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By: David B. Larter WASHINGTON — The U.S. Navy intends to get much bigger, and that has meant new openings for European companies in the U.S. defense market. The Navy's new over-the-horizon missile destined for the littoral combat ship and the future frigate was recently awarded to the Norwegian firm Kongsberg, in partnership with U.S. company Raytheon, for its Naval Strike Missile. The future frigate program itself has awarded contracts to Spain's Navantia and Italy's Fincantieri for design work before the Navy selects a design later this year, meaning the service's next surface combatant may be a European design. And for the Navy's future training helicopter, both Franco-Dutch company Airbus and Italian firm Leonardo are top competitors for that program. Analysts say the Navy's recent surge in interest has been spurred by a confluence of circumstances that could mean even more opportunities for foreign companies looking to break into the U.S. market. Increased defense budgets are one reason the European companies have been seeing more business from the Navy and other American military branches. But a shift in the way the Defense Department tries to fill capabilities gaps has made the space more competitive for overseas firms, said Dan Gouré, a defense analyst with the Lexington Institute think tank. As the Navy and other services have shifted toward great power competition, it has found a number of capabilities that were not hugely important in a unipolar world have again become requirements with the reemergence of Russia and the rise of China as security threats. One such area is the small surface combatant, or FFG(X) program, which would be needed to escort supply convoys and work as a survivable sensor node in a larger surface combatant network. “With the frigate, for example, we hadn't built one of those in 40 years, but the Europeans have been building them for decades,” Gouré noted. “And if we needed a diesel-electric sub, they'd of course be the first in line.” This emphasis on speed of acquisition has also helped because the Navy and the rest of the Department of Defense are reluctant to get tied down by a yearslong, inevitably over-budget development process unless necessary, Gouré said. “The trend has been toward [other transaction authority] contracts, and that has made the European companies credible competitors,” he said. Another factor is that the Navy has been more willing to make trades on capabilities, said Bryan Clark, an analyst with the Center for Strategic and Budgetary Assessments. “I think what's new is that the Navy is openly seeking foreign proposals for some of these major new programs,” Clark said. “Foreign companies have always been able to submit proposals in response to RFPs, but usually they don't offer the high-end capability the U.S. is usually seeking. “The big change is that the Navy is willing to get a less-sophisticated capability in to get a design that is more mature.” In the case of the Navy's trainer helicopter competition, past success with European companies inside the DoD could be a driving factor in Airbus' and Leonardo's competitive bids. Airbus' North American division has been successful with the U.S. Army's Lakota program, built by Airbus Helicopters in Columbus, Mississippi, which is where the company would build its H135 helicopter if selected for the program. The Army has been happy with Lakota, so much so that it has been pushing to buy more of the airframes despite legal battles over the contracts. But the success of Airbus Helicopters with the Army is possible for much the same reason that, for example, Australian-owned Austal USA has been successful building both the trimaran version of the littoral combat ship and the expeditionary fast transport: a major manufacturing infrastructure investment in the United States. And that kind of cash outlay for a program can scare away European competitors. Getting around “Buy American” provisions would literally take an act of Congress. Despite having already developed, tested and fielded the capability the Navy wants, Kongsberg had to team with American defense giant Raytheon to sell its missile to the DoD. The “Buy American” provisions laid down and regularly upheld by Congress for defense procurement does have protectionist overtones, but there is a national security argument as well. In the event of a major, protracted conflict with Russia or China, it wouldn't be advantageous to have major suppliers located an ocean away or in occupied territory. And maintaining the industrial base has long been a concern of the U.S. Navy because of the limited the number of trained workers with experience who are building ships and nuclear reactors. Navy officials have testified that the shrinking industrial base, including the shipbuilders and the litany of subcontractors and vendors, is a significant concern. In 2015, then-head of the Navy's research, development and acquisition office Sean Stackley testified before Congress that some of the shipyards were just a contract away from going under. “We have eight shipyards currently building U.S. Navy ships. And of those eight shipyards, about half of them are a single contract away from being what I would call ‘not viable,' ” Stackley told the Senate Armed Services Committee. “In other words, the workload drops below the point at which the shipyard can sustain the investment that it needs to be competitive and the loss of skilled labor that comes with the breakage of a contract.” https://www.defensenews.com/top-100/2018/08/09/us-navys-focus-on-rapid-acquisition-is-opening-up-opportunities-for-europe/

By: Jill Aitoro WASHINGTON — The secret to tackling the defense information technology market may be scale. Looking specifically at the pure-play IT companies that landed on the 2018 Defense News Top 100 list, many of those that have doubled down in some capacity saw defense revenue increase during fiscal 2017. That came on the tail end of another trend among the largest defense primes, to get out of the IT business. “The evolution started a couple years ago, where the large defense primes who had boned up on IT service work during the war [on terror] started to realize that for a variety of reasons they might not be able to compete as effectively, or extract the returns they want out of a business like that,” said Jon Raviv, senior analyst and vice president for aerospace and defense at Citi Research. Divestitures followed, and pure-play IT companies were able to quickly scale up not just in size and their ability to support massive contracts, but also in capability set. The acquisition of Lockheed Martin's IT business transformed Leidos from a $5 billion company to a $10 billion company. That deal closed in late 2016, explaining how the company saw double-digit growth in defense revenue in both 2016 and 2017 — despite the buy actually making the company less defense heavy overall. Similarly, CACI closed on the acquisition of L3 Technology's National Security Solutions for $550 million in February 2016 — three months before the end of its fiscal year. The associated revenue contributed to the 16 percent increase in defense revenue during 2017. Leidos CEO Roger Krone, in an interview with Defense News in 2016 soon after the acquisition closed, pointed to “scale, but not scale for scale's sake” as a big factor in the buy — noting, too, the importance of balancing the portfolio and geographic distribution. He also pointed to sheer numbers — 15,000 employees specifically — many with security clearances. The trend does seem to be continuing. CSRA chose to not participate in the 2018 Top 100 because its $9.7 billion acquisition by General Dynamics closed by the time data collection for the list kicked off. While General Dynamics is a top defense prime, its IT business functions as a largely separate entity, similar to the pure-play IT companies. The acquisition of CSRA, which reported $2.25 billion in defense revenue for fiscal 2016 — will add significant scale to GDIT. It is also likely to influence the company's Top 100 rank next year. The future promises more cyber and IT-related merger and acquisition activity in the vein of that deal, according to Daniel Gouré, a vice president with the Lexington Institute think tank. “Raytheon is still in acquisition mode with cyber, so it's an area that's still kind of churning,” he said. “I wouldn't be surprised to see some of these big players acquire some of the more defense-oriented cyber players.” Unclear is what the sweet spot may be for those exclusively IT-focused firms. “Where we sit right now, it's not clear what the right size is,” Raviv said. “GDIT and Leidos are about $10 billion in sales; SAIC and CACI and ManTech are lower tier. All of those companies say they are happy with scale but could do a deal. Whether they call it scale, or marrying capability sets — it's all marketing, I suppose.” And there are other tactics that achieve scale without acquisition. Perspecta emerged on the 2018 Top 100, having launched June 1, 2018 through the combination of DXC Technology's U.S. public sector business, Vencore, and KeyPoint Government Solutions. As one entity, Perspecta reported $2.73 billion in defense revenue and ranked 37. To put that in perspective, Vencore ranked 67 in last year's list, with $886.59 million in defense revenue. And all of these pure-play companies are increasingly marketing themselves as conduits to the “nontraditional players” that the Pentagon is so keen to attract. Amazon Web Services, for example, will often partner with government IT companies on defense contracts to hand off some of the contracting morass. That said, for all the potential, the bulk of the defense IT market is notoriously fickle. Services often set aside IT projects in an effort to preserve platform buys, and margins can be low. Agencies also struggle to balance upkeep of existing systems versus modernization efforts versus research and development into the next great technological marvel. But as Raviv noted, it's all IT. “Yes, there are companies working on high-end cyber, the ability to launch attacks through cyberspace or to harden the communication node on a new missile so it can't be hacked by, say, China. And while the word cyber came up a lot three or four years ago, now you hear a lot about AI, autonomy and machine learning. But it's all technology. And it's a lot of smart people working on a lot of advanced things many of us don't understand.” https://www.defensenews.com/top-100/2018/08/09/for-it-companies-the-secret-to-success-in-defense-is-all-about-big-growth/

Ott Ummelas Donald Trump has taken credit for a rise in military spending by NATO states, but in the alliance's eastern reaches, it's his Russian counterpart, Vladimir Putin, who's driving the rearming effort. Last month, North Atlantic Treaty Organization Secretary General Jens Stoltenberg thanked the U.S. President for “clearly having an impact” on defense spending by allies while Trump said his demands had added $41 billion to European and Canadian defense outlays. But the jump in acquisitions behind the former Iron Curtain of aircraft, ships and armored vehicles began when Russia annexed Crimea from Ukraine, well before Trump's 2016 election victory, according to analysts including Tomas Valasek, director of Carnegie Europe in Brussels. While the median defense expenditure of NATO members is 1.36 percent of gross domestic product, below the alliance's requirement of 2 percent, eastern members comprise seven of the 13 members that are paying above that level. “Countries on NATO's eastern border do not need Donald Trump to boost defense spending,” Valasek said. “They decided this long before he came to power. The spending boost was because of a president, but it was Vladimir Putin, not the U.S. President.” Constant overflights by Russian aircraft into NATO airspace, cyberattacks on government and military installations, wargames on the borders of the Baltic states and accusations that Russia was behind a failed coup in newest member Montenegro have put NATO's eastern quadrant on alert for what it says is an increasingly expansionist Russia. Of the 15 members exceeding the bloc's guideline that 20 percent of total defense spending should go to equipment, six are from eastern Europe. At the time of the NATO summit in Brussels, Romania said it would buy five more F-16s from Portugal, raising its squadron to 12, after it signed a $400-million deal to acquire a Patriot missile air-defense system with Raython in May. The country of 20 million people bordering Ukraine, Moldova and the Black Sea plans to buy 36 more F-16s, four corvettes, at least 3,000 transport vehicles and coastal gun batteries over the next five years. Slovakia also announced the purchase of F-16 fighter jets at the summit to replace its aging Russian Mig-29s in a deal that was years in negotiating. And last month, Bulgaria asked for bids for at least eight new or used fighter jets by October at a total cost of 1.8 billion lev ($1 billion). By end-2018, the government in Sofia plans to buy 1.5 billion lev worth of armored vehicles and two warships for 1 billion lev. Neighboring Hungary said in June that it had agreed to buy 20 Airbus H145M multi-purpose helicopters, the country's largest military purchase since 2001. NATO's European members are expected to spend around $60 billion on equipment this year, with the 13 eastern members accounting for about 10 percent, said Tony Lawrence, a research fellow with the International Center for Security and Defense in Tallinn. The newer members will together spend about $2 billion more on equipment this year than last, he said. According to NATO, seven of its 10 biggest spending increases will be in the east. “Since these nations' membership in NATO, there has been a clear inclination to foster and strengthen their link with the U.S.,” said Martin Lundmark, a researcher with Swedish Defense University in Stockholm. “By procuring strategic defense systems, they willingly become interdependent and inter-operable with the U.S.” https://www.bloomberg.com/news/articles/2018-08-13/nato-s-east-is-rearming-but-it-s-because-of-putin-not-trump

Rank Last Year's Rank Company Leadership Country 2017 Defense Revenue* (in millions) 2016 Defense Revenue* (in millions) % Defense Revenue Change 2017 Total Revenue* (in millions) Revenue From Defense 1 1 Lockheed Martin 1 Marillyn Hewson, Chairman, President and CEO U.S. $47,985.00 $43,468.00 10% $51,048.00 94% 2 4 Raytheon Company 1 Thomas Kennedy, Chairman and CEO U.S. $23,573.64 $22,384.17 5% $25,348.00 93% 3 3 BAE Systems Jerry DeMuro, President and CEO U.K. $22,380.04 $23,621.84 -5% $25,288.20 88% 4 5 Northrop Grumman 2 Wes Bush, Chairman and CEO U.S. $21,700.00 $20,200.00 7% $25,803.00 84% 5 2 Boeing 3 Dennis Muilenburg, President and CEO U.S. $20,561.00 $20,180.00 2% $94,005.00 22% 6 6 General Dynamics 4 Phebe Novakovic, Chairman and CEO U.S. $19,587.00 $19,696.00 -1% $30,973.00 63% 7 7 Airbus Thomas Enders, CEO Netherlands/France $11,185.91 $12,321.00 -9% $75,702.63 15% 8 11 Almaz-Antey 5 Yan Novikov, CEO Russia $9,125.02 $6,581.69 39% $9,125.02 100% 9 10 Thales Patrice Caine, Chairman and CEO France $8,926.13 $8,362.00 7% $17,852.26 50% 10 9 Leonardo Alessandro Profumo, CEO Italy $8,856.48 $8,526.22 4% $13,024.24 68% Full top 100: http://people.defensenews.com/top-100/

By: Aaron Mehta FARNBOROUGH, England — When Boeing and Embraer announced a tie-up for commercial business, it left quite a few questions about how the defense side of the Brazilian firm would work with the American giant. The answer, early on, is that there will be a new partnership around the KC-390 transport aircraft; but according to Jackson Schneider, president and CEO of Embraer Defense & Security, that is just the first step. During an interview at last month's Farnborough International Airshow, Schneider laid out his hopes for the Boeing tie-up as well as potential growth for the company's border security operations and A-29 Super Tucano aircraft. How does the Boeing-Embraer commercial deal impact the discussions you'll be having on the defense side? Defense will be a different transfer. We will decide together which will be the format. But it works as a normal joint venture, normal relationship, normal partnership. The most important thing to me in this dimension is [the interest] that both companies are dedicating for the programs. It is clear Boeing and Embraer is dedicated to investigate and identify the opportunities together. A lot of analysts expect the two companies to start in on some sort of intelligence, surveillance and reconnaissance/early-warning special-mission aircraft designs. Do you anticipate the same? I think that we have very interesting applications in terms of business jets — very creative. We have already had some solutions that could go to market for training, for medical evacuation, for airport inspections, but there are many other opportunities, alternatives that we can explore together, also in this joint venture. We will begin a conversation to see how we can explore together special-mission solutions for the market. Full Article: https://www.defensenews.com/industry/2018/08/03/embraers-defense-head-talks-growth-areas-for-the-brazilian-giant/

By: Martin Banks BRUSSELS — After two decades in which spending was often cut or stagnant, Europe is gearing up to spend big on defense. European Union nations, now unfettered by Britain's decision to leave the organization, have achieved a 70-year-old ambition to integrate their defenses, launching a pact among 25 EU governments to jointly fund, develop and deploy armed forces. The pact, called Permanent Structured Cooperation, or PESCO, is meant as a show of unity and a tangible step in EU integration, particularly after Brexit. Earlier this year, Brussels also launched a major incentive for EU member states to cooperate on military procurement with a European Defence Fund, or EDF, worth €5 billion (U.S. $5.8 billion) per year, the first time the EU has put serious money on the table for this purpose. The EU has already approved one aspect of the fund, the European Defence Industrial Development Programme, or EDIDP, intended to foster cross-border cooperation between companies. But this huge upsurge in EU defense efforts begs the question: Are these various initiatives doing anything to bolster Europe's defense industry? Full Article: https://www.defensenews.com/top-100/2018/08/09/eu-defense-ambitions-trickle-down-to-industry-but-is-it-good-for-business/

Lee Ann Shay Boeing made another investment in additive manufacturing, this time with the intent of producing higher volume of multi-metal parts faster. Boeing HorizonX Ventures invested an undisclosed amount in Digital Alloys, which created Joule Printing, a metal additive manufacturing technology that uses metal in wire form and high deposition rates to produce the parts. The investment was part of a $12.9 million Series B financing led by G20 Ventures and included other companies. Boeing and Digital Alloys did not disclose the exact investment but Boeing said it “was a minority investor in this round.” Lee Ann Shay | Aug 10, 2018 Boeing made another investment in additive manufacturing, this time with the intent of producing higher volume of multi-metal parts faster. Boeing HorizonX Ventures invested an undisclosed amount in Digital Alloys, which created Joule Printing, a metal additive manufacturing technology that uses metal in wire form and high deposition rates to produce the parts. The investment was part of a $12.9 million Series B financing led by G20 Ventures and included other companies. Boeing and Digital Alloys did not disclose the exact investment but Boeing said it “was a minority investor in this round.” Get Key Developments Delivered to Your Inbox Get Your Sample Edition Digital Alloys holds two patents for Joule Printing, which can use multiple metals into a single part. This could enable new parts designs and improved thermal, electric and mechanical properties. This printing process is “similar to resistive welding and does not result in fully melting the material through external energy sources like lasers, e-beams, or electric arcs. As such, it has the potential to print alloys that have been a challenge with existing printing techniques, but with less energy and a lower machine complexity,” says Boeing. Joule Printing solves “three big problems that are gating the use of metal printing and production:” production costs, printing speeds and complexity, says Duncan McCallum, Digital Alloy's CEO. Full Article: https://www.mro-network.com/technology/boeing-makes-third-move-metal-additive-manufacturing-year

Le fleuron de l'armement français et ses équipements intègrent des composants américains dont Washington pourrait interdire l'exportation. Révélations. Par Ariane Lavrilleux et Guerric Poncet Ala veille de sa rencontre avec Vladimir Poutine à Helsinki mi-juillet, Donald Trump s'est fendu d'une phrase que les industriels français n'ont pas oubliée : « L'Union européenne est un ennemi (...) et profite vraiment des Etats-Unis. » Les mots du président de la première puissance mondiale ne sont pas que provocateurs : une véritable épée de Damoclès est suspendue au-dessus du secteur de la défense, et elle se nomme Itar. Derrière ce sigle se cache la régulation internationale sur le commerce des armes (International Traffic in Arms Regulations). Article complet: http://www.lepoint.fr/economie/pourquoi-trump-veut-briser-le-rafale-09-08-2018-2242513_28.php

By: Aaron Mehta WASHINGTON — In the early days of the Pentagon's Defense Innovation Unit Experimental, then-Defense Secretary Ash Carter stressed that the “experimental” part of the unit was vital, a sign that the Silicon Valley outreach hub could remain flexible. “DIUx is, after all, an experiment, as well as a pathfinder,” Carter said in 2016, following a relaunch of the group after a frustrating first year. “We created it so we could try new approaches, learn what works and what doesn't, and iterate until we get it right. And we'll keep iterating together and learning from each other as we go forward.” Now, three years after its founding, it appears the experiment is over. Deputy Secretary of Defense Patrick Shanahan on Thursday announced that the office will now be known only as the Defense Innovation Unit, formally dropping the “experimental” part of the title. In a memo, Shanahan called the group a “proven, valuable asset” for the department and said the name change is a testament to my commitment to the importance of its mission.” “Removing ‘experimental' reflects DIU's permanence within the DoD. Though DIU will continue to experiment with new ways of delivering capability to the warfighter, the organization itself is no longer an experiment,” Shanahan wrote. “DIU remains vital to fostering innovation across the Department and transforming the way DoD builds a more lethal force.” It's a vote of confidence that will be welcomed by the now-DIU team and its supporters, after a year where many wondered about the future of the office. Since its creation, DIUx reported directly to the defense secretary — until February of this year, when it was rolled under the undersecretary of defense for research and engineering. Raj Shah, who led the group for the last two years, stepped down earlier this year as the office's leader; a search for his full-time replacement is ongoing. And three years after the office was formed, some have questioned what exactly the group has accomplished. Full article: https://www.defensenews.com/pentagon/2018/08/09/experiment-over-pentagons-tech-hub-gets-a-vote-of-confidence/