The Insider

By John Liang
April 24, 2019 at 2:35 PM

This Wednesday INSIDER Daily Digest has coverage of a multimillion-dollar Pentagon reprogramming request obtained by Inside Defense.

Inside Defense obtained a Pentagon reprogramming request that's chock-full of programs the Defense Department wants money for:

Army seeks OK to reprogram $115M to jump-start Iron Dome acquisition

The Defense Department is seeking permission from Congress to shift $115 million appropriated in prior years into accounts that would allow the Army to immediately jump-start a $437 million purchase from Israel of two Iron Dome batteries to provide an interim capability by 2020 against cruise missiles, unmanned air vehicles, mortars, rockets and artillery.

DOD requests $141M reprogramming for Air Force One recap

The Defense Department is requesting a $141 million funding shift to ensure the Presidential Aircraft Recapitalization program stays on schedule for delivery by 2024, according to a document obtained by Inside Defense.

Pentagon requesting $15M for new SDA, $19M for SPACECOM in new reprogramming

The Defense Department is requesting a $15 million reprogramming to establish the Space Development Agency and $19 million to stand up U.S. Space Command -- two critical components of the Pentagon's plan to reorganize the military space enterprise.

Air Force requests $87M reprogramming for 'enhanced' T-6 OBOGS

The Air Force wants to shift $87 million to buy and install Enhanced On-Board Oxygen Generating Systems on its 445 T-6 trainers.

Navy seeks $38.2 million reprogramming for hypersonic, extended range upgrade to SM-6

The Navy is seeking permission to reprogram $38.2 million dollars to "provide a hypersonic and extended range anti-surface warfare" capability to SM-6 Block IB Phase 1B all-up-rounds, according to a Defense Department document.

The Pentagon is looking to streamline technology transfer efforts:

New proposal emerges to lower technology transfer barriers for closest U.S. allies

As the Pentagon conducts high-level conversations with key U.S. allies on strengthening defense industrial base cooperation, a new proposal has emerged that could become legislation used to lower barriers for technology transfer between the United States, Canada, the United Kingdom and Australia.

It's earnings season. Here's our coverage of three of the "big five" defense contractors:

Major defense contractors report sales growth

General Dynamics, Boeing's defense business and Northrop Grumman today all reported sales boosts in the most recent quarter.

The Special Inspector General for Afghanistan Reconstruction spoke at a Defense Writers Group breakfast this morning:

SIGAR says overclassification of Afghanistan war, reconstruction continues

The Special Inspector General for Afghanistan Reconstruction says the U.S. government continues to over-classify important information about the 17-year war and the status of Afghan forces.

We now know which contractors will build Future Attack Reconnaissance Aircraft prototypes:

Army selects five concepts for FARA prototype

The Army has chosen five vendors to build prototypes for the Future Attack Reconnaissance Aircraft competition, the service announced this week.

Air Force Lt. Col. Robert Vicars, commander of the 5th Flying Training Squadron, recently spoke with Inside Defense about aviator training:

Second round of Air Force's PTN adds RPA training, NASA partnership

An Air Force effort to expedite aviator training using next-generation technology has expanded in its second iteration to include remotely piloted aircraft and a partnership with NASA, according to the program's lead.

By Courtney Albon
April 24, 2019 at 1:45 PM

The Air Force wants to shift $87 million to buy and install Enhanced On-Board Oxygen Generating Systems on its 445 T-6 trainers.

The request was included in an April 17 reprogramming document obtained by Inside Defense and comes about a year after the Air Force paused T-6 flying following a sudden increase in the number of pilots reporting hypoxia-like conditions.

The new system will feature an OBOGS concentrator, engine bleed air shutoff valve, mechanisms to remove water and moisture from the upstream bleed air system, and an automated backup oxygen system. It will also include a maintenance system and sensors that measure pilot intake levels.

By Justin Katz
April 24, 2019 at 1:42 PM

The Navy is seeking permission to reprogram $38.2 million dollars to "provide a hypersonic and extended range anti-surface warfare" capability to SM-6 Block IB Phase 1B all-up-rounds, according to a Defense Department document.

The April 17 reprogramming request, signed by acting Pentagon Comptroller Elaine McCusker, states the funding will be used for trade studies, concept and component designs, materials, detailed design specifications and interface specifications.

“These efforts are required in support of AUR and radome thermal protection, control surface assemblies high-temperature materials characterization [and] steering control section detailed design and materials,” according to the document.

The funds are also necessary for “MK 29 canister modification design, vertical launching system integration, as well as system/sub-system and software specifications to initiate combat system integration.”

A little less than half of the funds are being moved from the Navy’s shipbuilding account because the service determined $16.7 million “was in excess to the program manager’s estimate at completion” of several Arleigh Burke (DDG-51) class destroyers.

Money is also available from “multi-function fuze ammunition funding,” which the Navy is using economic order of quantity to buy 6,000 rounds per year, according to the document.

By Justin Katz
April 24, 2019 at 9:45 AM

The Pentagon and Coast Guard awarded a $745 million contract yesterday to VT Halter Marine for the detail design and construction of the highly anticipated Polar Security Cutter, according to a Defense Department statement.

If all options are exercised, the contract's value will reach approximately $1.9 billion. Work for the base contract is expected to be completed by June 2024, or by November 2027 if all options are exercised. The contract's options are for the construction of two additional ships, according to a statement from Naval Sea Systems Command.

VT Halter Marine, which is based in Pascagoula, MS, is the shipbuilding arm of Singapore Technologies Engineering.

"VT Halter Marine was involved in the design analysis study of the PSC since February 2017 and is currently in the production engineering studies support work since February 2019, a company statement reads.

Multiple lawmakers from Mississippi, including Sens. Roger Wicker (R) and Cindy Hyde-Smith (R) and Rep. Steven Palazzo (R), applauded the contract's award in a statement today and noted the creation of 450 new jobs in their state as a result.

By Justin Doubleday
April 23, 2019 at 3:38 PM

The Defense Digital Service's founding director is stepping down after four years on the job, the Pentagon announced today.

Chris Lynch, who had led DDS since its establishment in 2015, will step down later this month, according to an announcement released by DOD today. Lynch will be replaced by Brett Goldstein, who most recently served as special adviser to the Navy.

"Although we will miss Chris, the unique startup culture he built and the talented team he recruited will continue to disrupt and transform technology at the DOD," acting Defense Secretary Pat Shanahan said in the statement. "We are excited for Brett to be taking on the role of director to build and expand the team and its work. His public and private sector knowledge, technical expertise, and commitment to improving government through technology will be invaluable to a range of critical missions across the department."

Goldstein launched the venture capital firm Ekistik Ventures after serving as chief information officer for the city of Chicago between 2011 and 2013. Previously, he had served five years in the Chicago Police Department, attaining the rank of commander. He began his career as one of the first employees of OpenTable.

DDS grew out of the U.S. Digital Service established at the White House under the Obama administration. It is charged with bringing in talent, technologies and processes from the private sector to solve DOD problems.

As co-founder and director of DDS, Lynch led a range of the group's efforts over the past few years, including its bug bounty "Hack the Pentagon" program, reforming digital services for military health benefits, and helping to build out the next-generation GPS, according to the DOD announcement.

Lynch also led the early development of the Pentagon's potentially $10 billion cloud program, the Joint Enterprise Defense Infrastructure (JEDI). The program is seen as an important pathfinder for DOD to take advantage of technology like artificial intelligence and machine learning, but has also courted controversy. Oracle is currently suing the government over DOD's plan to award only one contract for the JEDI program.

By John Liang
April 23, 2019 at 3:29 PM

This Tuesday INSIDER Daily Digest has news on the Redesigned Kill Vehicle, the Section 809 panel, a recently completed Defense Science Board study and much more.

We start off with some missile defense news:

MDA finalized $1B contract to accelerate RKV; schedule unraveled months later

The Missile Defense Agency last spring finalized a contract to accelerate development of a new Ground-based Midcourse Defense warhead that locked in costs 55% above estimates for the pre-acceleration plan -- a bid to speed development that unraveled within months when design challenges surfaced saddling the project with an estimated two-year delay.

Inside Defense obtained the Pentagon's first detailed response to the Section 809 panel's recommendations:

Pentagon mostly backs Section 809 panel's reform ideas, but says more research required

The Defense Department supports the majority of reforms recommended by a congressionally mandated panel, but says many of the group's proposals require further research or lawmaker intervention, according to a report signed by Pentagon acquisition chief Ellen Lord.

A Defense Science Board task force has completed a study on potential U.S. military applications of 5G network technology:

DSB task force completes military applications of 5G networks study

An influential Pentagon advisory panel has completed a classified assessment of potential U.S. military applications of 5G network technology to aide defense policymakers contemplating the ramifications of the looming adoption of fifth-generation wireless technology networks -- being shaped in part by China -- that promise step-change improvements in data speed, volume and latency.

Here is some defense business news:

LMI Ventures forms first partnership

LMI Ventures has established a partnership with Immuta, which focuses on data management, in its first deal since being established several months ago.

Inside Defense recently chatted with Damon Feltman, chief of Air Force Space Command's global effects division:

AFSPC eyeing new joint SATCOM environment as part of enterprise strategy

The Air Force wants to establish a joint information operations center to help the space community better manage satellite communications resources as part of a broader enterprise SATCOM strategy that is set to be released later this year.

We have more details on what happened to the JASON contract:

DOD tech chief killed JASON contract, questioning its value and leaving other agencies scrambling

Pentagon technology chief Mike Griffin ended the Defense Department's long-standing contract with a group of high-level scientists known as JASON because he felt the group wasn’t worth funding anymore, arguing DOD would be better off using other avenues for independent technical analysis, according to government officials.

Howard Berkof, deputy program manager for the unmanned maritime systems program office, spoke with Inside Defense this week:

Snakehead UUV development acceleration enabled by work on Orca

The five-year acceleration of a large unmanned undersea vehicle was made possible in part by the work the Navy has been doing with a similar vessel that is further along in the acquisition process, according to a service official.

The Defense Information Systems Agency is now in charge of the "Sharkseer" cybersecurity program:

Pentagon reprograms funding for DISA to take over 'Sharkseer' cybersecurity program

The Pentagon has realigned funding so the Defense Information Systems Agency can take over management of the "Sharkseer" cybersecurity program from the National Security Agency, in line with a congressional mandate.

By Marjorie Censer
April 23, 2019 at 12:44 PM

As the Pentagon grapples with whether to oust Turkey from the F-35 program, the manufacturer's chief executive said today "the list of interested countries is continuing to grow."

"There's continued interest," Marillyn Hewson added during a call with analysts. "Even the existing partners are expanding their needs -- take Japan for example."

"It's certainly an opportunity for us to address a growing demand," she said. "We frankly have great capacity on this program."

Meanwhile, the contractor reported that sales in its most recent quarter reached $14.3 billion, up 23 percent from the same three-month period a year earlier.

The company's quarterly profit hit $1.7 billion, up about 47 percent from the prior year.

Lockheed reported improved sales and profit in all four of its business units.

By Ashley Tressel
April 23, 2019 at 11:26 AM

While the Army Reserve has increased training for cyber operations in a potential high-end conflict, it should also keep aware of developing more advanced technologies, according to its chief.

Lt. Gen. Charles Luckey told reporters at an Association of the United States Army breakfast this morning, "I think we should be careful about being too focused on cyber and not focused enough on all aspects of the electromagnetic spectrum, the speed at which artificial intelligence may become a challenge for humans . . . I think [cyber] has become 'the thing,' and we've got to be more expansive."

Reservists have been completing exercises at the National Training Center, "trying to create disruption in the electromagnetic spectrum," like jamming, Luckey said.

Luckey has spoken before about "digital key terrain," which includes "high-end digital -- whether it's quantum computing, cyber, artificial intelligence, et cetera, -- there are certain places in America where there's a lot of stuff going on, and there's concentrations or pockets where there's a lot of energy."

The Reserve has been working to recruit talent in the technology sector for Army Futures Command, which is looking to capitalize on the sort of rapid innovation rampant in Silicon Valley and to that end shares office space with a startup incubator in Austin, TX.

Luckey said the two recent locations the Reserve set up to recruit tech talent -- in Mountain View, CA, and Cambridge, MA -- are "getting a buzz going" for recruitment.

He said the Reserve is ahead of its recruiting goal this year. "I'm not worried about us . . . I think we're doing a pretty good job of recruiting really good talent."

However, as part of a larger conversation about the relationship of major, global corporations and nation-states, he said Silicon Valley companies don’t necessarily think of themselves as "American businesses, and I'm not saying they should . . . But that doesn't translate to me as a lack of loyalty, focus or commitment on the part of the individual to the Constitution," he said.

By Marjorie Censer
April 23, 2019 at 11:02 AM

United Technologies said today it saw “strong growth” in its intelligence, surveillance and reconnaissance work as well as its space business.

During a call with analysts Tuesday, Greg Hayes, the company's chief executive, said its acquisition of Rockwell Collins has bolstered the company's defense work, giving it “real heft on the military communication side.”

Both Pratt & Whitney and Collins Aerospace Systems had “really, really strong quarters,” Hayes added.

“We shouldn't forget that we have a very, very solid position on the defense systems side,” he continued. “Defense spending goes up and down. We know that. Has it peaked? I'm not sure.”

But the company's defense programs “have a lot of runway,” Hayes said.

Pratt & Whitney today reported quarterly sales of $4.8 billion, up about 11 percent from the same three-month period a year earlier. Quarterly profit reached $433 million, up about 5 percent from a year earlier.

Collins Aerospace Systems reported much higher sales and profit as a result of the addition of Rockwell Collins. The unit recorded quarterly sales of $6.5 billion, up 71 percent from the prior year, while profit reached $856 million, up almost 46 percent from a year earlier.

Hayes told analysts the company's planned split into three companies, which separates Otis and Carrier into independent companies, is on track.

More than 500 people are working on the separation, Hayes said, and the company will be “operationally ready” to split by the end of the year.

He said UTC has completed its tax filings in Canada and the United States and is waiting for rulings, which he said is a six- to nine-month process.

“There is a tremendous amount of work going on to get these two businesses set up,” Hayes said. “But I think, again, it's all on track.”

He said the company expects to name the new management teams by the end of the second quarter.

By Mallory Shelbourne
April 22, 2019 at 4:37 PM

While the Arctic is at "low risk for conflict," the Navy plans to be ready to safeguard American interests in the region during a period of great power competition, according to the service's new Arctic strategic outlook.

Chief of Naval Operations Adm. John Richardson on April 9 told the Senate Armed Services Committee he signed a new strategic outlook for the Arctic earlier this year.

The document, obtained by Inside Defense, is dated January 2019 and details how the service’s view of the Arctic bolsters the new National Defense Strategy.

"This strategic outlook highlights the importance of monitoring the changing environment, continuously evaluating Navy Arctic capabilities, and developing strong partnerships with interagency and international Arctic stakeholders," the document reads.

"The Navy will continually assess its preparedness and make informed decisions on Arctic operations and planning in response to changes in the Arctic operational environment or changes in its strategic context," it continues.

The outlook states the service will evaluate "threats, opportunities, and risks" in the region through the lens of great power competition.

The National Defense Strategy, unveiled in January 2018, seeks to prepare for a period of great power competition, specifically with nations like Russia and China.

By Justin Katz
April 22, 2019 at 3:48 PM

The Congressional Budget Office today published a report detailing how it determined depot maintenance for Los Angeles-class submarines has historically been less expensive at private shipyards than in public shipyards.

The 30-page report builds on a dozen slides CBO published last September that outlined preliminary findings leading to that conclusion.

The new report states the difference between the two analyses is the size of the cost gaps in recent years.

"The 2018 analysis showed that costs at private shipyards remained lower in recent years than costs at public shipyards, whereas the gap has roughly disappeared in this analysis (for overhauls after 2007)," the report states.

"The reason for that change is that CBO received updated data from the Navy," the report continues.

Auditors write that following the 2018 analysis, the Navy altered its own analytical approach, which resulted in the service finding that docking selected restricted availabilities costs at private and public shipyards have been nearly the same in recent years, a "result that is broadly consistent with CBO’s analysis of recent DSRAs."

By John Liang
April 22, 2019 at 2:17 PM

This Monday INSIDER Daily Digest has a deep dive into Raytheon's efforts to hold onto its decades-long missile defense radar work.

Inside Defense recently toured Raytheon's Andover, MA-based missile defense radar production facilities. Here's our in-depth story from that tour:

Patriot incumbent Raytheon aims to hold onto franchise with new LTAMDS radar

ANDOVER, MA -- Protruding from the side of a pair of two-story buildings here are dozens of oversize pipes that turn down at a right angle and extend directly to the ground, a quirky architectural feature that brings to mind insect legs.

In case you missed these from last Friday:

Army official: Aviation supply chain is the 'weak link' in sustaining force

NASHVILLE, TN -- The executive director of Army Aviation and Missile Command says "the current level of fragility" within the aviation supply chain is "unacceptable" and his No. 1 concern for sustaining the force.

Navy's push to standardize autonomous technology will start with MUSV solicitation

The upcoming request for proposals from the Navy's unmanned maritime systems office for the Medium Unmanned Surface Vehicle will send a "clear signal" to industry about autonomy: intellectual property cannot come at the expense of the military's ability to "plug and play," according to a service official.

Marine Corps plans to sign three-year research agreement with Kaman Aerospace

The Marine Corps is preparing to sign a three-year cooperative research and development agreement this summer with Kaman Aerospace to develop autonomous flight capabilities for logistics delivery using CQ-24A KMAX helicopters.

By Marjorie Censer
April 22, 2019 at 2:00 PM

KBR, which won three slots in the Army's LOGCAP V competition, "moved into the program's strongest position, based on recent task orders per region," according to a new report from Moody's Investors Service released today.

The report calls the awards, which went to KBR, Vectrus, Fluor and a PAE-Parsons team, "surprising."

Moody's states KBR, in receiving the Afghanistan area, "won the most active LOGCAP region," which it notes is currently served by DynCorp International and Fluor.

"Afghanistan represents a most challenging region from an executional perspective," the report states. "For LOGCAP V, the Army prioritized past performance, proposal quality and capabilities ahead of price. KBR's proposal was likely so superior that the Army viewed the risk of replacing current vendors already in-theater to be worthwhile."

Moody's writes that DynCorp's "complete shutout was the worst possible outcome for the company and was also unexpected based on the level of mission support tasks the Army had been steering toward DI's areas of responsibility under LOGCAP IV."

The report states the company generated about 20 percent of its annual sales from the program.

"The LOGCAP V loss will hurt DI but not heavily erode the company's mission support capabilities; it could actually spur DI's effort to expand its service offerings through [mergers and acquisitions]," Moody's writes. "While DI's financial performance improved over the past three years, consolidation of defense service contractors across the past decade has produced a more broadly skilled set of competitors."

By Marjorie Censer
April 22, 2019 at 1:31 PM

Enlightenment Capital said today it has acquired Trowbridge & Trowbridge, which provides cloud engineering, cybersecurity, IT engineering, application development and network engineering to defense, intelligence and civilian agencies.

Trowbridge, Enlightenment said, will serve as its newest platform.

McLean, VA-based Trowbridge was founded in 2006. Founder Karen Trowbridge will act as a strategic adviser, while Cass Panciocco, formerly Trowbridge's chief operating officer, has been named president and chief executive as part of the transaction.

By Marjorie Censer
April 22, 2019 at 9:53 AM

Jacobs Engineering said today it has agreed to purchase KeyW for $11.25 per share for a deal worth about $815 million, including an estimated $272 million of KeyW debt.

“This transaction directly aligns with Jacobs' Aerospace, Technology and Nuclear (ATN) transformational strategy of delivering innovative and unique, mission-oriented solutions for highly technical and high consequence government priorities, and further positions Jacobs as a leader in high-value Government Services,” the company said. 

Jacobs said the deal will improve its position in the intelligence, surveillance and reconnaissance sector as well as the space-based remote sensing market.

Additionally, the acquisition of KeyW provides access to offensive and defensive cyber operations and training work.

Jacobs said it expects to generate about $15 million of annual cost savings by the end of next year, primarily by “eliminating duplicative public company costs and real estate.” Additionally, the company thinks it can access more than $100 million in “potential revenue synergy opportunities from capturing incremental opportunities within the federal customer base, both in current contract vehicles and from opportunities in their respective bid pipelines.”

The deal is expected to be complete by the end of August.