- Lilly earns Air-6.0 employee of the quarter nod
- Production leads, program mangers meet to advance CCPM across all FRCs
- Enabling technology is focus of second annual FRC safety meeting
- New CMM Enhances FRCSW Manufacturing Capability
- Manufacturers association recognizes FRCSE with top award
- PHOTO RELEASE: Mazzone honored with Meritorious Civilian Service Award
- PHOTO RELEASE: McMichael receives Navy Meritorious Civilian Service Award
- F-35 Contract Feud Exposes Rift Over ‘Fair’ Prices
- DoD Asking For OCO Increase, Undecided On Value
- Defense Sector Post-Election: Caution Sets In
- Lawmakers Seek To Boost F-35 Purchases
- Marines look for a small UAS to equip Marine Expeditionary Rifle Squads
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Lilly earns Air-6.0 employee of the quarter nod
NAVAL AIR SYSTEMS COMMAND, NAVAL AIR STATION PATUXENT RIVER, Md. — Handling thousands of maintenance tasks on tight timelines and tighter budgets is something Naval Air Systems Command logisticians do on a regular basis. Developing more than 10,500 maintenance tasks across 26 major systems six months ahead of schedule and at more than $5 million under budget gained one NAVAIR Logistics and Industrial Operations (Air-6.0) logistician Employee of the Quarter recognition.
Herbert “Gene” Lilly, CH-53K King Stallion Design Interface and Maintenance planning lead (Air-6.7, Industrial and Logistics Maintenance Planning/Sustainment Department) received his crystal award Nov. 8 from Todd Balazs, NAVAIR deputy assistant commander for Logistics and Industrial Operations (Air-6.0) during a PMA-261 Heavy Lift Helicopter Program meeting.
“When you are trying to get ahead of your maintenance planning . you have critical items that need to be identified. Gene has done that,” Balazs said. “He also got his maintenance planning six months ahead of schedule and saved five million dollars. The areas that really suffer are the areas he addressed.”
Lt. Col. James Cooksey, assistant program manager for logistics for PMA-261, nominated Lily for his ability to push innovation and creativity.
“Creatively thinking within the guidelines, he identified critical item management barriers, coordinated the effort between the Fleet Support Team and vendors, to include coordinating appropriate funding, resulting in more accurate Critical Safety Item identification and effective provisioning, ” Cooksey wrote in Lilly’s nomination letter. “Lilly’s knowledge of logistics processes facilitated development of an organic depot capability establishment process sensitive to technical and budgetary factors and allowing early identification of public-private partnership opportunities. His innovative approach eliminated unnecessary linear process delays reducing component pilot repair resource requirements by 30 percent.”
Cooksey further praised Lilly’s efforts to pass along knowledge by developing a course for the NAVAIR College of Logistics and Industrial Operations on integrated product support concurrency management, which training for all PMA-261 logistics elements managers.
“As a result, the technical data assertions process was restructured to integrate Finance, Contracts, Engineering and Logistics with specific procedures and techniques resulting in effective sustainment plans and outcomes,” Cooksey wrote. “Lilly provided input to the CLIO Logistics 101 Course. He ensured logistics and integrated product support were clearly tied to development, acquisition, fielding and sustainment.”
By using the most common form of project management, Lilly said the team quantified what needed to be accomplished and how long they had to work. “We worked backward toward a completion [burn] rate and then worked the tasks, identified barriers, and developed better processes whenever we had to,” he said. “The most important lesson is that you have to have a set of reasonable goals to work toward and your team has to be invested in the outcomes.”
Lilly said the award not only reflected the teamwork of all that were involved, but emphasized the need for diversity. “Logistics is a team sport. All around you, there are brilliant ideas, approaches and perspectives that really influence the way we solve problems.”
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Production leads, program mangers meet to advance CCPM across all FRCs
NAVAL AIR SYSTEMS COMMAND, PATUXENT RIVER, Md. – Increasing speed to the fleet with the utilization of Critical Chain Project Management (CCPM) was the main topic of discussion at the Commander, Fleet Readiness Centers’ (COMFRC) off-site held at the Southern Maryland Higher Education Center in California, Maryland, Nov. 2-3. More than 50 representatives from Naval Air System Command (NAVAIR) program offices (PMA) and FRC production were in attendance focusing on alignment, standardization and communication.
CCPM, which currently is in place at all three major depot maintenance sites, is a Theory of Constraints-based, project management solution that uses a systems-view approach to account for variability and resources required to execute all maintenance and repairs and de-conflicts resource contentions in the planning stage, COMFRC Aviation Maintenance and Material Director Ann Wood said. “CCPM accounts for variability within projects and uses back scheduling methodology to manage across the entire portfolio of projects, protecting the delivery date to the customer by incorporating project-level buffers. It provides cross-project solutions to prioritize tasks and resources.”
The meeting, which was held to advance CCPM across all aircraft lines at the FRCs, focused on developing templates and buffers for each type/model/series (TMS) aircraft, gaining consensus and a plan of action on two-year induction and production plans for each TMS, setting the groundwork for a five-year pipeline and a resource planning schedule for each TMS, and engaging the TMSs on the removal of production delays.
Rear Adm. Michael Zarkowski, Commander, Fleet Readiness Center (COMFRC), who kicked off the two-day offsite, said the business of producing aircraft for the fleet is complex and that COMFRC must communicate with the customer about capability and capacity and execute solutions before readiness gaps emerge. “There are immense requirements in Naval Aviation, for component work, for aircraft and for engines. We must be able to articulate to our customers what our capacity is and what we can do for them in the future. And where there is a gap, we must work with the PMA and other stakeholders and get industry involved or reach out to the Air Force or Army for additional assistance, if necessary.
“Our responsibility is to communicate and then deliver what the fleet requires. The steps we are taking today will help answer that,” he said.
2016 saw FRCs make inroads into reducing readiness gaps, Zarkowski said. “The numbers of aircraft deliveries are up. And your hard work isn’t only reflected in the number of aircraft we delivered,” he said. “Many of those airframes had complex fixes. For example, the F/A-18 A-D Hornets required an additional 1,100 maintenance man-hours on average per aircraft than they did in 2015.”
Using technology, he said, will provide the enterprise with enabling visibility into production and its inherent constraints. He also said that Concerto, a CCPM software solution for managing multiple projects, will be used at all maintenance sites by the end of 2017. “We use our personal devices to track our purchases and monitor schedules. In our personal lives, we expect real time information. Why wouldn’t we expect that in the business of Naval Aviation so that it runs efficiently and effectively? With Concerto, we can collaboratively look at near real time status of aircraft. It also highlights where the constraints are and informs leadership on where to move resources across the enterprise.”
Martin Ahmad, who became COMFRC’s deputy in September 2016, also spoke at the event and echoed Zarkowski’s comments on communication and visibility on aircraft readiness across the enterprise. “Naval Aviation readiness is centered at the FRCs. We are the ones responsible for getting aircraft back on the flight line. We have to reach out and make sure that we are communicating and working with organizations and entities that affect us that so that resources are available to do the job.”
While CCPM methodologies have been in use at FRCSE for a couple of years, FRC SE Aviation Maintenance/Material Production director Holly Martinez said the meeting ensured that the FRCs and integrated program team (IPT) leads all heard the same message. “Now we all know where we are going in the future,” she said. “Concerto will get all of us on a level playing field. It will make data integrity ‘spot on’ and increase our confidence in the real-time data.
“With this, information we will better communicate with the customer on the ‘what and whys’ of production and show them how they can be part of the solution.”
Sandie Brazda, AV-8B IPT lead, agreed. “Pulling together the customer, IMC [Integrated Maintenance Concept] coordinators and the program office is critical to [FRC] throughput,” she said. “We now all have a better appreciation of what CCPM is and how it improves our business acumen.”
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Enabling technology is focus of second annual FRC safety meeting
NAVAL AIR SYSTEMS COMMAND, PATUXENT RIVER, Md. – More than 25 senior safety officers from eight Fleet Readiness Centers (FRC) sites worldwide and representatives from DoD attended the Annual Safety Director Meeting at FRC Aviation Support Equipment in Solomons Island, Maryland, Nov. 1-3.
Commander, Fleet Readiness Centers (COMFRC) Director for Safety and Regulatory Compliance Mitch Bauman said the event was held to provide safety officers with a forum to share ideas and train them on the Safety Management System (SMS)-a safety reporting software recently introduced into the FRCs.
Safety, he said, is an enabler of readiness by precluding the costly impacts of injuring artisans, Sailors and Marines. It will help minimize the costly mistakes in damaging aircraft, engine and components and must be embedded throughout the command, he said. “Using SMS will make reporting easier, increase accuracy and give us actionable data across all of COMFRC.” Already in use at seven of the FRCs, it is scheduled to be introduced at all FRC sites by the end of the year. Petty Officer 1st Class Henry Larreynaga, who recently became the lead safety officer for FRC Northwest, welcomed the SMS training. “SMS hasn’t been introduced to our command yet, so this is new guidance for us,” he said. “By listening and learning from other FRCs who are already using it, we have a better idea of how to get it running right and properly establish its use.”
One of SMS’s tools, iAuditor, will improve the ease and accuracy of recordkeeping in the FRCs. Dina Geilenkirchen, FRC Mid-Atlantic safety director, said she is looking forward to using this feature. “With iAuditor, we will be able to conduct inspections using tablets instead of on paper. That not only will help us save time, but be able to get the word out to our workforce and to other FRC safety officers quicker,” she said.
Safety regulations and compliance, COMFRC safety goals for 2017 and common issues across all FRCs were also discussed. “All FRCs have similar challenges,” FRC East safety director Luc Desilets said. “For example, FRC Southwest is looking into stands for V-22 maintenance. FRC East already has them, and we shared our experiences with them. We have a responsibility to reach out to each other.”
For Larreynaga, one of the most surprising facts he learned at the meeting was the amount COMFRC must shoulder each year due to injuries. “Hearing that injuries cost roughly $10 million a year out of our budgets and that by reducing them by 10 percent could return a million dollars to us really got me thinking,” he said. “I’ll make it a point to educate my command that there is a bigger picture to safety and budgets that they don’t see.”
Efforts to reduce those numbers are paying off. Bauman said that COMFRC is on track to having one of its safest years ever with incident rates well below the Bureau of Labor Statistics’ averages for the Aerospace, Maintenance, Repair and Overhaul Industry.
Rear Adm. Michael Zarkowski, Commander, Fleet Readiness Centers, commended the leads in his remarks during the meeting and urged them to stay diligent. “2016 was a good year, but you can never declare victory when it comes to safety and quality. We need to keep that momentum up as we close out 2016 and start 2017,” he said.
He also reminded them that safety and quality must be foremost in every aspect of work and must never be compromised. “Safety is the most critical thing that we do. It is the beginning of everything,” he said. “Production is the scorecard and gets us the visibility. But it means nothing if we don’t do it safely.”
No FRC stands alone when it comes to safety, Zarkowski said. “Our goal is enable artisans to have an incident-free career so that they can enjoy the retirement they deserve,” he said. “At the end of the day, there is only one scorecard we all are responsible for when it comes to safety and readiness. You play a role in that.”
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New CMM Enhances FRCSW Manufacturing Capability
(FLEET READINESS CENTER SOUTHWEST, 08 NOV 16) . Fleet Readiness Center Southwest Public Affairs
NAVAL AIR STATION NORTH ISLAND – Precision in manufacturing aircraft parts not only ensures performance as intended, but safe operation under a gambit of stresses and circumstances. Accuracy is paramount.
Fleet Readiness Center Southwest (FRCSW) recently improved the accuracy of its manufacturing measurements to 0.001of an inch by purchasing a new Coordinate Measuring Machine (CMM) through the command’s Capital Investment Program (CIP).
The CIP invests in new technology equipment that will improve the command’s efficiency.
“This project was to be completed in 12 months; it was awarded in April and completed November 4, so it was ahead of schedule and under budget,” noted CIP project manager Martha Hoffman.
Located in Building 472 and costing approximately $500,000, the CMM will not only help FRCSW meet its demand for manufacturing measurements, but will also allow for measurements of parts manufactured before installation.
Five artisans who are assigned to operate the new measuring machine recently completed a week-long certification class provided by Zeiss, the CMM manufacturer.
“Engineering will send a blueprint and 3-D model (of the part) for us to use,” said machinist Kevin Guittar.
“We program the CMM. It uses a stylus and touches different points on the part, and during the programming we can pull dimensions that will match the blueprint. So using the blueprint, we write a program to make the measurements and it will record those measurements. This will tell us if it’s a good or bad part.”
The bridge-type measuring machine uses computer-aided design and computer-aided manufacturing (CAD/CAM) software with a toolkit, and can be adapted to meet future sensor and software requirements.
“The training is pretty constant as we get more involved and deeper in the software. The goal is to get enough people trained up to run three shifts,” Guittar said. “It has all of the latest and greatest things and the tool kit has all of the accessories we need and more than enough to do the job.”
To ensure a quality product within technical specifications, parts undergo First Article Testing, or testing procedures that oversee production steps.
Guittar said that flight critical parts, like F/A-18 ribs and formers, undergo a 100 percent inspection on every dimension.
Prior to the installation of the new CMM, artisans were using an older measuring machine that was built in the early 1990s.
“And before that,” Guittar noted, “they used a lot of large fixtures for gauges so they could put the parts in and manually check everything; it was very time consuming and took up a lot of space.”
Now, artisans will use the Zeiss CMM which delivers faster results with a greater capacity.
“The new machine runs approximately six times faster than the older one and it can run multiple parts. The older machine required us to write a program and run one part and then set the next one. But with the new one, we can set all of the same parts and run at the same time. So, we can get everything done in one shot,” Guittar said.
Another advantage of the Zeiss model is its advanced scanning head.
“When we’d measure a circle on the old machine you’d take a single point, and the machine would take 8 to 16 points to make the circle. This one takes 1,000 to 3,000 points so you get a true form; if it’s a true circle, an oval, or a trimetric shape. It provides a lot more information that’s important to intricate things, like bushings.”
In the event a measurement is not within required specifications, engineering is notified and the machining modified to increase the accuracy.
The Zeiss CMM is the third measuring machine in the manufacturing department, and a fourth from the reverse engineering department will be added soon, Guittar said.
“We’ll be using all four of them, hopefully across all three shifts. All of this will result in less rework which will save manpower and money and increase readiness,” he said.
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Manufacturers association recognizes FRCSE with top award
(FLEET READINESS CENTER SOUTHEAST, 07 NOC 16) . Fleet Readiness Center Southeast Public Affairs
Jacksonville, Fla. – Lake Ray, president of the First Coast Manufacturers Association (FCMA), named Fleet Readiness Center Southeast (FRCSE) as the recipient of the FCMA Manufacturer of the Year Award at the association’s annual ceremony Oct. 19 in St. Augustine, Florida.
FRCSE Commanding Officer Capt. Chuck Stuart received the award on behalf of the facility, which performs maintenance, repairs and overhauls of aircraft for military and civilian clients – necessitating a large manufacturing capability.
“For FRCSE to be recognized by such a distinguished group of manufacturers who are dedicated to sustaining and improving the local economy is a tremendous honor,” Stuart said. “This award is a testament to the skill, commitment and dedication of our Sailors and civilian employees.”
Formed in 1989, the FCMA is made up of more than 300 companies with a manufacturing presence in Northeast Florida. The association provides workforce training and fosters business and networking relationships.
The Manufacturer of the Year Award is given each year to an organization that embodies a commitment to improving the local economy, environmental protection and providing education for its workforce.
FRCSE achievements cited by the association for the award included the facility’s allocation of more than $7 million over the past five years to construct a full-spectrum training building for the education of its employees. In addition, the manufacturing group also noted FRCSE’s environmental improvements, consisting of reducing its energy footprint, as well as recycling more than 160 tons of used oil.
The last point was of particular importance to Stuart.
“It is extremely important to us to be good stewards of taxpayer resources,” Stuart said. “Running our facility efficiently allows us to do that, as well as get aircraft and components to our military as quickly as possible.”
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PHOTO RELEASE: Mazzone honored with Meritorious Civilian Service Award
Todd Balazs, deputy assistant commander for Logistics and Industrial Operations, Naval Air Systems Command (Air-6.0), right, presents Darlene Mazzone, Aviation Readiness and Resources Analysis Department technical director, a Department of the Navy Meritorious Civilian Service Award for her work as the assistant program executive officer for Logistics, Tactical Aircraft Programs Nov. 8. Mazzone was instrumental in standing up the Air Warfare Mission Area/From the Air Program Office (PMA-298) which laid the groundwork for all Naval Integrated Fire Counter-Air Programs. (U.S. Navy photo/released)
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PHOTO RELEASE: McMichael receives Navy Meritorious Civilian Service Award
Roy Harris, director, Aviation Readiness and Resource Analysis Department, Naval Air Systems Command (NAVAIR) (AIR-6.8), right, presents Elizabeth McMichael, Additive Manufacturing Integrated Program Team lead, Department of the Navy Meritorious Civilian Service Award for her work to incorporate additive manufacturing into Naval Aviation maintenance. Thanks to McMichael and her team, an MV-22B Osprey equipped with a 3-D printed titanium link and fitting inside an engine nacelle flew during a July 29 demonstration at Patuxent River Naval Air Station, Maryland. The flight marked NAVAIR’s first successful flight demonstration of a flight critical aircraft component built using additive manufacturing techniques. (U.S. Navy photo/released)
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F-35 Contract Feud Exposes Rift Over ‘Fair’ Prices
(NATIONAL DEFENSE 03 NOV 16) … Sandra I. Erwin
Shockwaves rippled across the defense industry following the news that Lockheed Martin is challenging the Pentagon over a $6.1 billion “unilateral” contract awarded to the company to continue building F-35 joint strike fighters for the U.S. military.
The low-rate initial production contract announced Nov. 2 would fund 57 F-35s aircraft. “The LRIP 9 contract represents a fair and reasonable deal for the U.S. government, the international partnership and industry,” said Lt. Gen. Chris Bogdan, F-35 program executive officer.
The manufacturer disagrees. Lockheed spokesman Michael J. Rein said in a statement that company was “disappointed with the decision by the government to issue a unilateral contract action.”
Officials declined to comment further as the company considers taking legal action. The parties are said to be wide apart on program cost estimates and the contractor fee – which partly is derived from program costs.
Industry sources said this is possibly the largest unilateral contract ever awarded by the Defense Department. The estimated $400 billion F-35 program is the Pentagon’s largest weapons acquisition.
How did it get to this point? Lockheed and the F-35 program office have been negotiating for 18 months over the terms of the LRIP 9 and 10 deals. Under national security provisions in the federal acquisition regulations, the government can at any point stop negotiations and issue a contract. The JPO can assert that these airplanes are urgently needed by the armed forces and that the contractor has to keep producing them even if they haven’t reached an agreement on the price. Lockheed is obligated to continue the work, but faces the choice of either accepting the terms or appealing the decision – either to the Armed Services Board of Contract Appeals, or to the Court of Federal Claims. The company has 90 days to decide.
What led to a collapse in the negotiations was the JPO rejecting Lockheed’s accounting of what it costs to build these airplanes. One industry source said the government did not believe the cost data submitted, which was based on the previous eight LRIP contracts, was reasonable. The JPO also challenged Lockheed’s claims that its fee should recognize capital outlays the company made to pay for parts, factory upgrades and other program-related expenses. This strikes at the core of the defense industry’s business model, in which a company assumes risks upfront but expects to be rewarded later. The dispute also speaks to brewing disagreements in Defense Department programs between what contractors assert something costs, versus what the government believes it “should cost.”
Industry analysts were surprised by the developments even though contracting disputes are not unusual in Pentagon programs. The government “used a very extreme approach to definitize the F-35 LRIP 9 contract,” wrote Roman Schweizer, of the Cowen Washington Research Group. The JPO “used a bazooka on LRIP 9,” which could signal long-term troubles for the program.
Schweizer said “bare-knuckle contracting is nothing new to the F-35 program, and the government and Lockheed have used ‘undefinitized contract actions’ to keep the money flowing and the jets coming together while the nitty-gritty was hammered out.” But after the latest standoff over pricing, the government “decided to break the ice with a colossal sledgehammer.”
“Contract officers can use unilateral actions to adjust or tweak contracts but we’ve never seen it applied this way,” Schweizer noted.
It is still unclear how this will affect a much-anticipated three-year block-buy deal for at least 450 more aircraft for U.S. and international customers in 2018, he added. “We have been optimistic that deal would really kick the program to another level but are concerned now that if negotiating a two-year pact devolved to this outcome, the prospects for rolling up a deal three times the size may be extremely difficult.”
The LRIP 9 price the government enforced in the contract is a 3.7 percent reduction from the LRIP 8 contract signed in December 2014 and an overall 58 percent price reduction since the LRIP-1 contract, the JPO said in a statement. Once production of LRIP 9 aircraft is completed, more than 250 F-35s would be in operation by eight nations. The LRIP 9 engine contract between the government and engine manufacturer Pratt & Whitney was signed in April.
Contracting experts speculate that, if Lockheed chooses to take legal action, it will file a claim with the Armed Services Board of Contract Appeals. The ASBCA is a neutral, independent forum that has been in existence for over 50 years. It mostly handles post-award contract disputes between contractors and the Department of Defense, NASA and the CIA.
Under the Contract Disputes Act, contractors can take their case to the ASBCA or to the Court of Federal Claims.
“Contractors often choose the board,” said federal contracting attorney Todd Overman, of Bass, Berry & Sims government contracts practice. “It’s not the same level of formality as the Court of Federal Claims,” he said.
ASBCA allows the agency to stay involved in the case during the fact-finding process. A decision written by a board judge is binding. The next appeal then goes to the federal circuit court. Without knowing the details of the Lockheed case, Overman guessed that the company did its research and likely believes there is “precedent at the board that will be more helpful to them.” ASBCA judges are known to be “very knowledgeable about DoD programs.”
Legal issues aside, the contractual troubles that are now disrupting the F-35 program are largely the product of the Pentagon’s own decisions on how to compensate contractors under cost-plus contracts. “Industry makes its fee on cost-type contract based on the amount of cost it justifies,” said retired Navy Vice Adm. David Dunaway, former commander of Naval Air Systems Command who oversaw multibillion-dollar programs.
“We have a fundamental problem in that we can’t quantify value, therefore we can’t come to a price,” Dunaway told National Defense. When incentive fees are assessed in part as a percentage of cost, “you have a system that doesn’t match the free market,” he said. “We need to value things better. That’s a tough problem. In a cost world that’s the way companies make money. It’s counter intuitive when you want to cut costs.”
One of the F-35’s toughest critics, Sen. John McCain (R-AZ), chairman of the Senate Armed Services Committee, said in a statement that the “recent breakdown in F-35 contract negotiations between the Department of Defense and Lockheed Martin is troubling and disappointing. It should be seen, more broadly, as yet another symptom of our flawed defense acquisition system in general and the structure of the F-35 program in particular. To be sure, developing advanced fighter aircraft is extremely complicated. But the decision to produce hundreds of aircraft, on a cost-plus basis, before the technology is developed and completed, and to do all of this, lot after lot, without an actual contract in place between the government and industry, is the height of acquisition malpractice.”
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DoD Asking For OCO Increase, Undecided On Value
(DEFENSE DAILY 03 NOV 16) … Pat Host
FORT LEONARD WOOD, Mo. – The Defense Department will ask Congress for additional wartime spending, but leadership hasn’t decided how much more to request, Defense Secretary Ashton Carter said Wednesday.
Carter told reporters he’s said since the first Overseas Contingency Operations (OCO) request was submitted this for fiscal year 2016 that it’s the “nature of warfare” to not know, at the beginning of the year, what everything will cost. The Pentagon is bolstered by what Carter called success in both its counter ISIL efforts and work in Afghanistan.
Bloomberg reported Pentagon comptroller Mike McCord told the publication in an interview the request would be worth more than $6 billion, but Carter declined to put a dollar figure on the request, saying only that he’d submit one.
“We haven’t settled on how much those are worth,” Carter said. “We’re still doing those estimates and assessing the situation.”
Carter spent Tuesday and Wednesday traveling between New York and Fort Leonard Wood, Mo. He addressed City College of New York and Stand Up for Heroes audiences in Manhattan on Tuesday, discussing new DoD initiatives to better recruit well-qualified prospects and candidates in challenging territories like the northeast.
Carter on Wednesday spent the day here getting briefings on the Army’s munition training and counter-IED efforts and participated in hands-on demonstrations. These included using the hand-held mine detector ANPSS-14, performing a thermal breach of metal using an exothermic cutting rod and Talon robots.
Carter will spend Thursday attending the U.S. Strategic Command (USSTRATCOM) change of command ceremony and will visit the Air Force Research Lab (AFRL) at Wright-Patterson AFB, Ohio. Air Force Gen. John Hyten replaces retiring Navy Adm. Cecil Haney as the leader at USSTRATCOM.
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Defense Sector Post-Election: Caution Sets In
(NATIONAL DEFENSE 14 NOV 16) … Sandra I. Erwin
Investors’ euphoria about rising Pentagon budgets and a lessening of regulations in a Donald Trump administration is giving way to realism and caution.
Defense watchers overwhelmingly agree that military spending will go up under Trump, but warn of caveats. Republican control of the executive and legislative branches of government almost ensures that the current caps on discretionary federal spending will be lifted.
Doubts are growing, however, over whether the administration and Congress will be able to come together around a defense budget plan in the long term. Whereas congressional defense hawks will seek to immediately pour money into areas like equipment modernization and force readiness, Trump has been adamant that any defense boost would have to be offset by reductions in overhead, bureaucratic bloat, fraud and waste in Pentagon programs.
“It’s incumbent on the administration and the Department of Defense to come up with a sensible plan that can be executed,” says Jack Deschauer, a partner at the Washington, D.C. office of Squire Patton Boggs, a lobbying firm.
The Trump White House’s first order of business will be the fiscal year 2017 budget that Congress is unlikely to pass during the lame duck session. Republicans want an $18 billion increase for defense and President Obama has vowed to veto such a measure unless the money is split evenly between defense and nondefense agencies.
“I don’t see any reason why Republicans would compromise on that,” says Deschauer. Since the Republicans do not have the 60 votes to roll over Senate Democrats, the minority will have a say in the process, he notes. But without the threat of a presidential veto, they will not be able to prevent defense budget increases of some magnitude. He predicts the full $18 billion boost for defense will be enacted after Trump takes office.
The Bipartisan Budget Act of 2015 canceled the automatic reductions in discretionary spending for 2016 and 2017. Defense spending was capped at $551.1 billion for 2017. Current law limits defense spending to $549 billion in 2018.
Looking farther ahead, if and when the Budget Control Act spending restrictions are lifted, the Pentagon is going to have to present a reasonable funding plan that addresses “readiness and recapitalization the right way,” he says.
The Pentagon will be pressed to restore credibility with Congress on fiscal responsibility. Over the past decade, it has relied on war budgets known as “overseas contingency operations” accounts to fund basic needs like personnel and weapon systems. “That shows that there hasn’t been any budget discipline in the Department of Defense in a long time,” says Deschauer.
The Pentagon over the years has used so-called budget gimmicks to claim cost savings that never materialized. One of the Obama budget proposals, for instance, included $60 billion in “efficiencies” such as contracting reforms and reductions in administrative overhead. These phantom savings may no longer be acceptable. “It will be the administration’s responsibility to hold the military accountable,” Deschauer says. With a single party in control, it should be easier to reach a compromise, he says, although the White House and the Pentagon will have to “show budget discipline and demonstrate how funding increases contribute to defense.”
On the issue of federal regulations in military procurements, there has been much speculation that Trump might repeal measures that the defense industry claims add unnecessary cost and delays to Pentagon programs. While there may be a push to reconsider Obama’s labor-related executive orders, nobody should expect any sweeping deregulation, says Deschauer. “I don’t think there’ll be any rolling back of defense acquisition policies.”
With Sen. John McCain still at the helm of the Senate Armed Services Committee, there will be continuing pressure to crack down on contractors. “I don’t think they’re going to suddenly give defense contractors free rein or a blank check,” he says. “That’s not going to happen at all.”
Potentially of more significance to Pentagon weapon buyers and defense contractors is whether Trump delivers on campaign promises to withdraw the United States from international trade treaties and adopt protectionist policies. Any anti-trade measures, or even just fears of such actions, would be detrimental to the defense and aerospace business, analysts warn.
“This is a complicated area,” says Luigi Peluso, managing director in the aerospace and defense practice at AlixPartners. The aerospace and space sectors are truly global markets, he says. “They have global customers, global suppliers. They are very intertwined.” If trade relationships fracture in any way, “there are potentially significant risks.”
Aerospace and defense are sectors of the U.S. economy that have thrived in the global market. According to the Aerospace Industries Association, U.S. aerospace and defense companies generated a record $142 billion in exports in 2015. Over the past five years, exports have grown by 62 percent, from $88 billion in 2010. Aerospace and defense accounted for 9 percent of all U.S. exports in domestic goods and is the nation’s third largest exporting industry. This sector generated a trade surplus of $81 billion in 2015. Over the past five years, the industry’s trade surplus has grown by an annualized growth rate of 8.2 percent.
A trade war with China, for instance, could be devastating to aerospace exports as China might retaliate by directing its airlines to buy aircraft from Airbus rather than Boeing, Peluso says. Before the United States initiates a trade dispute, he says, “caution is warranted.”
Could defense companies do business in an anti-trade climate? “It would be very difficult,” he says. “It’s easy to see how you could do a lot of damage on the supplier and customer sides.”
Arms sales, additionally, are a key component of U.S. foreign policy. “We want compatible technology. And it creates U.S. jobs,” says Peluso. He speculates Trump will soften his campaign trade stance as it becomes apparent that it could backfire.
Deschauer points out that every major defense contractor is pursuing international sales. Companies also have to worry about Trump’s pledge to shift security burdens to U.S. allies in Europe and Asia. “If the administration increases allies’ responsibility to pay for their own defense, that could have an effect on how much money they will have to buy American-made equipment.”
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Lawmakers Seek To Boost F-35 Purchases
(NATIONAL DEFENSE MAGAZINE DECEMBER 2016) … Jon Harper
A group of 70 lawmakers is pressing appropriators to fund significantly more joint strike fighters than the Pentagon asked for in its fiscal year 2017 budget request. But a contract disagreement has raised concerns about the future of the program.
The Defense Department requested about $8.3 billion to procure 63 F-35s for the Air Force, Navy and Marine Corps in 2017. The House defense appropriations bill added 11 joint strike fighters to the planned buy. The Senate version added just four aircraft.
In an Oct. 4 letter to the leaders of the House defense appropriations subcommittee, representatives from both parties prodded them to stick with the House blueprint in upcoming budget negotiations.
“As you head into conference [with Senate lawmakers], we write in strong support of the F-35 joint strike fighter and urge you to continue supporting increased production rates at this critical juncture for the program,” they said.
The letter was signed by 41 Republicans and 29 Democrats.
“Increasing the production rate is the single most important factor in reducing future aircraft unit costs,” they said. “Additionally, significantly increasing production is critical to fielding F-35s in numbers needed to meet the expected threats in the mid-2020s.”
The lawmakers expressed concern about cuts to follow-on modernization that were included in the Senate bill.
“These cuts would delay critical … capability upgrades needed to ensure the F-35 stays ahead of increasing future threats. We urge the conferees to restore as much of this funding as possible,” they said.
Loren Thompson, a defense industry consultant and the chief operating officer of the non-profit Lexington Institute, said increasing the production rates would help reverse a negative trend.
“The Air Force has slipped off of its production ramp for F-35, and as a result each plane is going to cost more,” he said. “That is not the way the business plan was supposed to be implemented.”
Thompson believes there is enough support in Congress to fund additional F-35 buys beyond the level requested by the Pentagon.
“The most likely approach would be to take money out of other items” in the budget, he said. One option would be to scale back upgrades of legacy fighters, he noted.
But a contract spat could potentially upend future production of the F-35.
In November, the Defense Department announced a $6.1 billion low-rate initial production contract for 57 F-35s in lot 9. In a statement, Lockheed said it was “disappointed” by the Pentagon’s “unilateral” move, and noted that the contract was “not mutually agreed upon.”
The company could potentially take legal action and appeal the decision. Lockheed executives “will evaluate our options and path forward,” the statement said.
Roman Schweizer, an industry analyst at the Cowen Washington Research Group, said in a note to investors: “The government’s decision to use a bazooka on LRIP 9 could signal turbulence ahead as the program ramps into a potential block buy.”
The spat could make it more difficult for the Pentagon and Lockheed to reach large production deals in the future, he said.
The next “inflection point” in the program is a potential three-year block buy deal for 450 or more aircraft that would start with international customers in 2018, he noted.
“We have been optimistic that deal would really kick the program to another level but are concerned now that … rolling up a deal three times the size [of LRIP 9 and the anticipated LRIP 10] may be extremely difficult,” Schweizer said.
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Marines look for a small UAS to equip Marine Expeditionary Rifle Squads
Inside the Navy, Nov. 14 | Lee Hudson
The Marine Corps is looking for a small unmanned aerial system to equip each Marine Expeditionary Rifle Squad after identifying a gap in a requirements document last year, according to the service.
Maj. Jamie Murphy, MERS capabilities integration officer, told Inside the Navy during a Nov. 10 interview the MERS initial capabilities document was updated last year and identified 16 gaps. “Some of the gaps are starting to be covered,” he said. On Oct. 12, a request for information was released for a vertical-takeoff-and-landing small UAS to provide intelligence, surveillance and reconnaissance during the day and at night in all environmental conditions. “The system should be rugged, lightweight and ready to use as delivered with minimal logistic, training and support requirements,” according to the RFI.
“The system should provide real-time full motion video via electro-optical and/or infrared sensors.” The Marine Corps is looking for a system that has a man-portable ground control station and has the necessary equipment to monitor the sensor position and status, control its movement and view its video, the RFI reads. Specifically, the ground control station should weigh 20 pounds or less, the UAS should have a minimum range of one kilometer and a minimum endurance of 30 minutes. The system should be of “adequate maturity to be fielded immediately,” according to the RFI. Responses to the RFI are due no later than Dec. 31. Currently, the service has three small UAS in its inventory: the RQ-11B Raven, RQ-20 Puma and Wasp IV. “The VTOL SUAS RFI is specifically to refresh our understanding of what VTOL SUAS technologies are commercially available today,” Lt. Col. Noah Spataro, UAS capabilities integration and requirements officer, wrote in a Nov. 7 email to ITN. Murphy said the Marine Corps may not be able to equip every squad with a Predator or a Reaper but there is some commercially available capability that could be fielded. The service is working closely with the Army on a couple of related projects. Murphy said the Army has the same issues from the perspective of their Squad X program that is equivalent to the Marines’ MERS effort.
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