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  February 21, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

  Opinion: Defense Budget’s Resilience Rests On Shaky Foundation

  Byron Callan Some of the main talking points on the fiscal 2021 defense budget request and the plan that accompanies it through 2025 are that it aligns resources with the National Defense Strategy and that this year's budget theme is about all-domain operations. The Pentagon called out priorities to sustain readiness and prepare for future challenges with investment in hypersonics, autonomous systems and artificial intelligence. Given a flat top line, the Defense Department had to make tough choices by making program cuts that have been well-documented and are well-covered by this publication. The outlines of structural changes in how the Pentagon is preparing for the future are indeed visible in the budget request and plan, but it is unrealistic to expect this budget to have completely framed out all that will be done. Increases in research, development, test and evaluation (RDT&E) spending both in absolute terms and compared to last year's plan for 2021-24 underscore shifts that are underway. It may take at least 2-3 more years to see how some of these RDT&E efforts translate into new programs and will inform how the U.S. will fight in future conflicts. Much as defense contractor management, analysts and planners will focus on the details in the defense budget, it is important also to factor in some of the assumptions that underpin the budget—the foundation upon which it rests. Here there are questions worth considering. The first is the real GDP forecast for 2021-29. The Office of Management and Budget (OMB) forecast depends on stable 3% annual real growth every year, which is well above consensus estimates. The U.S. is now in its longest economic expansion ever. Can this be extended into 2021 or beyond? Possibly. Has the U.S. somehow eliminated the risk of recession from a rapid increase in interest rates, another energy shock, a pandemic or a severe economic crisis in other parts of the world? Very likely not. Another questionable factor is the new budget and plan's interest-rate assumptions, as there was a big change from prior projections. The OMB and Congressional Budget Office (CBO) do not disclose how they expect the composition of federal debt by debt maturity to change over forecast periods. They usually provide projections only on three-month Treasury bill interest rates and on the 10-year Treasury note. The U.S. Treasury shows that as of Jan. 31, of the $17.2 trillion in federal debt held by the public, 14% was in Treasury bills with an average interest rate of 1.7%, and 58% was in notes with maturities of 2-10 years at an average rate of 2.1%. Net interest outlays are a mix of the interest the federal government pays to public holders of that debt and the interest it pays to itself on debt held in federal trust funds. One way to think about the debt burden and the interest expense associated with it is to take the net interest outlay projections and divide them by the total debt the OMB or CBO estimates. One of the changes the OMB made in its budget projections was to lower interest rate estimates. In recent years, these projections were too high compared to prevailing market levels, as the OMB and CBO both projected rates would return to “normal” levels. In the OMB's mid-session review from this past summer, the implied interest rate (net interest outlays divided by total debt) was 2.3% in 2019 and rose to 3.0% by 2022 and 3.3% by 2025. In the latest budget and plan, the implied rate is flat—at 2.1% in 2020, creeping up to 2.3% by 2025. This is another questionable factor that could weigh on the foundation of the defense spending plans. If rates do move to higher levels, then outlays will compete with other forms of federal spending. If rates fall further than projected, it may be due to a far weaker economy, which in turn weighs on federal deficits. A final questionable factor is the deficit projections themselves. The Trump administration again plans reductions in non-defense discretionary spending, which Congress has not supported in the last three budget requests. The share of non-defense discretionary outlays as a percent of total outlays drops to 12% in 2024 from 15% in 2019. For defense contractor management, planners, analysts and investors, foundations on which the budget plans are based imply that the structural and programmatic changes in the 2021 budget could be accelerated if deficits and interest rates are higher than the plan presumes. Like a high-rise building built to code in an earthquake zone, the Pentagon's structural and spending changes may make defense better able to withstand future macroeconomic tremors and shifts. https://aviationweek.com/defense-space/opinion-defense-budgets-resilience-rests-shaky-foundation

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  September 16, 2020 | International, Aerospace, Naval, Other Defence

  Opinion: How To Break Exponential Pentagon Cost Growth

  James Chew The recently published viewpoint “Can the Pentagon Spend More Smartly?” (AW&ST Aug. 31-Sept. 13, p. 58) highlights the consequences of increased dependence on technology to maintain an edge. In fact, the core issue of the exponential growth in cost associated with the linear growth in technology capability is highlighted in Norman Augustine's 1982 book Augustine's Laws. Specifically, two of “Augustine's laws” focus on what needs to be avoided within the Defense Department acquisition community. One of the laws states: “In the year 2054, the entire defense budget will purchase just one aircraft. This aircraft will have to be shared by the Air Force and Navy three and a half days each per week, except for leap year when it will be made available to the Marines for the extra day.” Additionally, the book highlights the Defense Department's growing dependence on electronic systems with this law: “After the year 2015, there will be no airplane crashes. There will be no takeoffs either, because electronics will occupy 100% of every airplane's weight.” Even if these laws seem outlandish, the book's underlying lessons still ring true today. For decades, the Pentagon was the driving force behind the development of microelectronics until, interestingly, the commercial sector ultimately ended up in the driver's seat. To share a little history, the Army-funded Micromodule project was the precursor of the integrated circuit and the Very-Large Scale Integration project created today's electronic design automation companies and resulted in the development of multichip wafer fabrication technology. The fact is, today's microelectronics technology would not exist, or would almost certainly be less sophisticated, if not for a few brave and visionary Defense Department project officers. The electronics industry is likely the most visible and significant example of a commercial market that not only transitioned from but significantly advanced technology developed by the U.S. military. Without the government investment, the device on which I am writing this article, and the one on which you are reading it, would perhaps not exist. There are lessons to be learned from both the public and private sectors, and best practices from each can certainly be applied cross-functionally to optimize outcomes. For example, the commercial electronics industry has enabled electronic systems companies to develop high-quality, sustainable and modernizable products on a “can't-miss-Christmas” schedule. Much of the industry's success is due in large part to an adherence to “first-pass success” and the computational software tools and processes that enable it. These tools and processes have been developed by companies that invest significant portions of their annual sales—some up to 40%—into research and development (that is “IR&D” to you in the Pentagon) and are a result of the intense competition within the unforgiving consumer electronics market. These tools and processes, which have institutionalized the product development practice of “emulate before you fabricate,” make up the foundation of on-schedule, on-cost product development. The best-case scenario is that the current Defense Department and defense industry electronic development process matches up with the commercial electronics development process, where they both seek to achieve “first-pass success.” Even if all things were equal, which they aren't, the commercial timeline would still be around 30% that of the defense timeline. Eliminating the need for prototype hardware and the associated tests and reworks is a major reduction in design time and cost. So, after so many years of funding research into electronic design and development, why have the Defense Department and defense industry turned away from the commercial processes that stemmed from that investment? Why aren't these processes being adopted? Congress appreciates that transitioning to commercial electronics best practices is the basis for the much-desired firm, fixed-price acquisition. The fiscal 2017 National Defense Authorization Act, reinforced by the fiscal 2021 Defense Appropriations Act, has an entire section on transitioning to commercial electronics best practices. Program offices and some individuals within the defense industrial base are seeking to better understand the commercial industry-proven way to design electronics that reduce design schedules by at least 70%, producing “first-pass success” electronic system designs that are immediately sustainable and agilely modernizable. The answer is out there—adopt commercial best practices to save time and money. With nontraditional companies entering the picture (what's the name of that space company?), the public sector should have plenty of motivation to implement tools and processes that are prevalent and successful in today's private sector. https://aviationweek.com/defense-space/budget-policy-operations/opinion-how-break-exponential-pentagon-cost-growth

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  February 2, 2021 | International, Aerospace, Naval, Land, C4ISR, Security

  Contract Awards by US Department of Defense - February 01, 2021

  NAVY Raytheon Technologies Corp., Pratt and Whitney, Pratt and Whitney Military Engines, East Hartford, Connecticut, is awarded a $290,704,534 cost-plus-incentive-fee, fixed-price incentive (firm target) contract. This contract provides material and support equipment for depot maintenance facilities, program administrative labor for non-recurring sustainment activities, mockup engines and modules for test cells, as well as supplies, services, and planning for depot activations in support of the F-35 Lightning II Program Lot 13 propulsion system for the Navy, Marine Corps, Air Force, non-Department of Defense (DOD) participants and Foreign Military Sales (FMS) customers. Work will be performed in Oklahoma City, Oklahoma (30%); East Hartford, Connecticut (22%); Cherry Point, North Carolina (10%); Indianapolis, Indiana (6.75%); Windsor, Connecticut (3.25%); Yuma, Arizona (1.25%); Norfolk, United Kingdom (1%); Leeuwarden, Netherlands (1%); various locations within the continental U.S. (3.75%); and various locations outside the continental U.S. (21%), and is expected to be completed in January 2024. Fiscal 2020 aircraft procurement (Navy) funds in the amount of $89,468,714; fiscal 2020 aircraft procurement (Air Force) funds in the amount of $84,152,318; non-DOD participant funds in the amount of $45,225,342; and FMS funds in the amount of $15,886,074, will be obligated at the time of award, none of which will expire at the end of the current fiscal year. This contract was not competitively procured pursuant to 10 U.S. Code 2304(c)(1). The Naval Air Systems Command, Patuxent River, Maryland, is the contracting activity (N00019-21-C-0006). Crowley Government Services Inc., Jacksonville, Florida (N62387-15-C-2505) is awarded a $25,484,291 modification under a previously awarded firm-fixed-price contract to exercise a six month option period (P00128) for the operation and maintenance of five Navy ocean surveillance ships USNS Victorious (T-AGOS 19); USNS Able (T-AGOS 20); USNS Effective (T-AGOS 21); USNS Loyal (T-AGOS 22); and USNS Impeccable (T-AGOS 23), and missile range instrumentation ships USNS Invincible (T-AGM 24); and USNS Howard Lorenzen (T-AGM 25). This modification provides for the exercises of a six-month option period to the bridge contract that was awarded on July 22, 2020. Work will be performed at sea, world-wide beginning Feb. 1, 2021, and is expected to be completed by July 31, 2021. Working capital funds (Navy) in the amount of $25,484,291 are obligated for fiscal 2021 and will not expire at the end of the fiscal year. This bridge was not competitively procured and was prepared in accordance with Federal Acquisition Regulation 6.302-1 and 10 U.S. Code § 2304(c)(1). The Military Sealift Command, Norfolk, Virginia, is the contracting activity. Lockheed Martin, Mission Systems and Training, Baltimore, Maryland, is awarded a $14,184,813 cost-plus award-fee order N62786-21-F-0004, against previously awarded basic ordering agreement N00024-19-G-2313 to provide engineering and management services for LCS-21 post shakedown availability. Work will be performed in Mayport, Florida (37%); Moorestown, New Jersey (29%); Virginia Beach, Virginia (18%); Washington, D.C. (15%); and Baltimore, Maryland (1%), and is expected to be completed by July 2022. Fiscal 2015 shipbuilding and conversion (Navy) $5,339,694 funding will be obligated at time of award and will not expire at the end of the current fiscal year. The Supervisor of Shipbuilding, Conversion, and Repair, Bath, Maine, is the contracting activity. ARMY Ellume USA LLC, Valencia, California, was awarded a $250,000,000 firm-fixed-price contract to procure reliable home use testing without prescription requirements to meet the demand to respond to the ongoing COVID-19 pandemic. Bids were solicited via the internet with one received. Work will be performed in Valencia, California, with an estimated completion date of Feb. 1, 2022. Fiscal 2021 special funds in the amount of $250,000,000 were obligated at the time of the award. U.S. Army Contracting Command, Aberdeen Proving Ground, Maryland, is the contracting activity (W911NF-21-9-0003). NIKA Technologies,* Rockville, Maryland (W912DY-21-D-0017); Health Facilities Solutions, San Antonio, Texas (W912DY-21-D-0021); Polu Kai Tidewater,* Falls Church, Virginia (W912DY-21-D-0020); Vali Cooper International, Covington, Louisiana (W912DY-21-D-0018); VW International Inc., Alexandria, Virginia (W912DY-20-D-0019); and The Outfit Inc., New Braunfels, Texas (W912DY-21-D-0016), will compete for each order of the $50,000,000 firm-fixed-price contract to provide medical project support services, facility support services, quantity verification and analysis services, project development support services and commissioning support services. Bids were solicited via the internet with 15 received. Work locations and funding will be determined with each order, with an estimated completion date of Jan. 31, 2026. U.S. Army Corps of Engineers, Huntsville, Alabama, is the contracting activity. AIR FORCE Rolls-Royce Corp., Indianapolis, Indiana, has been awarded a $96,932,957 delivery order (FA8504-21-F-0022) to contract FA8504-17-D-0002 for C-130J propulsion long-term sustainment. This order provides funding for Option IV. Work will be performed at Robins Air Force Base, Georgia, and is expected to be completed Jan. 31, 2022. Fiscal 2021 Special Operations Command operation and maintenance funds in the amount of $7,109,327; fiscal 2021 Air National Guard operation and maintenance funds in the amount of $22,126,544; fiscal 2021 Air Force Reserve operations and maintenance funds in the amount of $12,187,542; fiscal 2021 Air Force operation and maintenance funds in the amount of $54,486,354; and fiscal 2021 Special Operations Command research, development, test and evaluation funds in the amount of $1,023,191 are being obligated at the time of award. Total cumulative face value of the contract is $66,684,503. Air Force Life Cycle Management Center, Robins AFB, Georgia, is the contracting activity. Innovative Scientific Solutions Inc., Dayton, Ohio, has been awarded a not-to-exceed $44,195,532 indefinite-delivery/indefinite-quantity contract for Technology for Sustained Supersonic Combustion (TSSC). This is for the Technical Area 2 portion of TSSC. The mission of this TSSC effort focuses on development and evaluation of advanced aero propulsion systems and components, airframe structures, internal/external aerodynamics including integration into air vehicles, weapons and launch components with an emphasis on decreasing weigh and evaluating the effect of engine scale to determine operability, durability and performance. Work will be performed at Wright-Patterson Air Force Base, Ohio, and is expected to be completed February 2028. This award is the result of a competitive acquisition and four offers were received. The first task order will be incrementally funded with fiscal 2020 research, development, test and evaluation funds in the amount of $20,000 at time of award. Air Force Research Laboratory, Wright-Patterson AFB, Ohio, is the contracting activity (FA8650-21-D-2401). Cyber Systems and Services Solutions, Bellevue, Nebraska, has been awarded a $17,765,741 firm-fixed-price and cost-plus-fixed-fee modification (P0010) to contract FA8773-18-D-0002 to exercise Option Three for defensive cyber realization, integration and operational support services. Work will be performed at Joint Base San Antonio (JBSA)-Lackland, Texas, and is expected to be completed Feb. 28, 2022. This modification is the result of a competitive acquisition and seven offers were received. Fiscal 2021 operation and maintenance funds in the amount of $8,764,731 are being obligated at the time of award. The 38th Contracting Squadron, JBSA-Lackland, Texas, is the contracting activity. University of Toledo, Toledo, Ohio, has been awarded a $12,500,000 cost-reimbursement contract for “Photovoltaic Sheets for High-Specific-Power Space-Based Energy Harvesting (PVS-EH)”. This contract is to provide, develop and demonstrate the concept of PV “sheets” (PVS), consisting of modular, interconnect able, high-efficiency PV power sources fabricated on low-weight flexible substrates using scalable processing. Under this program, the contractor will further the effort to study and develop advanced materials, interfaces and electrical contacts for high efficiency and high specific power tandem thin film photovoltaic technologies to achieve lightweight solar sheet technologies that enable specific powers to exceed 1000 W/kg onboard spacecraft self- sensing, attribution and autonomy. Work will be performed in Toledo, Ohio, and is expected to be completed February 2026. Fiscal 2020 research, development, test and evaluation funds in the amount of $3,000,000 are being obligated at the time of award. Air Force Research Laboratory, Kirtland Air Force Base, New Mexico, is the contracting activity (FA9453-21-C-0056). Northrop Grumman Systems Corp., Herndon, Virginia, has been awarded a $7,763,422 firm-fixed-price task order under the ground subsystems sustainment contract (FA8214-15-D-0001) for the Minuteman III Launch Control Center Block Upgrade production for the exercise of Option Year One of Malmstrom Wing I. Work will be performed in Ogden, Utah, and is expected to be completed Aug. 15, 2022. Fiscal 2021 missile procurement funds in the full amount are being obligated at the time of award. Total value of the task order after exercise of the previously mentioned option is $26,428,083. Air Force Nuclear Weapons Center, Hill Air Force Base, Utah, is the contracting activity (FA8204-20-F-0071). CORRECTION: The contract modification (P00014) awarded to Gulfstream Aerospace Corp., Savannah, Georgia, Jan. 27, 2021, had an incorrect obligation amount. The operation and maintenance funds being obligated at the time of award should be $50,418,022, not $44,482,293 (FA8106-18-D-0002). DEFENSE LOGISTICS AGENCY Stryker Corp., Portage, Michigan, has been awarded a maximum $89,644,767 fixed-price with economic-price-adjustment, indefinite-delivery/indefinite-quantity contract for cranial and maxillofacial procedural packages and ancillary items. This was a sole-source acquisition using justification 10 U.S .Code 2304 (c)(1), as stated in Federal Acquisition Regulation 6.302-1. This is a one-year contract with four one-year option periods. Location of performance is Michigan, with a Jan. 31, 2022, ordering period end date. Using military services are Army, Navy and Air Force. Type of appropriation is fiscal 2021 through 2022 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pennsylvania (SPE2DE-21-D-0011). Exxel Outdoors LLC,* Broomfield, Colorado, has been awarded a maximum $55,760,612 firm-fixed-priced, indefinite-delivery/definite-quantity contract for three-season sleep systems and components. This was a competitive acquisition with three responses received. This is a one-year base contract with four one-year option periods. Location of performance is Colorado, with a Jan. 28, 2022, ordering period end date. Using military services are Army, Navy, Air Force and Marine Corps. Type of appropriation is fiscal 2021 through 2022 defense working capital funds. The contracting activity is the Defense Logistics Agency, Troop Support, Philadelphia, Pennsylvania (SPE1C1-21-D-1439). SNC Manufacturing LLC,** Orocovis, Puerto Rico, has been awarded a maximum $41,007,805 firm-fixed-price, indefinite-delivery/indefinite-quantity contract for trousers. This was a competitive acquisition with eight responses received. This is a one-year contract with four one-year option periods. Location of performance is Puerto Rico, with a Jan. 31, 2022, ordering period end date. Using military service is Army. Type of appropriation is fiscal 2021 through 2022 defense working capital funds. The contracting activity is the Defense Logistics Agency, Troop Support, Philadelphia, Pennsylvania (SPE1C1-21-D-1413). *Small business **Small disadvantaged business https://www.defense.gov/Newsroom/Contracts/Contract/Article/2489417/source/GovDelivery/