April 28, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

DoD Budget Cuts Likely As $4 Trillion Deficit Looms

By THERESA HITCHENSon April 27, 2020 at 5:02 PM

WASHINGTON: With the federal deficit expected to balloon to over $4 trillion in fiscal 2020 due to spending to pump the economy in the face of the COVID-19 coronavirus pandemic, downward pressure on the US defense budget is inevitable, several experts believe.

“I think the budget comes down sooner rather than later,” Mackenzie Eaglen, resident fellow at the American Enterprise Institute, said bluntly in a webinar today.

The best-case scenario is for flat defense budgets for the foreseeable future, but if history is a guide, the smart money is on defense budget cuts, explained Todd Harrison, DoD budget guru at the Center for Strategic and International Security (CSIS).

“What has historically happened is, when Congress's fiscal conservatives come out and get serious about reducing the debt, reducing spending defense is almost always part of what they come up with for a solution,” he said. “So, we could be looking at a deficit-driven defense drawdown coming. ... At least history would suggest that that is a real possibility.”

Indeed, even as Congress is pulling out all the stops trying to assist DoD and the defense industrial base to weather the COVID-19 coronavirus pandemic, DoD already is being eyed as the future deficit bill-payer, Eaglen told the webinar. “DoD is at the top of the list,” she said.

Eaglen added that, at a more macro-level, the budget crunch could force DoD to re-look the goals of the 2018 National Defense Strategy (NDS) with an eye to downsizing.

“There's going to be an impact across the board,” she said. “There probably will be a total relook — at even the NDS fundamentals, and what mission is going to have to go — in response to this.”

Harrison noted that already DoD has been looking at flat budgets through 2021, which has caused it to have to take some risks as it tries to juggle divesting in high-maintenance legacy systems with investing in future programs while maintaining readiness to handle a possible peer conflict with Russia and/or China.

“Just to divest legacy systems and invest in new ones and try to maintain, or slightly grow, force structure, DoD was already saying that it would need three to five percent real growth each year in the defense budget, going forward, just to fully execute that,” he said.

This means that DoD leadership is going to face even more difficult decisions in the future, Harrison explained. “Now we're looking at an environment where the budget might be flat at the best case or trending down over time. Something's gonna have to give. And so, if DoD really wants to protect these key modernization programs, not only is it going to have to divest legacy systems, it's going to have to divest them faster, and it's going to have to make some reductions in force structure that's going to incur risk.”

More immediately, Harrison said, as Congress moves over the next few months to pass a fourth, or even a fifth, economic stimulus package DoD already is signaling that it hopes to see a number of its “unfunded requirements” stuffed into those bills.

“DoD is saying: ‘hey, if you want to fund more things for DoD to help stimulate the economy, and help the defense industry, well, here's a list you already have that you can pick from.”

DoD's unfunded priorities list — the annual wish list of programs it would like to fund if only there was more money in the top-line — for 2021 includes a total of $35.9 billion for programs across the military services and the combatant commands.

The Pentagon might also petition Congress for greater authority to use operations and maintenance funds appropriated but not spent due to work slowdowns to short up programs facing cost overruns because DoD paid contractors for work supposed to be done, but not actually done, while employees are home-bound due to the pandemic, Harrison said.

“DoD has implemented the CARES Act implementation, saying that they would pay for paid leave for employees of defense industry firms that are unable to report to work. And so that cost is covered,” Andrew Hunter, who works on defense industrial base issues at CSIS, explained. “Those folks aren't necessarily going to be laid off; they will be kept on the payroll and paid. And again, that will create some costs down the road to then pay those folks to do the actual work that they're originally scheduled to do.”

Most of the nearly $10.5 billion in the CARES Act, signed by President Donald Trump on March 27 to help DoD protect itself from the impacts of the pandemic goes into O&M accounts, according to CSIS. That said, some $1 billion goes to procurement funding, with an eye on health-related equipment. Further, it includes some $1.5 billion in the Defense Working Capital Fund, which allows DoD to make investments in things like depot maintenance, transportation and supply management in the near term and recoup the costs through future year pricing deals.

However, the bill grants DoD a good deal of flexibility to move money around — with the exception of banning any funding for Trump's southern border wall construction.

https://breakingdefense.com/2020/04/dod-budget-cuts-likely-as-4-trillion-deficit-looms/

On the same subject

July 16, 2018 | International, Naval

Governments receive plans for industrial tie-up between Fincantieri, Naval Group
By: Pierre Tran PARIS — France and Italy received in June plans for industrial cooperation from shipbuilders Fincantieri and Naval Group, the spokeswoman for the French Armed Forces Ministry said. “The governments concerned received the proposals from the companies and these proposals are being studied,” Valérie Lecasble said July 12, replying to a question from Defense News. That delivery last month met a timetable for the Italian and French shipbuilders to pitch their plans for an industrial alliance in building warships and cooperating in export sales. Submarines are excluded from that proposed cooperation. Naval Group is pursuing that link up with “great determination,” a company spokesman said. Meanwhile, a 36-page report from ADIT, a partially state-owned company working in economic intelligence, has painted a “highly negative” picture of the compliance and ethics of Fincantieri, business paper La Tribune reported July 12. That ADIT report is circulating in the French Economy and Finance Ministry and the offices of the Armed Forces Minister, the report said. There is also a report from the DGSE foreign intelligence service that cites “doubtful practices” Fincantieri's commercial matters. That DGSE report has been handed to the French prime minister's office, as well as the two French ministries. The business model for the proposed Franco-Italian deal is seen by Naval Group as similar to the partnership between French carmaker Renault and its Japanese ally Nissan, in which there is close cooperation but the two are separate companies. That proposed cross-border collaboration would seek synergies by pooling research, development and the procurement of equipment, and by cooperating on export offers in a bid to cut competition between the two companies.There would also be a cross shareholding of some 10 percent between the two companies. It remains to be seen how the two partners have brought into the plan the French and Italian systems companies Thales and Leonardo, respectively, which supply electronics for warships. Thales holds a 35 percent stake in Naval Group, with the majority of the remainder owned by the French state. https://www.defensenews.com/naval/2018/07/12/governments-receive-plans-for-industrial-tie-up-between-fincantieri-naval-group/
July 27, 2020 | International, Aerospace

Trump admin officially makes it easier to export military drones
By: Aaron Mehta and Valerie Insinna &emsp; This is a developing story. Stay tuned for updates. WASHINGTON — The U.S. State Department has officially loosened restrictions on exporting military-grade unmanned aerial vehicles to foreign nations, a move long sought by the defense industry. Under a new policy announced Friday, unmanned aerial systems that fly at speeds below 800 kph will no longer be subject to the “presumption of denial” that, in effect, blocked most international sales of drones such as the MQ-9 Reaper and the RQ-4 Global Hawk. R. Clarke Cooper, the assistant secretary bureau of political-military affairs, announced a change to how the United States interprets the Missile Technology Control Regime, or MTCR, Friday. News that the change was imminent, and that it would focus on reinterpreting the regulations with a focus on speed, was first reported Thursday by Defense News. The U.S. government's interpretation of the export controls had led to a blanket denial of most countries' requests to buy “category-1” systems capable of carrying 500-kilogram payloads for more than 300 kilometers. Instead of having a “presumption of denial” for those drones, where export officials needed special circumstances to allow the sale of the drones, the new guidance would mean those officials would now consider proposed sales using the same criteria as they do for other military exports. Cooper stressed that the UAVs covere includes “no risk for weapons of mass destruction delivery. Higher-speed systems such as cruise missiles, hypersonic aerial vehicles, and advanced unmanned combat aerial vehicles are not affected by this revision.” The regulations were primarily introduced to regulate the sale of cruise missiles abroad, but the interpretation also covers certain unmanned vehicles. The United States has been exploring a change in how to interpret the MTCR for some time, with discussions centered around the “presumption of denial” clause for category-1 UAVs. Speaking at the Hudson Institute shortly after Cooper's remarks, Assistant Secretary for International Security and Nonproliferation Chris Ford stressed said the administration plans to keep pushing other nations in the agreement to come to a similar stance, but that “the United States is not willing to let U.S. interests be forever held hostage” by international decision makers. Ford also said that there is a specific member of the MTCR “seems to have prioritized reflexive opposition to anything the United States proposes,” and would block any potential changes. Although not listed by name, Ford later indicated he was talking about Russia. In a statement, Sen. Bob Menendez, D-N.J., the ranking member of the Senate Foreign Relations Committee, called the move a “reckless decision” that makes it “more likely that we will export some of our deadliest weaponry to human rights abusers across the world.” Menendez has been central in trying to block arms sales to Saudi Arabia over human rights concerns. Industry impact The decision primarily opens up sales opportunities for General Atomics and Northrop Grumman, which manufacture multiple slow-moving UAS impacted by the presumption of denial clause. Most medium-altitude, long-endurance systems like General Atomics' MQ-1 Predator and MQ-9 Reaper fly at slow speeds, with the Reaper clocking in with a cruise speed of 230 mph, or 370 kph, according to an Air Force fact sheet. Northrop Grumman's RQ-4 Global Hawk, a high-altitude drone used for intelligence, surveillance and reconnaissance, flies at a cruise speed of about 357 mph, or 575 kph. Immediately after the announcement, both companies issued statement heralding the change. “It is critical for our national security that our export policies continue to keep pace with the rapid evolution of technology and support collaboration with our allies,” said Northrop Grumman spokesman Tim Paynter. He pointed to the company's MQ-8 Fire Scout as another UAS that could be more widely exported as a result of the new interpretation. In addition, Niki Johnson, General Atomic's vice president for government affairs and strategic communications, said “We welcome the changes announced today that will alter the treatment of General Atomics' UAS under U.S. export policy. We look forward to this announcement leading to approvals for sales to a larger portion of the international market.” Ford declined to speculate about how much money may trade hands as a result of the change, aside from broadly saying he expects it will have a “ripple effect” for countries who may be on the market for unmanned systems. While broadly seen by the defense industry as a positive step forward, one industry source expressed concerns that the changes announced Friday could ultimately be toothless. In April 2018, the Trump administration announced a number of policy reforms aimed at speeding up the sales process, such as allowing certain UAS to be exported via the Direct Commercial Sales process as opposed to the more laborious Foreign Military Sales process. But those changes did not have the intended consequences, the industry official said. “Implementation of the 2018 policy was very slow. It did not actually lead to that many new approvals in terms of countries that we can export to. So while we think this change will help us overcome the MTCR question during the policy review process, we still think that there is a higher hurdle for UAS within the conventional arms transfer policy ordeal,” the source said. Companies could still hit “brick walls” within the normal State Department arms sale process if, for instance, the department finds that drone sales negatively alter the military balance among countries in a given region. “The question for us is: Does this lead to policy approvals that allow us to go sell?” the source said. This person added that if sales do not immediately begin to move forward, it's possible that — should former Vice President Joe Biden win the presidential election in November — the incoming Democratic administration could roll back the MTCR interpretation changes. During a phone call with reporters, Cooper stressed that the change in policy will not result in a blanket approval for all UAS sales. “It is case by case,” he said. “It's not just a matter of addressing the [MTCR] requirement, because while UAS systems vary widely in their sophistication and application, it's incumbent upon the United States that we ensure that the systems we sell are used responsibly and will not threaten our interest or those of our allies.” Rachel Stohl, vice president for defense issues at the Stimson Center, called the unilateral decision by the White House “yet another affront to international agreements and global arms controls.” “Let me be clear: A presumption of denial is not a ‘no,' ” Stohl said. “It just means you have to work a little harder to get to ‘yes' and ensure that a lethal system that can change the nature of conflict, has raised serious questions and concerns about the legitimacy, legality, and strategic efficacy of their use, and has demonstrably impacted civilian lives is in the best interest of the United States. “Once again, the Trump administration is focused on short-term economic gain rather than medium- to long-term security and foreign policy interests.” But Michael Horowitz, a professor and director of the Perry World House at the University of Pennsylvania, argues that the change is long overdue. “Treating uninhabited aircraft as missiles for export policy purposes doesn't work,” Horowitz said. “It has allowed China to capture a significant chunk of the drone export market, including with U.S. allies and partners.” However, Horowitz added that the decision to focus on speed may miss the big picture. “Rather than simply treating uninhabited aircraft as aircraft for export purposes, the new policy creates a speed test that addresses issues for current platforms,” he said. “Depending on implementation, this could be a policy improvement, but it could also lead to issues down the road as the uninhabited aircraft category evolves.” https://www.defensenews.com/industry/2020/07/24/us-state-department-officially-makes-it-easier-to-export-military-drones/
March 16, 2021 | International, Aerospace

Israel, South Korea to co-operate on unmanned airborne ISTAR
Israel and South Korea are to co-operate in the field of unmanned airborne intelligence, surveillance, targeting and reconnaissance (ISTAR), with a memorandum of understanding (MOU) signed on 15 March. Showcased at ADEX 2017, KAI's stealth U...

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