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August 5, 2020 | International, Land

To keep weapon sales in place, US offers new options for payment

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WASHINGTON — The United States is developing new options for arms customers as a way to ensure allies and partners don't drop planned procurements as the world economy remains in shock from the impacts of COVID 19.

Among the options, according to outgoing Defense Security Cooperation Agency head Lt. Gen. Charles Hooper, are allowing foreign countries to finance arms procurement through U.S. bank loans and altering existing payment schedules to stretch the costs over time.

“The bottom line here is, we are willing to work with our allies and partners, when they raise the challenges that they have, to find ways for them to continue to buy American and to ensure that they can pay for the equipment along a payment schedule that reflects their own economic conditions,” Hooper said.

During an exclusive exit interview with Defense News, Hooper declined to say which countries have already approached his agency about economic impact from the disease, but said that there are “certainly” customer nations that have reached out.

“There are partners that, we're already seeing that they are having challenges. So we're standing ready to work with them. As soon as we can gain an appreciation and the understanding of the challenges, we can find ways to help them,” Hooper said.

Hooper talked with Defense News two weeks before his Aug. 3 retirement. He is succeeded by Heidi Grant, the head of the Defense Security Technology Administration, a move that marks the first time a civilian has led the office since a previous agency was recognized into the current DSCA structure in 1998. The general expressed no concerns over that move, in large part, he said, because of Grant, a fixture in the international security cooperation world.

Grant will have to hit the ground running, given the potential impact from COVID on the world economies. The good news, Hooper said, is that by March, DSCA had concluded that the global economy would be hurt by the disease and set up an interagency working group, called the Operations Planning Group, to study program-level impacts from global trends and develop solutions.

The first step Hooper's team took was to revise the collection process of foreign payment in order to make them “a bit more flexible, to accommodate those partners that may be having some economic difficulties or may have reprioritized their budgets towards for example, economic recovery and away from defense.”

Those options include delaying payments on planned procurements to future years, creating new payment plans for ongoing procurement efforts, and returning funds currently on deposit with the United States to the customer nations as well as new financing strategies.

“One of the things we did is we are allowing our partners to draw on standby letters of credit from foreign banks operating in the United States, according to U.S. banking rules,” Hooper explained. “That offers a nation an opportunity to draw, for example, in that case, a standby letter of credit on one of their banks that operates in the United States, under United States banking rules, which ensures that there's no fiduciary risk to the United States.”

DSCA officials had been considering adding such an option for some time, but the economic downturn pushed the agency to start offering it for customer nations, Hooper added. Lucie Béraud-Sudreau, director of the Arms and Military Expenditure Programme at the Stockholm International Peace Research Institute, said that option sounds different from funding plans that have existed for some time in Europe, where specific entities in countries are responsible for guaranteeing arms-recipient states' loans thanks to the state treasury.

“There are a number of economic factors globally, that we anticipate will likely have an impact on country's abilities to move forward,” Hooper said. “Obviously, energy prices are lower, and those countries all over the world that specialize in energy are going to see a fall in revenue. We see countries that, as a result of the pandemic, are having to shift funds from their defense budgets to more domestic missions like economic recovery and other things.”

In addition to oil-reliant nations in the Middle East, Béraud-Sudreau said to watch the Pacific region, where “many countries have already decided to cut their military spending for this year, and planning decreases for 2021.” Indonesia, Thailand, South Korea, and the Philippines are among the nations that have already announced plans to cut defense spending, while Singapore is seeing delays in weapon deliveries due to supply chain issues.

“If there are limited orders in 2020-2021, there will be repercussions later on, as these companies work on long-term projects. Hence the pressure, on both sides of the Atlantic, for the defense sector to be part of economic recovery packages and high levels of military expenditure,” she said.

Over the course of his time at DSCA, Hooper oversaw almost 18,300 Foreign Military Sales actions, including 5,800 new agreements and various amendments and modifications to existing agreements, according to agency figures. He reduced three different surcharges on customers, saving customers millions of dollars as well. Also, timelines shrunk, with DSCA offering 50 percent of all new FMS cases that flow through the process to partner nations in 49 days or less by Hooper's exit.

And while Hooper did not want to preview what weapon sales totals for fiscal 2020 will be, he did say that the United States remains “on a very positive trajectory... We remain the global partner of choice. And I'm very optimistic that we're going to continue to see positive trends in our foreign military sales this year and in the years to come.”

https://www.defensenews.com/pentagon/2020/08/04/to-keep-weapon-sales-in-place-us-offers-new-options-for-payment/

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  • UK Defence Cyber Protection Partnership

    March 20, 2019 | International, C4ISR, Security, Other Defence

    UK Defence Cyber Protection Partnership

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  • Contract Awards by US Department of Defense - November 20, 2020

    November 24, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

    Contract Awards by US Department of Defense - November 20, 2020

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The contract modifies the TMRR prototype flight test plan, to now include preparations for a second flight test and development of two prototype RVs with telemetry capability in order to further mature technology. Work will be performed in King of Prussia, Pennsylvania, and is expected to be completed Oct. 21, 2022. Fiscal 2020 research, development, test and evaluation funds are being used with no funds being obligated at the time of award. Total cumulative face value of the contract is $151,943,606. The Air Force Nuclear War Center, Hill Air Force Base, Utah, is the contracting activity. AT2 LLC, Severn, Maryland, has been awarded a $15,751,876 firm-fixed-price modification (P00017) to contract FA4890-18-C-0008 for Air Combat Command and Air Force Global Strike Command Primary Training Ranges operation and maintenance (O&M) support services. This contract provides for O&M of range threat, scoring and feedback systems. 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This contract is being awarded to the contractor on a sole-source basis under 10 U.S. Code 2304(c)(1) and was previously synopsized on the Federal Business Opportunities website. The Strategic Systems Programs, Washington, D.C., is the contracting activity. Lockheed Martin Corp., Rotary and Mission Systems, Orlando, Florida, is awarded a $9,574,093 modification (P00047) to previously awarded cost-plus-fixed-fee contract N68335-17-C-0253. This modification exercises an option to provide the second phase of interim contractor support for fleet Repair of Repairables (RoR), non-fleet RoR and installation RoR support for the Common Aviation Support Equipment program office. Work will be performed in Orlando, Florida, and is expected to be completed in March 2021. 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Great Lakes Dredge & Dock LLC, Oakbrook Terrace, Illinois, was awarded a $15,844,050 firm-fixed-price contract for maintenance dredging. Bids were solicited via the internet with two received. Work will be performed in St. Mary's, Georgia, with an estimated completion date of June 5, 2021. Fiscal 2020 operation and maintenance (Defense) funds in the amount of $15,844,050 were obligated at the time of the award. The U.S. Army Corps of Engineers, Jacksonville, Florida, is the contracting activity (W912EP-21-C-0002). McCarthy HITT - Next NGA West JV, St. Louis, Missouri, was awarded an $8,982,180 modification (P00012) to contract W912DQ-19-C-7001 for a resident management system. Work will be performed in St. Louis, Missouri, with an estimated completion date of April 24, 2023. Fiscal 2020 military construction (Defense wide) funds in the amount of $8,982,180 were obligated at the time of the award. 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  • After a leadership shakeup at General Dynamics, a murky future for submarine building

    October 29, 2019 | International, Naval

    After a leadership shakeup at General Dynamics, a murky future for submarine building

    By: David B. Larter WASHINGTON — Submarine building, the pride of the U.S. Navy's shipbuilding efforts over the past decade, is facing a mountain of uncertainty, a point underscored by the replacement of senior members of General Dynamics leadership, compounding delays with construction of the Virginia-class submarine and nagging questions about the quality of the work after a high-profile welding issue threatened to trip up the Columbia-class ballistic missile sub program at the starting line. Adding to the uncertainty for General Dynamics, which operates the Electric Boat shipyard in Connecticut, are indications that profits from constructing Virginia-class subs may be slipping. And challenges in training new workers in the complex world of building subs as well as concerns that the Columbia program might negatively affect General Dynamics' bottom line are impacting General Dynamics' partner yard Huntington Ingalls Industries in Newport News, Virginia, as well as the U.S. Navy. Furthermore, a contract for the significantly larger Block V Virginia-class submarine, expected to be one of the largest in the Navy's history, has been repeatedly delayed amid disputes over labor rates, sources told Defense News. That contract is more than a year past due, according to Navy budget documents. In September, General Dynamics pushed out Electric Boat President Jeffrey Geiger. Industry and Navy sources, speaking on the condition of anonymity, said Geiger's replacement was the culmination of mounting frustration on the part of the Navy. That came to a head when quality control issues surfaced with missile tubes in production destined for the Virginia Payload Module, Columbia-class subs and the United Kingdom's replacement ballistic missile sub. Geiger's ouster came on the heals of General Dynamics replacing long-time executive John Casey as head of the Marine Systems division when he retired earlier this year. The shakeup, delays and lingering issues put the Navy and the submarine-building enterprise at a crossroads. It's clear that the Navy's efforts to ramp up production of its Virginia-class attack boats ahead of Columbia have encountered myriad issues and delays. But while delays may be acceptable for the Virginia program, the interconnected nature of submarine building means those delays could eek into a program that the Navy has for years insisted cannot be delayed any further: the replacement of its aging Ohio-class ballistic missile subs, part of the nuclear deterrent triad. The Navy has said Columbia must be ready for its first patrol in 2031 to ensure the nation doesn't fall below a dangerous threshold where retiring Ohio-class submarines leaving the country without an adequate number of boats to execute its deterrent strategy. But to head that off, the Navy may have reduce its expectations of the industrial base's capacity to build submarines, said Bryan Clark, a senior fellow at the Center for Strategic and Budgetary Assessments think tank and a retired submarine officer. “The Navy is going to have to reduce its appetite for submarine capacity while it gets the construction process in a better position,” he said. “All of the things we have seen in the past year in the submarine-building enterprise are the results of the ramped-up production levels and the challenges that EB [Electric Boat] faces in hiring more workers up in Connecticut. “They've been growing capacity, investing in infrastructure; they're trying to hire a bunch of workers and design engineers. [But] there just isn't a large workforce of those kinds of people up there as opposed to in Hampton Roads or the Gulf Coast. So there are a lot of challenges in ramping up production to [increase] Virginia-class production and, in addition, starting Columbia and beginning the Virginia Payload Module-equipped Virginias, which is a 30 percent larger submarine.” A bridge to Columbia In March, Defense News reported that all the Virginia-class submarines under construction were between four and seven months behind schedule. Naval Sea Systems Command pointed to the cumulative effect of ramping up to building two Virginia-class submarines per year. In a statement, the service's top acquisition official said the Navy was continuing to confront material, labor and shipyard infrastructure issues. Labor issues in particular hit the Newport News yard, which told investors in a recent earnings call that profits had slipped by about 23 percent on the Virginia sub building because of delays associated with labor issues. In the face of the mounting issues, the Navy should be willing to make difficult choices to get back on an even footing, Clark said. “Are we going to make some tough choices and dial back submarine construction deliberately to make sure we can get Columbia started correctly?” he asked. “And that means maybe we slow down Virginia, maybe we go to one per year for at least a couple of years to catch up.” Clark said the Navy should continue to fund two submarines per year but should expect that they will take longer to build while General Dynamics and Newport News stabilize their labor and parts issues. Paring back submarine production is a tough pill to swallow for the Navy, as it's been fighting for years to prevent a shortfall of attack submarines in the coming decade. The Navy expects its inventory of attack boats to drop from 52 to 42 by the late 2020s as Cold War-era Los Angeles-class attack subs retire. Furthermore, there's the question of whether scaling back production might invite a funding cut, which could make matters worse. The supplier and labor issues, after all, primarily stem from the 1990s when the Navy all but stopped buying submarines, which resulted in a contraction of the number of businesses that built submarine parts and a loss in skilled laborers who knew how to build them. Less funding would likely have a detrimental effect on sub-building efforts, said Bill Greenwalt, a former Senate Armed Services Committee staffer. “Under our current budget and appropriations process, slowing down — which likely implies cutting program funding — would exacerbate industrial base problems as it already has in the past due to lack of program demand,” Greenwalt said. “Congress and the Navy need to be prepared for industrial base surprises and seriously face the past problem of the underfunding of naval shipbuilding.” “A flexible schedule and more realistic and flexible funding mechanisms will be needed to meet whatever industrial base challenges ... will inevitably arise,” he added. “In the near term we may even need to look at some of our allies' capabilities to meet shortfalls and help us keep on schedule until we rebuild U.S. capacity.” Greenwalt's view tracks with that of General Dynamics, according to a source with knowledge of the company's thinking on the difficulties it has faced. The company considers ramping up production on the Virginia-class sub as essential to building a sufficient labor force and supplier capacity so the resources are available to build Columbia class on schedule, the source said. ‘Two-hump camel' The Navy's top acquisition official, James Geurts, has similarly described the issue. On the possibility of building a third Virginia-class submarine in 2023, Geurts told the House Armed Services Committee's sea power panel in March that it would benefit the Columbia-building effort. “We can get some of the additional workforce trained up, get some more of the supplier base and get some of the supplier builds out of the way before Columbia gets here,” he said. Officials everywhere seem to agree that the labor force is the most critical factor when it comes to getting submarine building on track. In an exit interview with Defense News in August, outgoing Chief of Naval Operations Adm. John Richardson said turnover at shipyards was a challenge but also an exciting chance to build a new generation of skilled labor. “We're asking a lot of the submarine industrial base right now to continue with Virginia, two to three per year including that payload module, and deliver Columbia,” Richardson said. “And the workforce is going through a transformation. “The people who built and delivered the Virginia program, the Los Angeles program and Seawolf — those folks are retiring. We used to have this two-hump camel in terms of the demographics of the shipyard: You had the Cold Warriors and you had the post-9/11 folks. And that Cold War hump is gone. And I think that although it's going through some friction right now, it's really inculcating, indoctrinating and educating a brand-new workforce.” Richardson also sounded a note of warning about work quality, saying that the managers overseeing the work for the submarine-building enterprise must be on top of their jobs. “We've had some welding issues: We've got to be on that,” he said. “[It's] a lot closer oversight as we educate this new team.” Clarification: The story has been updated to better reflect the arguments surrounding the future of submarine building. https://www.defensenews.com/naval/2019/10/28/after-a-leadership-shakeup-at-general-dynamics-a-murky-future-for-submarine-building/

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