said Keith Deters, the plant manager who JSMC for General Dynamics. “They know that the work done there is important to the defense of this country and helps ensure our manufacturing base remains strong.”

V-22 Meeting
By Christopher J. Castelli
June 22, 2012 at 7:40 PM

Defense Department officials held a "director-level" meeting at the Pentagon this morning with officials from the Japanese defense and foreign-affairs ministries to provide an update on issues related to recent crashes of V-22 Osprey aircraft, Pentagon Press Secretary George Little said in a statement.

The meeting was led by Christopher Johnstone, the Pentagon policy shop's director for Northeast Asia, and Brig. Gen. Terrence O'Shaughnessy, the Joint Staff's deputy director for politico-military affairs for Asia, Little said. The session also included representatives from the Marine Corps and Air Force, who provided updates on the status of the investigations into recent Osprey mishaps, he said. Assistant Secretary of Defense for Asian and Pacific Security Affairs Mark Lippert, who Little said Thursday would participate in the session, did not.

"DOD takes the inquiries made by the Japanese government very seriously and provided relevant information to the extent currently possible, and will continue to do so," Little said. The Marine Corps' plans to base MV-22 Ospreys in Japan are facing potential delays amid increasing concern there about the safety of the aircraft. An Air Force CV-22 Osprey crashed June 13 during a routine training mission at Hurlburt Field's Eglin Range, north of Navarre, FL. "The Osprey is a highly capable aircraft with an excellent operational safety record, which includes more than five years of worldwide deployments and 140,000 flight hours," Little said.

Space Shuffle
By John Liang
June 22, 2012 at 6:08 PM

The Air Force is doing a bit of reshuffling within its senior space and missile defense ranks, according to a just-released Pentagon announcement:

Maj. Gen. Terrence A. Feehan, program executive for programs and integration, Missile Defense Agency, Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, Huntsville, Ala., to vice commander, Space and Missile Systems Center, Air Force Space Command, Los Angeles Air Force Base, Calif.

Brig. Gen. Samuel A. Greaves, who has been selected for the rank of major general, director, strategic plans, programs and analyses, Headquarters Air Force Space Command, Peterson Air Force Base, Colo., to deputy director, Missile Defense Agency, Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, Huntsville, Ala.

Brig. Gen Roger W. Teague, vice commander, Space and Missile Systems Center, Air Force Space Command, Los Angeles Air Force Base, Calif., to director, strategic plans, programs and analyses, Headquarters Air Force Space Command, Peterson Air Force Base, Colo.

Conference Takeaways
By John Liang
June 22, 2012 at 3:06 PM

Credit Suisse analysts attended Bloomberg Government's aerospace and defense conference this week, and this morning issued their thoughts on what they heard:

* Plenty of Rhetoric and Congress Still Lacks Direction: There was clear consensus that sequester has disastrous ramifications ranging from decimation of the defense industry, massive job loss and severe weakening of national security and the economy. But, nobody offered any semblance of a solution. Of course, among the speakers only the congressmen and senators are in any position of real power and they generally pointed figures at one another and stayed to party lines, although there were minor signals that modest compromise could occur down the road. Our sense is that no solution is imminent and this will not be addressed until after the election.

* Lack of Visibility Should Drive Continued Defense Stock Volatility: We expect shares to be pressured through summer and into the election, although there may be support for companies like LMT ahead of its anticipated September dividend hike. While most speakers expect an ultimate deal through compromise on revenues, cost-cutting and entitlements, it appears that such a deal will not materialize until the lame duck and perhaps even calendar Q1'13. Mechanically, we see a CR in place in calendar Q4'12 and there is some risk that Sequester then triggers on Jan 3rd. Our understanding is that such a trigger won't take effect until Feb 13th (CR in place until then), but we suspect eventual compromise on cuts of $250-300B, which is what we believe is currently discounted in the shares. If cuts are limited to $100B as Senator McCain (R-AZ) and Carl Levin (D-MI) hope, we see modest upside vs more severe downside with full sequester.

* Notable Comments: Perhaps Dov Zakheim (former DOD Comptroller) said it best. Sitting on a panel with Democratic and Republican congressmen, Zakheim was frank in saying he does not think that this Congress can cut a deal because it "would've done so already". He added that he expected GDP to decline 0.5% on Sequestration. Marian Blakey (CEO Aerospace Industries Association) quantified potential job loss at 1 million jobs (330k directly from contractors and another 570k associated positions).

Regarding negotiations, Congressman Forbes (R-VA) said it's easy to say "let's put everything on the table", but we [Congress] don't even have a table.

On a positive note, Senator McCain mentioned that an amendment had been tagged onto the Farm bill requiring a report on the effects of sequestration on DOD and the economy by August 15th and said it is irresponsible for the administration not to have done this analysis earlier.

Of course, InsideDefense.com was at the conference as well. Scroll down the Defense:Next blog to view our coverage.