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May 19, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

Citing TransDigm, DoD seeks new acquisition powers, and trade groups oppose

By: Joe Gould

WASHINGTON ― Four defense industry trade associations “strongly oppose" a handful of Pentagon-backed procurement reform proposals that they say would harm the defense industrial base, and they're asking Congress to reject them.

Two of the proposals aim at controversial pricing practices used by TransDigm by requiring contractors to submit cost information for commercial items and by requiring contracting officers to conduct a commercial item determination for every procurement. Others would set a preference for performance-based contract payments and authorize the Defense Department to release or disclose detailed manufacturing or process data.

The May 6 protest letter came from the Acquisition Reform Working Group — made up of the National Defense Industrial Association, American Council of Engineering Companies, the Computing Technology Industry Association and the Information Technology Industry Council — to the the House and Senate armed services committees. It comes as the panels were readying their drafts of the 2021 National Defense Authorization Act.

The Pentagon has worked to monitor its network of suppliers from the economic shocks associated with the coronavirus pandemic and to protect suppliers by using emergency funding from Congress to speed payments and improve cash flow along the supply chain.

The trade groups noted they represent “thousands of small, mid-sized, and large companies in addition to hundreds of thousands of employees that provide goods, services, and personnel to the Department of Defense,” and said the four proposals a “could have significant consequences for the defense industrial base.”

Congress focused ire at TransDigm last year after the Defense Department's Inspector General found for $26.2 million in parts the military bought from TransDigm, it earned $16.1 million in excess profit. Transdigm was the only manufacturer of the majority of the parts, which let it set the market prices even for competitively awarded parts.

Though DoD has argued its contractors need new latitude to make commercial item determinations and obtain cost or pricing information to prevent the excessive pricing TransDigm was accused of, the trade groups argue the TransDigm's actions weren't facilitated by an inappropriate reliance on improper commercial item determinations, or insufficient access to pricing data.

“As illustrated by the TransDigm Group, Inc's pricing practices, generally once a conversion to a commercial product or commercial service is made, it is common for prices to increase and subsequent contracting officers find it difficult to obtain data necessary to determine price reasonableness and negotiate fair and reasonable prices on behalf of the taxpayer,” the department said in its proposal.

Another proposal would require a contractor to submit uncertified cost information for commercial item proposals or contracts less than $2 million. The idea behind the reform is DoD wants to be able to get more insight into the costs of sole-source items and put itself in a more favorable position to negotiate with sole-source companies.

Congressional hearings on TransDigm's excessive pricing showed Defense leaders need the authority to obtain the data “to the extent necessary to determine price reasonableness is paramount in ensuring that such excessive pricing practices are curtailed.”

But the trade groups argue that levying the new regulations would “add a significant barrier to commercial item acquisition, reduce information sharing, further burden the system, and impede—rather than enable—the delivery of capabilities to the warfighter at the ‘speed of relevance'—all with little to no added protection for the government or the taxpayer."

The trade associations also opposed DoD's legislation to set a preference for performance-based contract payments. The groups said a DoD proposal to “recouple” total performance-based payments to total cost incurred would reverse Congress's previous work to emphasize performance over cost and contradict a spate of defense acquisitions rules.

DoD's argument is that it shouldn't be reimbursing a contractor more than its actual costs, or it “would result in negative levels of contractor investment,” and create a disincentive for contractors to deliver.

Another disputed proposal would let DoD release detailed manufacturing or process data, or DPMD, pertaining to privately funded commercial or noncommercial items outside of the government to third parties seeking to compete against the original equipment manufacturer. It's the latest episode in a running game of tug-of-war between industry and DoD over intellectual property.

While Congress has in recent years prodded DoD to set intellectual property strategies early in acquisition programs and negotiate for IP rights on a case-by-case basis, the trade groups argue the proposal would give DoD “an automatic default authority” and “eliminate the possibility of a negotiated solution.”

https://www.defensenews.com/congress/2020/05/15/citing-transdigm-dod-seeks-new-acquisition-powers-and-trade-groups-oppose/

On the same subject

  • German F-35 decision sacrifices NATO capability for Franco-German industrial cooperation

    February 11, 2019 | International, Aerospace

    German F-35 decision sacrifices NATO capability for Franco-German industrial cooperation

    By: Hans Binnendijk and Jim Townsend While the German decision last week to remove the Lockheed Martin F-35 from consideration as a replacement for 90 aging Tornado fighters solidifies Franco-German industrial cooperation, it could come at the expense of making Germany's Luftwaffe a less capable air force until at least 2040, when a new advanced Franco-German fighter becomes available. The decision also places German domestic political considerations ahead of Germany's leadership role in NATO. This would be understandable for a nation that does not perceive a significant military threat from Russia, but it is disturbing for those who emphasize the need to maximize NATO's deterrent posture in the East. The decision should be reconsidered. After removing the F-35 (and also the older F-15) from consideration, Germany now has three choices. It can augment its planned 177 Eurofighter Typhoon fleet with up to 90 additional Typhoons adapted for suppression of enemy air defense and electronic warfare missions. That fleet of some 267 Typhoons would simplify servicing and training, but it could also ground the entire German fighter fleet should major structural problems appear in the aircraft. The Typhoon has had considerable readiness problems: Germany would be putting all of its fighter eggs in one basket. Germany could alternatively buy 90 Boeing F-18s (Super Hornets and Growlers), which is still under active German consideration. That decision would provide better air-to-ground and electronic-warfare capabilities for Germany than the additional Typhoons. But it would still leave Germany behind without a fifth-generation fighter as other allies move onto the future of air power. Or Germany could buy some mix of additional Typhoons and F-18s. Today, Germany flies no U.S.-built aircraft, and some observers are betting against the F-18 for that reason. These three remaining alternatives are all second best from the perspective of maximizing Germany's air power and its leadership among NATO air forces. Operationally, the F-35 is by far the best airplane in this mix. It has stealth and battle-management capabilities that are a generation ahead of the Typhoon or F-18. It is a force multiplier that enhances the capabilities of lesser allied aircraft. If the Luftwaffe needs to penetrate heavy air defenses in a future fight, their pilots would be more secure in the F-35. The Luftwaffe without F-35s would be hard-pressed to fight alone in a contested air environment. Currently eight NATO nations have agreed to purchase the F-35. Those nations will have highly interoperable fifth-generation aircraft. They will provide for the elite fighters in future NATO air-superiority and defense-suppression missions. Without the F-35, Germany will be absent from that elite group, and German pilots would probably be given only secondary missions. The F-35 also has advantages to perform Germany's NATO nuclear mission. The ability of the F-35 to penetrate and survive these missions is superior. The F-35 would have been nuclear-certified prior to delivery. Certification for the Typhoon and F-18s would take additional time, money and German political capital. The default position, therefore, might be further life extensions for the old Tornados and further degradation of NATO's nuclear deterrence. It is no wonder that the chief of the German Luftwaffe publicly declared his support for the F-35. He was silenced and retired early. So why did German political leaders make this decision? Money alone is not the answer. While the F-35 is a much better plane, its costs are coming down considerably to the point where they would be about as much as a Typhoon. The Typhoon would, of course, have local labor benefits. Nor is availability the answer. Lockheed has told the Germans that they could have their first F-35 three years after a contract is signed. The answer is more political and industrial. The Merkel government rules by grand coalition, with Social Democrats holding key positions in the Federal Foreign Office and the Finance Ministry. The Social Democrats tend to resist greater defense spending and have a more benign view of Russia's intentions. Many resist Germany's nuclear mission. And no one in the coalition wants to reward U.S. President Donald Trump. More important, France and Germany are drawing closer together on defense policy in the wake of Brexit and President Trump's criticisms of NATO. The recently signed Aachen Treaty committed the two nationsto new levels of cooperation in defense and foreign policy. A center piece of this reinforced Franco-German defense cooperation is an agreement reached last summer to jointly design and produce a next-generation fighter by 2040. Dassault and Airbus plan to leverage their current Rafale and Typhoon aircraft as a bridge to this new joint aircraft. Paris fears that a German purchase of the F-35, especially in large numbers, could undercut the need for the next-gen fighter and harm European capabilities to produce advanced fighters. They have let Berlin know this. A strong Franco-German engine at the heart of European defense is to be encouraged. But it should not come at the expense of optimal NATO air power and deterrence. Nor should it come at the expense of broader NATO solidarity. Germany should reconsider its F-35 decision and purchase at least enough F-35s to retain its leadership position in European air power and its familiarity with fifth-generation aircraft technology. Its European allies, who will also be negatively impacted, should weigh in. Failing this, a purchase of the F-18 would be a second-best option. Hans Binnendijk is a distinguished fellow at the Atlantic Council and formerly served as the U.S. National Security Council's senior director for defense policy. James Townsend is a senior fellow at the Center for a New American Security and formerly served as deputy assistant secretary of defense for European and NATO policy. https://www.defensenews.com/opinion/commentary/2019/02/08/german-f-35-decision-sacrifices-nato-capability-for-franco-german-industrial-cooperation/

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  • Germany sets up European defense agenda with a waning US footprint in mind

    July 16, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

    Germany sets up European defense agenda with a waning US footprint in mind

    By: Sebastian Sprenger COLOGNE, Germany — The European Union should prepare for the possibility of a gradual disengagement by the United States from the continent, even if Democratic challenger Joe Biden beats President Donald Trump in the November election, according to Germany's defense minister. Speaking before the European parliament on Tuesday, Annegret Kramp-Karrenbauer said she believes only the “tone” in trans-Atlantic relations would change following a Biden win. The reorientation of America's foreign policy toward China as a global rival would remain a key driving force in Washington, possibly at the expense of Europe, she said. “If that is the case, it means we Europeans must become able to act more so than is the case today,“ she said in testimony meant to lay out Germany's defense agenda during a six-month turn at the helm of the European Council of the EU that began July 1. To be sure, Kramp-Karrenbauer stressed that Europe remains dependent on U.S. and NATO support, and that there's no sign of that equation changing anytime soon. German leaders have consistently held up the trans-Atlantic alliance as a cornerstone of their geopolitical calculus, even as Trump took shots at Berlin for the its lackluster defense spending. But the defense minister's assessment that nothing other than the style of discourse would change with Trump's exit — he is trailing Biden in recent polls — may be a sign that Germans suspect bigger forces at play on the other side of the Atlantic. In that light, the Defence Ministry's defense agenda for the EU reads as something of a toolkit to avoid getting caught flat-footed. Creating a “strategic compass“ for the bloc, as Kramp-Karrenbauer called it, would be a key step in ensuring all member states back a common foreign and defense policy. An EU-wide threat assessment is the first step in that process, overseen by the EU Intelligence and Situation Centre and supported by member nations‘ intelligence services, she said. The assessment is slated to be “far along“ and will ideally be finished by the end of the year, when Germany hands the presidency baton to Slovenia, Kramp-Karrenbauer said. Also needed is a bloc-wide “operational understanding“ for whenever there is actual fighting to be done, according to the defense minister. Even peacekeeping and training missions, which tend to dominate the EU mission roster, always come with more kinetic, force-protection elements, for example, and there should be a process in place for setting up those types of operations, she argued. “You could approach it with the idea that this would fall to the same few countries in Europe, or you could develop a method as part of the strategic compass that this would become a matter for all members,“ Kramp-Karrenbauer said. West Africa could be a first test case of waning U.S. concerns about European interests. An American counterterrorism mission there has been crucial in supporting a U.N. peacekeeping force of EU and African troops. European leaders consider the region a hotbed for terrorism, fearing the possibility of fighters making their way to Europe. But the mission is controversial in the United States, and an American withdrawal could be in the offing at some point, Kramp-Karrenbauer said. “That is a scenario that we could find ourselves confronted with in the future.“ There is also the question of a withdrawal of almost 10,000 U.S. forces from Germany, the details of which are still somewhat shrouded in mystery. Hashed out by Trump and a small circle of White House advisers, military leaders are still figuring out the details for implementing the decision, Army Secretary Ryan McCarthy said in a phone call with reporters Wednesday. McCarthy said he discussed the matter with U.S. Air Force Gen. Tod Wolters, NATO's top general for Europe, earlier that day. But he had little to share about the process, saying only that Pentagon officials would release more details in the coming weeks. The “repositioning,“ as McCarthy called the move, is controversial among defense analysts on both sides of the Atlantic because it could simultaneously hurt America's and Europe's defense posture. Germany is a hub for U.S. troop training and logistics that would be difficult to quickly recreate elsewhere, the argument goes. The fact that military officials are only now doing the analytic legwork for a possible redeployment shows that no such examinations took place before Trump's announcement, retired Lt. Gen. Ben Hodges, a former commander of U.S. Army forces in Europe, told Defense News. Hodges said he was encouraged to see U.S. lawmakers question the decision, forcing a say on the issue by way of legislation. “Congressional support for NATO and for the German-U.S. relationship remains very strong,“ he said. Meanwhile, opinions differ on how much of a change a Biden presidency would bring to the trans-Atlantic alliance. “If you look at everything that Joe Biden has said, you certainly get the impression that he is interested in restoring alliances, including in Europe,“ said Jeffrey Rathke, president of the American Institute for Contemporary German Studies at Johns Hopkins University. “Of course there would be a different tone,“ he added. “But the substance would be different as well.“ For now, the German Defence Ministry's apparent trajectory of planning for a future where U.S. commitment may be iffy at best can bring more good than harm, he argued. Fears of an increasingly belligerent Russia and Trump's overt questioning of international alliances as key to keeping the peace have driven a wave of increased defense spending on the continent in recent years. “The things that Europe needs to do for its own security are precisely the things that improve the trans-Atlantic security relationship,“ Rathke said. When it comes to Washington's focus on China versus Europe, paying attention to different regions of the world should be possible simultaneously, he argued. “This is not an either-or situation. That's not how the United States should look at it.“ https://www.defensenews.com/global/europe/2020/07/15/germany-sets-up-a-european-defense-agenda-with-a-waning-us-footprint-in-mind/

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