The Insider

By John Liang
January 27, 2012 at 4:41 PM

Boeing, followed by Raytheon and General Dynamics, will likely fare the best -- stocks-wise -- in the wake of yesterday's preliminary Pentagon fiscal year 2013 budget announcement, according to a research note published by Wall Street analysis firm Credit Suisse.

The companies whose stocks would be most impacted by the Pentagon's budget decisions are Lockheed Martin, Northrop Grumman and Huntington Ingalls Industries, "although maintenance of an 11 carrier fleet provides some offset for HII," the note states.

Rockwell Collins, United Technologies, Textron and Esterline Technologies Corp. "may also be impacted by a 3-5 year delay in Army helicopter modernization," the note adds.

By Jen Judson
January 27, 2012 at 3:41 PM

Army Chief of Staff Gen. Raymond Odierno said he signed a memorandum of understanding this morning setting up an arrangement for the Air Force to provide ground support to the Army using C-130s rather than C -27Js, which the Army hoped would replace its retiring C-23 Sherpas.

Prior to his announcement this morning at the Pentagon during a budget briefing, Odierno previewed this arrangement at a Jan. 25 Association of the United States Army breakfast in Arlington, VA. He said then that the Air Force's C-27J cargo aircraft program was likely to be canceled and that the services were working together on an agreement to require the Air Force to provide support using C-130s.

A Pentagon white paper released Jan. 26 reveals C-130 aircraft would provide direct air support for the Army's ground forces after the Defense Department weighed all options. “The C-27J was developed and procured to provide a niche capability to directly support Army urgent needs in difficult environments such as Afghanistan where we thought the C-130 might not be able top operate effectively,” the white paper reads.

“However, in practice, we did not experience the anticipated airfield constraints for C-130 operations in Afghanistan and expect these constraints to be marginal in future scenarios,” the document states.

By John Liang
January 26, 2012 at 9:15 PM

The Pentagon's decision to cancel the Global Hawk Block 30 program and have the U-2 aircraft the unmanned system's mission resulted in disappointment for Global Hawk builder Northrop Grumman. In a just-released statement, the company pledges "to work with the Pentagon to assess alternatives to program termination." The statement further reads:

The Global Hawk program has demonstrated its utility in U.S. military operations in Iraq, Afghanistan and Libya, as well as its utility in humanitarian operations in Japan and Haiti. Just a few months ago, the Pentagon published an acquisition decision memorandum regarding Global Hawk Block 30 that stated: 'The continuation of the program is essential to the national security... there are no alternatives to the program which will provide acceptable capability to meet the joint military requirement at less cost.'

Global Hawk is the modern solution to providing surveillance. It provides long duration persistent surveillance, and collects information using multiple sensors on the platform. In contrast, the aging U-2 program, first introduced in the 1950s, places pilots in danger, has limited flight duration, and provides limited sensor capacity. Extending the U-2's service life also represents additional investment requirements for that program.

Northrop Grumman is committed to working with our customers to provide the best solutions for our country and our allies. We are pleased with the continuing support for the Global Hawk Block 40 system, as well as for the Navy's Broad Area Maritime Surveillance system and our other unmanned systems.

InsideDefense.com reported earlier this month that the top developmental testing official in the Pentagon's acquisition directorate had recommended not proceeding to initial operational testing for the Global Hawk, a recommendation the Air Force chose to ignore.

Moreover, in December 2011, Inside the Air Force reported that service Secretary Michael Donley would not finish the tasks that former acquisition chief Ashton Carter set out for the restructure of the Global Hawk program until the submission to Congress of the fiscal year 2013 budget request, adding:

Earlier this year, the Air Force began implementing more than a dozen initiatives required by the Pentagon's acquisition executive as part of the restructuring of the Global Hawk program. The initiatives were listed in a "for official use only" June 14 acquisition decision memorandum (ADM) issued by Carter. The plan included establishing independent review teams to assess everything from reliability to operational performance that are slated for completion beginning in the summer of 2011 and moving forward through 2012.

Air Force spokeswoman Jennifer Cassidy told Inside the Air Force in a Dec. 21 email that within 30 days of receiving the ADM, Donley supported the Global Hawk Block 40 milestone C decision and submitted a Block 40 test and evaluation concept briefing to the deputy assistant secretary of defense for developmental test and evaluation and the Pentagon's director of operational test and evaluation.

In addition, he has provided, or will soon provide, copies of the updated Air Force Weapon System Agreements to the acting deputy assistant secretary of defense for materiel readiness. Donley also, as the June 14 ADM requested, established a senior-level Air Force reliability and maintainability subject matter expert review team to make assessments and recommendations for reliability and sustainability improvement activities.

Last month, Global Hawk program manager Col. Karl Rozelsky told ITAF that the team's first meeting took place on Nov. 8 and Nov. 9 and that it was scheduled to meet again this month to mull over how to make reliability and maintainability improvements. The team consists of 10 or 11 members -- primarily subject matter experts in reliability and maintainability -- and is chaired by an engineer who works under Air Force Acquisition Executive David Van Buren, he said during a November interview (ITAF, Nov. 18, p. 1).

Check out Inside the Air Force tomorrow for more Global Hawk coverage.

By John Liang
January 26, 2012 at 7:59 PM

House Armed Services Committee Chairman Buck McKeon (R-CA) isn't too optimistic about the Pentagon's fiscal year 2013 budget request. In a just-released statement, he says:

Today Secretary Panetta announced how he will execute the President’s direction to cut $47 billion from his original request for FY13 military spending.  Contrary to those who would assert that this budget still represents an increase in defense spending, clearly this budget is a real cut in military spending.

To achieve these reductions, the President has abandoned the defense structure that has protected America for two generations; turning 100,000 Soldiers and Marines out of the force.  To compensate for this loss, he will build on unmanned assets and Special Forces.  To be clear, these asymmetric assets are a vital component in defending America; but they are insufficient to meet the manifold security challenges America faces.

This move ignores a critical lesson in recent history: that while high technology and elite forces give America an edge, they cannot substitute for overwhelming ground forces when we are faced with unforeseen battlefields.

These cuts reflect President Obama’s vision of an America that is weakened, not strengthened, by our men and women in uniform.  This is a vision at odds with the President’s empty praise on Tuesday evening, and one I fundamentally disagree with.  To be clear, the impacts of these cuts are far deeper than Congress envisioned in the Budget Control Act because of strategic choices the President has made.

Last year, when the Super Committee failed, I pledged that I would not be the Chairman who would preside over the hollowing out of our military.  I renew that commitment today.  This month the House Armed Services Committee will continue and intensify our rigorous oversight, keeping in mind that while the President proposes, Congress disposes.

UPDATE 3:45 p.m.:

House Armed Services seapower and projection forces subcommittee Chairman Todd Akin (R-MO) doesn't much like the proposed budget, either. In a statement of his own, he says:

I am deeply concerned by the cuts announced by the Secretary of Defense this afternoon.  Only a few weeks ago, the President announced a “pivot” to Asia, with a focus on Navy and Air Force power. However, today the Secretary announced that he is cutting at least 12 new Navy ships over the next five years and retiring at least 9 ships earlier than planned. It is stunning that the President would announce a strategy and then cut the Navy who will be called on to execute this strategy.

I am also concerned by the announced delays to the Ohio-class replacement program. Our nuclear missile submarines are a vital piece of our nuclear deterrence, and I am concerned that this delay will put our ability to deter at risk.

Lastly, I am deeply concerned about the 100,000 soldiers and Marines who will be losing their jobs. With a tough economy, many of these brave men and women will end up on the unemployment line. For every soldier or Marine getting fired, there had better be a government bureaucrat getting fired. The President made a special trip to the Pentagon recently to announce cuts to the Defense Department. When will the President make a special trip to announce cuts to any other federal bureaucracy? When will the President get serious about reforming mandatory spending programs, which are the real problems facing our national budget? Taken in whole, these cuts will create a more dangerous world for America and her allies.

UPDATE 4:45 p.m.:

California Democrat Loretta Sanchez (CA-47) had this to say:

I commend Secretary Panetta for the Department's review and for their considerable efforts to comply with significant cuts mandated by the Budget Control Act.  Recently, the Department of Defense issued a new strategy for the United States military.  It was appropriate, considering the budget cuts, for the Department to re-evaluate what resources need to be sustained while prioritizing regions our forces would need to maintain presence.  Simultaneously, the strategy stressed the importance of strengthening our alliances in order to maintain a global presence.  Despite the significant cuts I was happy to see the strategy addressed the importance of mobilizing a healthy industrial base in order to maintain efficiency and readiness.

The Secretary will request $525 billion for the Department's FY13 base budget along with $88.4 billion for overseas contingency operations.  I believe the most significant costs to the Departments are big systems such as our ships, air carriers and weapons systems and of course the labor and cost of benefits.  We are no longer fighting a conventional war, which means the skills, resources and technology we buy must also change.  And this is why I agree with Secretary Panetta that we must increase our Special Operations Forces capacity and focus on unconventional threats like cyber-attacks.  We will also be reducing our force size but this only reflects the current situation as we drawdown from two major wars.

We live in an unpredictable world, where threats can develop anywhere and at any time.  It is absolutely necessary for our Armed Forces to be trained, equipped, and ready to address these threats -- and yes this requires affluent resources and funding.  However, the instability of our current economy has rendered many Americans unable to receive adequate education and health care. The Department must be flexible and as Secretary Panetta has demonstrated, willing to develop new and cost-efficient ways to secure the safety of this nation.

House Armed Services strategic forces subcommittee Chairman Mike Turner (R-OH), on the other hand, was most concerned about the administration's proposed nonproliferation funding. In a statement of his own, Turner says:

When the New START treaty was ratified, it was part of a very clear bargain. The Administration promised that a specific and detailed nuclear weapons modernization plan would be implemented, and Senators consented to a unilateral reduction in U.S. nuclear forces because the remaining U.S. nuclear forces upon treaty implementation would be modernized.

The Secretary's announcement today is yet another indication that the President is backing off his part of the deal. Ultimately, this changes the circumstances for U.S. participation in the treaty under both Condition Nine of the New START Treaty Resolution of Ratification and language I offered in the National Defense Authorization Act for FY12.  Following this announcement, I will look carefully at the President’s budget request for NNSA Weapons Activities, specifically the CMRR and UPF projects which the President pledged to accelerate.  These two facilities are absolutely critical to the ability of the U.S. to maintain a credible and reliable deterrent, and they were an essential piece of the New START treaty bargain.

I am also concerned about the Administration's missile defense plans.  For three years, the Administration has underfunded and diverted funding from national missile defense.  With rising threats from Iran, North Korea, China and others, we cannot afford the risk created by the Administration’s irrational opposition to the missile defense of the United States.  I hope the FY12 budget undoes more than three years of neglect of national missile defense.

UPDATE 6:15 p.m.:

House Armed Services readiness subcommittee Chairman Randy Forbes (R-VA) added his two cents:

The President's defense strategy embraces weakness by a thousand cuts. PLA Admirals will welcome the news that the President has no plans to catch up to China's sixty attack submarines nor to invest in a missile defense system that can rival China's mounting arsenal of missiles. North Koreans will feel more secure as America prepares to dismiss almost 1 in 6 soldiers.  Tehran will be pleased that one-third less American cruisers are slated to patrol the world's sea lanes.  Foreign shipyards will embrace a shift toward outsourcing defense manufacturing jobs.

This Administration is not building a military that is lean, agile, and flexible.  It is dismantling our nation's greatest strategic asset and accepting grave risk in the process.  Virginians will undoubtedly suffer as a result of this Administration's budget proposal -- so too will our allies -- but it is our men and women in uniform who will suffer the most.  They are the ones who will face America's unforeseen enemies under-prepared, under-resourced, overworked and late to the battle.  America is a superpower on a dangerous and rapid course towards mediocrity.

By John Liang
January 26, 2012 at 7:26 PM

Defense Secretary Leon Panetta is right now briefing reporters on the Pentagon's fiscal year 2013 budget request. Our coverage so far:

In White Paper, Pentagon Lays Out Key Budget Decisions

DefenseAlert, Jan. 26, 2012 -- The Defense Department's $525 billion fiscal year 2013 budget request cuts F-35 Joint Strike Fighter procurement quantities, reduces funding for the Army's Ground Combat Vehicle program because of a delay caused by a contract dispute, and curtails the Joint Land Attack Cruise Missile Elevated Netted Sensor System due to concerns about its cost and operational mobility, states a DOD white paper released today.
DOCUMENT: DOD White Paper

Follow us on Twitter or our INSIDER page for continuous coverage of today's news.

By Dan Dupont
January 25, 2012 at 10:02 PM

The president has nominated Lt. Gen. Dennis Via for a fourth star and the position of commander, U.S. Army Materiel Command, according to a service announcement.

Via is the deputy commanding general and chief of staff at AMC.

From his Army bio:

A native of Martinsville, Virginia, Lieutenant General Via was commissioned on 18 May 1980 in the Signal Corps after graduating as a Distinguished Military Graduate from Virginia State University. He later earned a Master’s Degree from Boston University, and is a graduate of the United States Army Command and General Staff College (class of 1991) and the U.S. Army War College (class of 1999).

The General’s command assignments include the 82nd Signal Battalion, 82nd Airborne Division, Fort Bragg, NC; 3rd Signal Brigade, III Armored Corps, Fort Hood, TX; 5th Signal Command; United States Army Europe and 7th Army, Mannheim, Germany; and the United States Army Communications-Electronics Life Cycle Management Command and Fort Monmouth, Fort Monmouth, NJ.

His key staff assignments include Aide-de-Camp to the Chief of Staff, Allied Forces Southern Europe, Naples, Italy; Operations Officer, J-6, Armed Forces Inaugural Committee, Washington, DC; Chief Joint Requirements Oversight Council (JROC) Division, Office of the Deputy Chief of Staff, G-8, United States Army, Washington, DC; and Principal Director, Global Information Grid Operations/Commander, Defense Information Systems Agency Global Operations/Deputy Commander, Joint Task Force-Global Network Operations, Defense Information Systems Agency, Arlington, VA.

According to the Army announcement, the president has nominated a successor to Via as deputy commander: Maj. Gen. Patricia McQuistion, the commander of U.S. Army Sustaintment Command, Rock Island, IL.

By Gabe Starosta
January 25, 2012 at 9:24 PM

The day before Defense Secretary Leon Panetta reveals details of the Defense Department's fiscal year 2013 budget proposal, a group of retired senior Air Force officials has written a letter to members of Congress urging the government to fund next-generation aircraft like the F-35 fighter and KC-46 tanker to support the new strategic guidance released earlier this month.

In the letter, dated Jan. 25 and signed by a distinguished group of retirees -- among them two former Air Force secretaries -- the Air Force Association writes that it supports President Obama's intention to shift the Defense Department's focus from the wars in Iraq and Afghanistan to a broader set of threats and challenges. To project power around the world, including those in anti-access/area-denial environments, the signees stress the need to invest in platforms for the future, among them the Air Force's next-generation bomber. The letter claims that major recapitalization efforts within the service have been deferred for the past 20 years in favor of near-term operational demands, a trend that should be reversed.

“In the near-term, this requires investment in programs like the KC-46, F-35, and Next Generation Bomber,” states the letter. “Over the long-term, we must not assume de facto preeminence when it comes to innovating and producing the next generation of systems. We must continue to invest in science and technology, research and development, and a robust industrial base. Decisions that we make today will govern the national security options available for decades into the future.”

AFA's letter was sent to Sen. Carl Levin (D-MI) and Sen. John McCain (R-AZ), the chairman and ranking member of the Senate Armed Services Committee, as well as to senior members of the other defense oversight committees in Congress.

By Christopher J. Castelli
January 25, 2012 at 2:21 PM

President Obama has signed a National Strategy for Global Supply Chain Security that sets U.S. policy to strengthen the global supply chain.

"The first goal is to promote the timely and efficient flow of legitimate commerce while protecting and securing the supply chain from exploitation, and reducing its vulnerability to disruption," the White House states in a fact sheet. "To this end we will enhance the integrity of goods as they move through the global supply chain. We will also understand and resolve threats early in the process, and strengthen the security of physical infrastructure, conveyances, and information assets while seeking to maximize trade through modernizing supply chain infrastructure and processes."

The second goal, the statement adds, is to "foster a global supply chain system that is prepared for and can withstand evolving threats and hazards and that can recover rapidly from disruptions. To achieve this we will prioritize efforts to mitigate systemic vulnerabilities and refine plans to reconstitute the flow of commerce after disruptions."

By Christopher J. Castelli
January 25, 2012 at 3:29 AM

Toward the end of his State of the Union speech, President Obama included a plug for cybersecurity legislation that the administration proposed last year. "To stay one step ahead of our adversaries, I have already sent this Congress legislation that will secure our country from the growing danger of cyber-threats," Obama said. This references the comprehensive cybersecurity legislation package that the administration announced and sent to Capitol Hill in May 2011, a White House spokeswoman clarified.

By Jason Sherman
January 24, 2012 at 11:11 PM

The Army today lifted a stop-work order imposed last summer on BAE Systems following a dispute over who should run the service's Radford ammunition plant, clearing the way for BAE's Support Solution division in Rockville, MD, to proceed with a 10-year, $730 million deal to run the Virginia facility.

The move came after the Government Accountability Office yesterday denied a protest by Alliant Techsystems -- which has run the Radford plant since 1995 -- over modifications the Army made to the contract awarded BAE last May. ATK will now hand responsibility for the plant to BAE Systems this summer.

Dave Herr, BAE Systems Support Solutions president, said in a statement, “We look forward to beginning the transition. Our team is eager to provide the customer and community innovative ideas and cost-effective solutions, along with our proven track record of safe and secure facility operations.”

Last May, ATK protested the award to BAE Systems, arguing to the GAO that the Army improperly evaluated its proposal and didn't do a cost-technical trade-off analysis as promised. Before GAO rendered a finding, the Army in August withdrew the solicitation and took “corrective actions” to the contract awarded BAE. ATK then appealed again to the GAO, arguing that “corrective actions were improper because they limited the scope of offerors’ proposal revisions,” according to GAO in its denial.

By Thomas Duffy
January 24, 2012 at 3:55 PM

Noting that 2012 is expected to be "a very political year" in Washington, Rep. Howard "Buck" McKeon (R-CA) predicted this morning that Congress will likely have to adopt another continuing resolution to keep funding the federal government. McKeon, the chairman of the House Armed Services Committee, said the the difficulty Congress has had over the past few years in agreeing on a budget and passing appropriations bills means another CR can be expected.

McKeon's comments came during his opening remarks at a committee hearing on Defense Department auditing. McKeon pointed out to Pentagon comptroller Robert Hale that he and other GOP members of the committee were wearing buttons indicating that it has been 1,000 days since the Senate has passed an annual federal budget.

By Christopher J. Castelli
January 24, 2012 at 12:48 AM

President Obama has announced his intent to nominate individuals to several Pentagon leadership posts subject to Senate confirmation. Acting Pentagon procurement chief Frank Kendall would move up to assume the title in full. James Miller, the department's No. 2 policy official, would move up to become under secretary of defense for policy. Under Secretary of the Air Force Erin Conaton has been tapped to become under secretary of defense for personnel and readiness. And Deputy Assistant Secretary of Defense for Manpower and Personnel Jessica Lynn Wright would move up to become assistant secretary of defense for reserve affairs.

By John Liang
January 23, 2012 at 8:52 PM

The Pentagon has extended the expiration date of guidance issued in July 2011 outlining when U.S. government agencies may convert intercontinental ballistic missiles into space-launch platforms to haul payloads into orbit.

Inside the Air Force reported last year that Deputy Defense Secretary William Lynn on July 5 signed a directive-type memorandum outlining Pentagon responsibilities and procedures for utilizing excess ballistic missiles for space launch. The document presaged an update to the Defense Department's September 2000 policy on military missions to support space activities.

The new, updated memo incorporates a change made on Jan. 18 that extends the missive's expiration date from Jan. 9, 2012, to Nov. 9, 2012. As ITAF reported last July:

"Acquisition of space launch services using converted excess ballistic missile assets shall ensure required competition at the prime and subcontract level necessary to sustain and enhance the U.S. space launch industry base, and limit the impact on the U.S. space transportation industry," the eight-page document states. "Impact on the U.S. space transportation industry shall consider the broader launch industrial base and viable, established and emerging providers."

The directive codifies practices under which U.S. government agencies -- including the Air Force, the National Reconnaissance Office and NASA -- may use modified ballistic missiles to move satellites to space.

Decommissioned ICBMs may be used for such purposes on a "case-by-case basis," the directive states, requiring the approval of the defense secretary and two other conditions. One condition is "cost savings" to the government when compared to the price tag for space-launch services offered by commercial providers. As for the second condition, the payload slated for launch must support the mission of the sponsoring agency and the "modified excess ballistic missile" must meet the mission's performance, schedule and risk requirements, states the new directive.

These criteria reflect U.S. space transportation policy goals set by former President Bush in National Security Presidential Directive-40, signed on Dec. 4, 2004. "In order to prevent the proliferation of missile technology and to limit the adverse impact of use of excess ballistic missiles on U.S. space transportation capabilities," states the directive, "excess U.S. ballistic missiles shall either be retained for government use or destroyed."

The use of a modified ballistic missile must comply with U.S. obligations under treaties and international agreements, including the Missile Technology Control Regime guidelines, the follow-on Strategic Arms Reduction Treaty and the Intermediate Nuclear Forces Treaty.

By John Liang
January 23, 2012 at 5:57 PM

The Pentagon just released its 2012 "Non-Lethal Weapons For Complex Environments" report in the form of an ebook. According to a program office statement:

The ebook highlights today's DoD non-lethal weapons and capabilities. The eBook features the following: conversion of PDF to page-flipping eBook; text search, share capabilities via email and social media; full-screen shot; thumbnails; sound; zoom in/out and autoflip. The initiative improves the DoD Non-Lethal Weapons Program's efforts in both cost-efficiency and readability.

Inside the Pentagon reported in November that the Defense Department had begun to look to industry to develop directed-energy capabilities and a high-gain antenna system for small tactical vehicles to provide troops with a non-lethal weapon. DOD made the announcement in a series of listings posted on Federal Business Opportunities. ITP further reported:

The first request for information states the Defense Department's Joint Non-Lethal Weapons Directorate would like to develop a prime power system "that can achieve the required performance in a compact size" so that it can be integrated onto a small tactical vehicle.

The second RFI states the directorate would like industry to research "compact, lightweight, steerable and high-gain antenna systems" that could stand-alone or be integrated onto a small tactical vehicle.

The third RFI asks industry to develop a "compact, lightweight and efficient high-power microwave and radio frequency source technologies that will enable the development of directed energy non-lethal capabilities."

No specific vehicles have been targeted to incorporate these new technologies, Scott Griffiths, counter-materiel directed-energy officer of primary responsibility at the directorate, wrote in a Nov. 9 email.

There is no formal analysis of alternatives planned. An AOA usually takes about a year to complete.

"The JNLWD will review the responses to the RFI to determine if there are any sources that can provide technologies capable of achieving the desired performance," he wrote. "The JNLWD will assess options for developing technologies of interest, but no predetermined time line has been established."

By Christopher J. Castelli
January 20, 2012 at 8:31 PM

Weapons testing is on the agenda for the F-35 Joint Strike Fighter this year, according to test pilot Lt. Col. Matthew Kelly, the program's flight operations leader.

Tests on the ground will be followed by weapons-separation tests in the air, he told reporters today, noting the first drop is likely to happen in the second half of this year.

Kelly, who spoke at Naval Air Station, Patuxent River, MD, also said the program's main carrier-suitability test aircraft is slated to get the first redesigned tailhook later this year.

The program's next round of shipboard testing, which will involve the Marine Corps and Air Force variants, is slated for 2013. Sometime before that, the program will have to conduct the first nighttime flights of those variants, which should not be a problem, Kelly said.

Today's announcement by Defense Secretary Leon Panetta that the Pentagon is taking the F-35 short-takeoff-and-vertical-landing variant (STOVL) off probation would not significantly impact ongoing test activities here, he added, declining to comment on whether the program will achieve clearance for unmonitored flights of the STOVL variant by the end of the year.