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  • Holmes Lays Out ‘Fighter-Like’ Roadmap

    March 2, 2020 | International, Aerospace

    Holmes Lays Out ‘Fighter-Like’ Roadmap

    By John A. Tirpak ORLANDO, Fla.—Air Combat Command is shifting from a “fighter roadmap” to a “capabilities” roadmap that will capture many of the things fighters do today, but likely with new types of unmanned systems and “attritable” aircraft, Air Combat Command boss Gen. Mike Holmes said Feb. 27. Speaking with reporters at an AFA Air Warfare Symposium press conference, Holmes said ACC is grappling with “what is a fighter?” in the future. The fighter mission will give way to “attritable” aircraft and “loyal wingmen” unmanned aircraft, in addition to fighters, and possibly different kinds of manned aircraft. The roadmap will be very much dependent on the theaters in which the assets will be used. “What I would rather build is a capabilities roadmap that shows how we're going to accomplish the missions for the Air Force that we traditionally have done with fighters,” Holmes said. “And the subtlety there is, I would hope, 30 years from now, I'm not still trying to maintain 55 fighter squadrons. I think we will have advanced and there will be some other things that we'll be cutting-in.” The roadmap is in roughly five-year stages, which parallel “natural decision points” affecting chunks of the fleet, Holmes explained. The first stage seeks a replacement for the F-15C fleet, which is now aging out of the inventory. Those aircraft will be replaced by F-35s and the new F-15EXs, Holmes reported. The EXs are needed to reduce the overall age of the fighter fleet “so we can afford to sustain it,” he said, noting the EX is “what's available to us now.” The next stage “will be what we call the pre-block F-16s—the Block 25 and 30 Fighting Falcons—that we're still flying.” Within the next eight years, “depending on budgets and capabilities, we'll have to decide what we'll do about those airplanes,” Holmes said. There is an “opportunity” to cut-in “something new: low cost, attritable [aircraft], loyal wingmen, various things we're ... experimenting with.” After that, ACC will confront “the post-Block F-16s—the Block 40s and 50s—that can fly for quite a bit longer, but there is a modernization bill that would have to be spent to keep them useful,” Holmes said, suggesting further service life extension for the F-16 may be coming. Gen. Arnold Bunch, commander of Air Force Materiel Command, said the F-16 post-block fleet could be extended for as much as another 10 years of service life, starting in the mid-20s. A SLEP would have to focus first on making them safe to fly, he said, and they would need technology insertions to make them relevant, “depending on what you use them for.” The aircraft will already have Active Electronically Scanned Array radars and digital backbones, he noted. Finally, ACC is trying to decide what the Next-Generation Air Dominance system should be. “The equation and the math we use for ‘what is a fighter' still works pretty well for the European environment—the range, payload, and distance problem,” Holmes noted. But “it's not as effective a solution in the Pacific because of the distances,” and for that theater, he said, “I wouldn't expect [NGAD] to produce things that necessarily look like a traditional fighter, or in that traditional swap between range and payload that we've done.” Pacific Air Forces boss Gen. Charles Q. Brown, Jr. said in the future a family of systems approach will be more useful given the size of the area of operations and the differences in the adversary. “The family of systems provides us some level of advantage. If you're looking for a single point solution that has to be a fighter. It's the fighter, but not the information that comes off the fighter, the information the fighter gets from other platforms ... ,” Brown said. “How all that comes together will be important to support the fighter of the future, or whatever capability we have.” Holmes said Will Roper, the Air Force acquisition chief, is thinking about more low-cost “attritable” options for the Pacific, “thinking about that long-range problem, what might we come up with.” He has previously allowed that something akin to a large missileer, potentially a variant on the B-21, could be part of the mix, and ACC is also thinking about an “arsenal plane” concept. “Those discussions are going on, and they should be,” Holmes added. But “it is still ... our responsibility to the rest of the force to control the air and space on their behalf.” Roper's team is working with industry to pursue a new “digital” prototyping approach that Holmes said he's pleased with. He noted that Boeing was able to win the T-7 competition by showing it can “design and build airplanes in a different way and at a cost point nobody expected,” and “we think we have the opportunity to spread that across the other things we're doing.” He also says there is support from Capitol Hill with the approach at this stage, and ACC is working hard to share information on the future of ACC combat capabilities at “the right level” of classification. https://www.airforcemag.com/holmes-lays-out-fighter-like-roadmap/

  • Government checks another box on the long, long road to building a Polar icebreaker

    March 2, 2020 | Local, Naval

    Government checks another box on the long, long road to building a Polar icebreaker

    David Pugliese, Ottawa Citizen The federal government is requesting information from industry on which shipyard has the capability to build the Canadian Coast Guard's new Polar Class icebreaker. It's a strange request in some respects. Last year the Liberal government took away the Polar Class icebreaker project from Seaspan shipyards on the west coast and instead provided that company with a deal that will see it build 16 new Multi-Purpose Vessels for the Canadian Coast Guard. Irving on the east coast is running at full speed handling the combat ship portions of the National Shipbuilding Strategy. It has already fallen behind on the delivery of the first of the Arctic and Offshore Patrol Ships and it still has much work to do on the Canadian Surface Combatant program. It was expected that Davie, the largest shipyard in Canada, would receive the contract to build the Polar Class icebreaker. Yet the news release issued Friday from Public Services and Procurement Canada noted that, “the Government of Canada issued a Request for Information (RFI), open to all Canadian shipyards, seeking information on domestic shipyard capability and capacity to construct and deliver a Polar-class icebreaker. This follows standard procurement practices, and the information gathered will help the government determine how best to proceed so that the polar icebreaker is delivered in the most timely and efficient manner.” Companies, however, only have two weeks to respond to the request for information. The whole exercise has the feel of a government checking the boxes off before awarding the contract to Davie. Or it could be a measure to head off any legal challenge from other shipyards who would complain that a “fair, open and transparent” competition was not run. Cecely Roy, press secretary to Procurement Minister Anita Anand, said in an email to this newspaper that as “a significant amount of time has passed since the last commissioned studies on the capacity of domestic shipyards, this RFI was initiated to provide updated information to inform the government's decisions on the procurement process moving forward.” The polar icebreaker, the future Canadian Coast Guard Ship (CCGS) John G. Diefenbaker, will replace Canada's current largest icebreaker, the CCGS Louis S. St-Laurent. The current fleet of heavy icebreakers, including the CCGS Louis S. St-Laurent, remain in good condition and will be in operation until the polar icebreaker is delivered, according to the federal government. The Polar Class project was announced by the Conservative government in 2008 and has faced delays ever since. The ship had been expected to be in service in 2017. That date changed to 2021. Now there is no known date for the vessel to be operating. “The delivery date for the polar icebreaker will be identified as the project gets underway,” the federal government added in its news release. “At this stage, we are exploring options to ensure the Polar Icebreaker is built in the most efficient manner to meet the needs of the Coast Guard, but a decision was not been made on the contract award, nor will this RFI result in that decision,” Roy said in an email to this newspaper. https://www.thechronicleherald.ca/news/canada/government-checks-another-box-on-the-long-long-road-to-building-a-polar-icebreaker-417217/

  • Défense spatiale : la France a rejoint le Combined Space Operations Initiative (CSpO)

    March 2, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

    Défense spatiale : la France a rejoint le Combined Space Operations Initiative (CSpO)

    Christelle Perret C'est officiel, depuis le 11 février 2020, la France a rejoint l'initiative Combined Space Operations (ou CSpO) en qualité de membre aux côtés de six autres nations : l'Australie, le Canada, la Nouvelle-Zélande, le Royaume-Uni, les États-Unis et l'Allemagne. C'est lors de la réunion annuelle des états membres, qui s'est tenue les 11 et 12 février 2020 à Ottawa, au Canada, que la France a signé la lettre d'adhésion au CSpO. L'objectif de cette initiative est le développement d'une collaboration spatiale et l'élargissement de partenariats clés entre les pays signataires. L'initiative Combined Space Operations Le CSpO est une initiative assez récente. Actée initialement en 2014, elle rassemblait à ses débuts les États-Unis, l'Australie, le Canada et le Royaume-Uni. La Nouvelle-Zélande a adhéré au projet en 2015. En 2016, ce sont la France et l'Allemagne qui le rejoignaient, en qualité d'observateurs d'abord, avant de devenir membres associés en 2017. En décembre 2019, l'Allemagne devient finalement membre officiel, suivie de près par la France, ce 11 février 2020, lors de la réunion annuelle des nations membres, à Ottawa. L'objectif de l'initiative est toujours le même qu'exprimé en 2014 : développer la collaboration spatiale et les partenariats clés entre les nations membres. C'est Michel Friedling, Général de division aérienne à la tête du commandement de l'espace, qui a fait le déplacement pour signer la lettre d'adhésion à l'initiative CSpO, au nom de Florence Parly, ministre des Armées. Le CSpO pour coordonner la défense spatiale Lors des échanges des 11 et 12 février derniers, les nations membres ont évoqué les enjeux spatiaux actuels et futurs, abordant également la question de la coordination des politiques, des opérations et des capacités mondiales. Il a également été question des défis et des opportunités de 2019, pour aboutir à un bilan de l'année écoulée. La France partage donc désormais les intérêts de l'initiative CSpO,soit la participation à des efforts coordonnés dans le domaine de la défense spatiale. L'existence d'une telle initiative doit permettre d'améliorer les capacités spatiales des nations membres et de faciliter les actions conjointes entre les participants. Le Général John Raymond, commandant de la force spatiale américaine, a déclaré être ravi de l'entrée de la France et de l'Allemagne au CSpO, qui correspond au « renforcement de notre conscience collective du domaine spatial », précisant que « nos alliés nous aident à conserver notre supériorité spatiale et à renforcer les bases de notre efficacité au combat ». https://www.clubic.com/mag/sciences/conquete-spatiale/actualite-886069-defense-spatiale-france-rejoint-combined-space-operations-initiative-cspo.html

  • Pushing fighter jet deadline raises questions on which jets can do the work: experts

    March 2, 2020 | Local, Aerospace

    Pushing fighter jet deadline raises questions on which jets can do the work: experts

    Amanda Connolly GlobalNews.ca WATCH: Canadian fighter jets intercepted two Russian bombers travelling near the North American coastline. While they were in international airspace they entered an area patrolled by the Canadians. The two American aerospace firms that want the Canadian government to buy their fighter jets say they did not request an extension on the deadline for bids. At the same time, defence experts say the decision to grant the extension reflects the bigger challenge facing a government that has repeatedly insisted a competition is the only way to move forward with the $19-billion procurement, despite there being a limited pool of options. “The government believes it needs to run a competition, but there're many situations where, in reality, there's only one or two competitors that can actually meet the needs of the Canadian Forces,” said Richard Shimooka, a senior fellow at the Macdonald-Laurier Institute and an expert on defence. “So the government's put in a bit of a pickle by its rhetoric where it wants to portray that ‘yeah, we're having a competition or we're providing value for money and all these kind of important things for Canada', but in fact knows there's really only one competitor.” On Tuesday, the government announcement that the March 30 deadline will be pushed back three months, to June 30 instead. READ MORE: Canadian fighter jet replacement project hit with another delay In a press release on the decision earlier in the week, the government had said this extension was being granted “at the request of industry.” “Procurements of this magnitude are complex, and submission of a good proposal is important for suppliers and for Canada,” the government said in the press release. “This extension allows eligible suppliers to address recent feedback on their security offers, ensuring that Canada receives competitive proposals that meet its technical, cost and economic benefits requirements.” Global News has since been told that feedback included specific assessments about whether a firm would be able to meet the Canadian government's requirements for inter-operability with key allies, including the U.S. and the Five Eyes, and whether allies would be comfortable with them. Because the government is using a process known as phased bids for the fighter jet procurement, bidders get the chance to address any findings of non-compliance with those requirements before submitting their final proposals. And because of how closely Canada and the U.S. work together on issues ranging from intelligence sharing, continental defence and others, inter-operability – or the ability for jets to work seamlessly across various areas where Canadian and American systems overlap – is considered key to this contest. “We've got to buy aircraft that can be completely and seamlessly inter-operable with the U.S.,” said Dave Perry, vice president of the Canadian Global Affairs Institute and an expert on defence procurement. “They've asked the bidders to put forward a proposal on how they're going to make that work.” Perry noted that in the past, questions around how aircraft will operate between Canadian and American systems hasn't been relevant because Canadian fighter jets have always been American. Now, with foreign bidders like Sweden's Saab, the onus is on them to demonstrate their jets can actually do the work. “Saab is the only competitor that is not part of either Five Eyes or Two Eyes and as a result, it would have the greatest amount of work in order to meet the requirements of the Royal Canadian Airforce,” said Shimooka. “Right off the bat, it requires the greatest amount of work for this.” While the government wouldn't say which firm asked for the deadline extension, both Lockheed Martin and Boeing offered statements saying it wasn't them. “We did not request the extension,” said Boeing spokesperson Stephanie Townend. A spokesperson for Lockheed Martin offered a similar response. “We have not requested an extension of delivery for the FFCP preliminary proposal,” said Amanda Hauck, strategic communications lead for the firm. A spokesperson for Saab was less clear. “While Canada's FFCP competition prohibits bidders from commenting publicly on confidential elements of the RFP process, Saab was prepared, and remains prepared, to submit a bid based on the Government of Canada's schedule,” said Patrick Palmer, executive vice president of sales and marketing for Saab Canada. “Saab will continue to finalize its response to all stated requirements of the RFP and can confirm that we will submit a fully compliant response to the Future Fighter Capability Program RFP. We are confident that our offer will provide the best value and best solution for Canada, industry and Canadians for generations to come.” Global News followed up with a request for Palmer to clarify whether the bid Saab said it was prepared to submit by the March 30 deadline would have been a fully compliant one. The company has not yet clarified its response. Saab is offering its Gripen fighter jet in the contest while Lockheed Martin is offering its controversial F-35 and Boeing is offering its Super Hornet. Two other European firms – Airbus and Dassault – dropped out of the contest over the past year-and-a-half, citing security requirements and associated extra costs for the suppliers if chosen. The competition is complicated though by questions and past concerns about both of the American offerings. Boeing brought a trade tribunal complaint against the Canadian aerospace firm Bombardier in 2018 which resulted in Bombardier being forced to pay steep duties on imports of its C-Series plane to the United States. Innovation Minister Navdeep Bains said shortly afterward that the government would weigh a company's “economic behaviour” and that those who had caused economic harm to Canada would be at a disadvantage in the fighter jet competition. That clause still exists in the criteria being used to assess the projects. But Prime Minister Justin Trudeau also promised during the 2015 election campaign not to buy the F-35, the planned procurement of which under the previous Conservative government had been dogged with accusations of hidden costs and sole-sourcing. Since the launch of the competition, the F-35 has become widely-viewed by military experts as a frontrunner in the contest. A government source speaking on background insisted the extension will not impact the expected decision date. The result of the contest are due in 2022 with expected delivery of whichever jet is chosen beginning in 2025. https://q107.com/news/6600416/canada-fighter-jet-competition/

  • Musk Tells USAF Fighter Era Is Over

    March 2, 2020 | International, Aerospace

    Musk Tells USAF Fighter Era Is Over

    Lee Hudson ORLANDO, Florida—Billionaire entrepreneur and SpaceX founder Elon Musk has told the U.S. Air Force the fighter era is over. “The really dangerous future” is autonomous drone warfare, Musk said Feb. 28 during the annual Air Warfare Symposium here. Musk said he does not necessarily like this idea but it will become reality. Another controversial opinion he offered is that the Lockheed Martin F-35 should have a competitor. A few hours after his presentation, Musk elaborated on Twitter: “The competitor should be a drone fighter plane that's remote controlled by a human, but with its maneuvers augemented by autonomy. The F-35 would have no chance against it.” Over the next five years, artificial intelligence will be the most transformative technology to shape the space industry, Musk says. Accordingly, he encourages young people to study physics and computer science. The Pentagon continues to invest in this technology and is proposing that a substantial amount of its research and development dollars go toward artificial intelligence. Musk warns if the U.S. does not invest heavily in space it will fall behind adversaries, but said establishing a Space Force is a step in the right direction. The nation must rapidly innovate and instill the idea that failure is acceptable, he added. If the U.S. military does not let its people innovate and fail, Musk cautions, the nation may fall behind when developing future technology. For example, when SpaceX developed its Starlink constellation it started manufacturing satellites while still evolving the design. This helped the team discover what parts were difficult to build and redesign those sections for easier production. https://aviationweek.com/shows-events/air-warfare-symposium/musk-tells-usaf-fighter-era-over

  • Growing threat at high altitude: innovation to fight drones

    March 2, 2020 | International, Aerospace

    Growing threat at high altitude: innovation to fight drones

    Over the past ten years, the growing availability of Unmanned Aerial Vehicles (UAV), commonly known as drones, has been a blessing for video enthusiasts and other tech addicts. But it also created a headache for safety authorities. To respond to this flourishing market, countermeasures are being developed in parallel, and represent a full-fledged business today. Very early after their appearance on the market, drones invited themselves on the battlefield. In 2014, the Islamic state was already using versions (Phantom 3 or 4) for reconnaissance. Then came the suicide drones, fitted with makeshift grenades. Conventional armies are also increasingly relying on them. If the United States used to have a quasi-monopoly on offensive UAVs at the beginning of the 21st century, countries such as China, Russia, and even Iran are constantly trying to fill the gap. In 2019, a wave of Iranian-made Qasef drones operated by the Houthi rebels took Saudi Arabia by surprise. Despite the presence of modern anti-aircraft missile systems such as the Patriot, the refineries of Abqaiq and Khurais, eastern Saudi Arabia, were heavily damaged, putting half of the country's oil production to a halt. Even in times of peace, UAVs can constitute a threat. In January 2019, drones caused a panic at London Gatwick Airport (LGW), United Kingdom, in the days preceding Christmas. The airport was closed for three days, creating a financial loss of several millions of pounds. The following months, less successful drone incidents also disturbed traffic at Changi Airport (SIN) in Singapore and at London Heathrow (LHR). To raise awareness of this danger and the lack of readiness, Greenpeace activists intentionally crashed several drones against French nuclear plants. A drone to rule them all In a similar fashion to the airports that have decided to rely on falconry to prevent birdstrikes, Fortem Technologies has decided to fight fire with fire. The US-based company offers several solutions to secure sites at risk from drone threats. A centralized system called SkyDome relies on an array of sensors, cameras and radars to monitor the surroundings and identify potential threats. The integrated artificial intelligence is capable of differentiating a bird from a drone, and to judge if the latter poses a threat or not. Once the threat is identified, SkyDome sends the HunterDrone capable to intercept the culprit and to fish it out of the air using a projectable net. Fortem Technologies has recently caught the interest of the U.S. Department of Defense (DoD). On February 3, 2020, the company announced it had been awarded a contract through the Defense Innovation Unit (DIU). While the price of the contract is unknown, it appears that the DoD chose to acquire the whole set of solutions. “Fortem has a number of technologies that can help protect military bases without adverse effects to local communities,” the manufacturer said. The Israeli company Rafael also offers a centralized system, but with a different solution. Named DroneDome (in reference to the Iron Dome that defends Israel from missile threats) it relies either on a precise jammer, or on a powerful laser. It was this system that put an end to Gatwick's mayhem. It was also used in 2018 to secure the G20 Buenos Aires summit. Man-portable solutions also exist. During the last national day in France, the military presented to the officials two anti-drone rifles (the Nerod F5 by the French-based MC2-Technologies and the DroneGun Tactical by the Australian company DroneShield). The purpose of those Star-Wars-like devices is not to destroy the enemy drones as one could expect, but to jam their signals. When they lose contact with their control base, drones usually go back to their takeoff point or stay in stationary flight until they run out of battery. That solution avoids for dangerous debris to fall and create collateral damages, for example onto a crowd during an event. https://www.aerotime.aero/clement.charpentreau/24617-growing-threat-at-high-altitude-innovation-to-fight-drones

  • Contract Awards by US Department of Defense - February 28, 2020

    March 2, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

    Contract Awards by US Department of Defense - February 28, 2020

    ARMY Ceradyne Inc., Irvine, California (W91CRB-20-D-0007); and TenCate Advanced Armor USA Inc., Hebron, Ohio (W91CRB-20-D-0008), will compete for each order of the $264,638,260 cost-plus-fixed-fee, firm-fixed-price contract for X-Side Ballistic Insert hard armor plates. Bids were solicited via the internet with two received. Work locations and funding will be determined with each order, with an estimated completion date of Feb. 27, 2024. U.S. Army Contracting Command, Aberdeen Proving Ground, Maryland, is the contracting activity. Southwest Valley Constructors Co., Albuquerque, New Mexico, was awarded a $175,415,000 firm-fixed-price contract for the design-build of the Rio Grande Valley Sector 07 border infrastructure construction project. Bids were solicited via the internet with five received. Work will be performed in Rio Grande City, Texas, with an estimated completion date of Oct. 4, 2021. Fiscal 2018 and 2019 appropriation funds in the amount of $175,415,000 were obligated at the time of the award. U.S. Army Corps of Engineers, Louisville, Kentucky, is the contracting activity (W9126G-20-F-A001). Vectrus Systems Corp., Colorado Springs, Colorado, was awarded a $121,777,015 modification (P00053) to contract W91RUS-13-C-0006 for continued support of critical operation, maintenance and defense of Army communications. Work will be performed in Kuwait, with an estimated completion date of Aug. 28, 2020. Fiscal 2020 operations and maintenance funds in the amount of $121,777,015 were obligated at the time of the award. U.S. Army Contracting Command, Aberdeen Proving Ground, Maryland, is the contracting activity. Fechheimer Brothers Co, Cincinnati, Ohio, was awarded a $99,000,000 firm-fixed-price contract for procurement of the Army Green Service Uniform. Bids were solicited via the internet with one received. Work locations and funding will be determined with each order, with an estimated completion date of Feb. 25, 2021. U.S. Army Contracting Command, Aberdeen Proving Ground, Maryland, is the contracting activity (W911QY-20-D-0012). J & J Maintenance Inc., Austin, Texas, was awarded an $86,190,738 modification (P00004) to contract W81K04-19-D-0011 for healthcare environmental services in support of San Antonio Military Medical Center-North. Bids were solicited via the internet with one received. Work locations and funding will be determined with each order, with an estimated completion date of Jan. 31, 2021. U.S. Army Health Contracting Activity, San Antonio, Texas, is the contracting activity. General Dynamics Land Systems, Sterling Heights, Michigan, was awarded an $83,859,066 modification (P00074) to contract W56HZV16-D-0025 to extend the period of performance by 12 months on the contractor's efforts to maintain and deploy the Stryker Family of Vehicles. Bids were solicited via the internet with one received. Work locations and funding will be determined with each order, with an estimated completion date of Feb. 28, 2021. U.S. Army Contracting Command, Detroit Arsenal, Michigan, is the contracting activity. Leidos Inc., Gaithersburg, Maryland, was awarded a $33,330,855 modification (P00030) to contract W58RGZ-17-C-0058 for contractor logistics support services in Afghanistan in support of the Afghanistan Air Force and Special Mission Wing. Work will be performed in Kabul, Afghanistan, and Gaithersburg, Maryland, with an estimated completion date of May 31, 2020. Fiscal 2020 Afghanistan Security Forces, Army and operations and maintenance, Army funds in the amount of $33,330,855 were obligated at the time of the award. U.S. Army Contracting Command, Redstone Arsenal, Alabama, is the contracting activity. Raytheon/Lockheed Martin Javelin JV, Tucson, Arizona, was awarded an $18,431,215 modification (P00022) to contract W31P4Q-19-C-0059. Work will be performed in Tucson, Arizona, with an estimated completion date of June 25, 2020. Fiscal 2020 operations and maintenance, Army, and foreign military sales (Australia, Czech Republic, Estonia, France, Georgia, Indonesia, Ireland, Jordan, Lithuania, New Zealand, Norway, Oman, Qatar, Turkey, Ukraine and United Arab Emirates) funds in the amount of $18,431,215 were obligated at the time of the award. U.S. Army Contracting Command, Redstone Arsenal, Alabama, is the contracting activity. Rore Corp, San Diego, California, was awarded a $17,249,182 firm-fixed-price contract for construction of a new jet fuel complex with field erected vertical storage tanks, pump shelter, truck fill stands, offloads, and refueler truck parking at the Air National Guard Base at the Fresno-Yosemite International Airport. Bids were solicited via the internet with three received. Work will be performed in Fresno, California, with an estimated completion date of Feb. 28, 2022. Fiscal 2016 military construction, defense-wide funds in the amount of $17,249,182 were obligated at the time of the award. U.S. Army Corps of Engineers, Sacramento, California, is the contracting activity (W91238-20-C-0005). National Conferencing Inc., Dumfries, Virginia, was awarded a $22,483,731 cost-no-fee contract for event planning and logistical support services for the Office of the Chief of Chaplains. Bids were solicited via the internet with one received. Work will be performed in Dumfries, Virginia, with an estimated completion date of June, 30, 2020. Fiscal 2020 operations and maintenance, Army funds and overseas contingency operations, defense funds in the amount of $14,714,154 were obligated at the time of the award. Field Directorate Office, Fort Sam Houston, Texas, is the contracting activity (W9124J-20-C-0005). National Industries for the Blind, Alexandria, Virginia, was awarded a $13,641,430 modification (P00005) to contract W911QY-19-C-0025 for Advanced Combat Shirts. Work will be performed in Alexandria, Virginia, with an estimated completion date of Feb. 28, 2021. Fiscal 2020 operations and maintenance, Army funds in the amount of $13,641,430 were obligated at the time of the award. U.S. Army Contracting Command, Aberdeen Proving Ground, Maryland, is the contracting activity. Kiewit Infrastructure West Co, Vancouver, Washington, was awarded a $10,150,000 modification (P00017) to contract W912DW-18-C-0011 for construction of a fish passage facility at Mud Mountain Dam. Work will be performed in Buckley, Washington, with an estimated completion date of Sept. 22, 2022. Fiscal 2018 civil construction funds in the amount of $10,150,000 were obligated at the time of the award. U.S. Army Corps of Engineers, Seattle, Washington, is the contracting activity. AIR FORCE Northrop Grumman Systems Corp., Linthicum Heights, Maryland, has been awarded a $262,281,057 firm-fixed price modification (P00027) to previously awarded contract FA8615-17-C-6047 for Active Electronically Scanned Array radars of Air Force F-16 aircraft. This modification is for the exercise of options to include 15 engineering, manufacturing and development and 90 production radars, as well as associated support equipment and spares. Work will be performed at Linthicum Heights, Maryland, and is expected to be completed by Dec. 2022. The total cumulative face value of the contract is $553,448,803. Fiscal 2020 research and development funds in the amount of $34,182,567; fiscal 2018 procurement funds in the amount of $88,201,189; and fiscal 2020 procurement funds in the amount of $197,955,911 are being obligated at the time of award. The Air Force Life Cycle Management Center, Fighter Bomber Directorate, F-16 Division, Wright Patterson Air Force Base, Ohio, is the contracting activity. Teledyne Brown Engineering Inc., Huntsville, Alabama, has been awarded a $40,000,000 ceiling, hybrid indefinite-delivery/indefinite-quantity, firm-fixed-price and cost-plus-fixed-fee contract for the production of the Automated Radioxenon Concentrator and Spectrometer (ARCS) production units and spares. This contract will produce a multiple high sensitivity radioxenon sampler systems for the nuclear test monitoring requirements of the United States Atomic Energy Detection System network to verify international treaties. The current ARCS system was developed with the needs of both the Air Force Technical Applications Center and the Comprehensive Test Ban Treaty Organization (CTBTO) in mind. The CTBTO operates a world-wide network of nuclear sensing stations called the International Monitoring System. The work is expected to be completed by Jan. 31, 2028. This award is the result of a sole-source acquisition. Fiscal 2020 other procurement funding in the amount of $4,519,077 will be obligated in Task Order 0001 at the time of award. The Acquisition Management Integration Center, Patrick Air Force Base, Florida, is the contracting activity (FA7022-20-D-0003). Southern Methodist University, Dallas, Texas, has been awarded a $17,957,968 cost reimbursable, no-fee contract for Seismic-Acoustic Monitoring Program IV. This contract provides operations and maintenance (O&M) and research and development (R&D) support to the Air Force Technical Applications Center mission by operating, maintaining and sustaining geophysical equipment in Korea. Work will be performed in Dallas, Texas, and locations in Korea, and is expected to be completed by Nov. 30, 2028. This award is the result of a sole-source acquisition. Fiscal 2020 O&M funds in the amount of $1,023,637 and R&D funds in the amount of $418,105 are being obligated at the time of award. The Acquisition Management Integration Center, Patrick Air Force Base, Florida, is the contracting activity (FA7022-20-C-0003). Tyonek Global Services LLC, Anchorage, Alaska, has been awarded a $15,060,087 contract modification (P00006) to previously awarded FA8773-19-C-A004 for cyber operations formal training support. The contract modification exercises option year one of the four year contract. Work will be performed at Hurlburt Field, Florida, and Joint Base San Antonio, Texas, and is expected to be complete by Feb. 28, 2021. Fiscal 2020 operations and maintenance funds in the amount of $ $3,765,021 are being obligated at the time of award. The 38th Contracting Squadron, Tinker Air Force Base, Oklahoma, is the contracting activity. 22nd Century Technologies Inc., Somerset, New Jersey, has been awarded a firm-fixed price contract for $9,060,499 to execute option four (P00016) of previously awarded multi-year contract FA8773-15-C-0067 for essential capabilities to support the 33rd Network Warfare Squadron (33 NWS) in conducting its mission of Defense Cyber Operations (DCO) for the Air Force (AF) and supported unified commands and their combatant commands. The contractor plans, implements and executes the 33 NWS managed AF DCO Mission. In addition, support is required for conducting analysis of all network defense events, alerts and traffic on all network Intrusion Detection System and Intrusion Prevention System, Non-secure Internet Protocol Router Network and Secure Internet Protocol Router Network for the 33 NWS. Work will be performed at Joint Base San Antonio-Lackland, Texas, and is expected to be complete by Feb. 28, 2021. The award is the result of a competitive acquisition with eight proposals received. Fiscal 2020 operations and maintenance funds in the amount of $8,315,457 are being obligated at the time of the award. The 38th Contracting Squadron, Tinker Air Force Base, Oklahoma, is the contracting activity. Data Computer Corp. of America, Ellicott City, Maryland, has been awarded a $7,201,112 contract modification (P00025) to a previously awarded contract FA8806-16-F-0002 for Western Range Modernization Network. This contract modification is for an engineering change proposal that supports the modernization of the Western Range Communications Subsystems to an IP-based network that supports data, voice and video mission communication, ensuring that there is continuity of services. The location of performance is Vandenberg Air Force Base, California, and is estimated to be completed by March 31, 2023. Fiscal 2019 space and procurement funds are being obligated at the time of award. The total cumulative face value of the contract is $89,028,641. Peterson Air Force Base, Colorado Springs, Colorado, is the contracting activity. NAVY Bell-Boeing Joint Project Office, Amarillo, Texas, is awarded a $165,275,894 modification (P00028) to a previously awarded fixed-price-incentive-firm-target, cost-plus-fixed-fee contract (N00019-17-C-0015) for the manufacture and delivery of two MV-22B variation in quantity aircraft for the Marine Corps and to provide funding for additional repairs in support of the Common Configuration-Readiness and Modernization Program. Work will be performed in Fort Worth, Texas (30%); Ridley Park, Pennsylvania (15%); Amarillo, Texas (13%); Red Oak, Texas (3%); East Aurora, New York (3%); Park City, Utah (2%); McKinney, Texas (1%); Endicott, New York (1%); various other locations within the continental U.S. (CONUS) (28%); and various other locations outside CONUS (4%); expected completion by September 2023. Fiscal 2020 aircraft procurement (Navy) funds in the amount of $165,275,894 will be obligated at time of award, none of which will expire at the end of the current fiscal year. The Naval Air Systems Command, Patuxent River, Maryland, is the contracting activity. Lockheed Martin Corp., Lockheed Martin Aeronautics Co., Fort Worth, Texas is awarded a $141,655,639 modification (P00028) to a previously awarded fixed-price-incentive-firm-target contract (N00019-18-C-1048). This modification provides for the stand-up of organic level repair capabilities for the combat aircraft F-35 communications, navigation and information system. Work will be performed in San Diego, California (39%); Fort Worth, Texas (28%); Melbourne, Florida (12%); Genoa, Italy (10%); White Plains, New York (5%); Oslo, Norway (4%); and Beverly, Massachusetts (2%), and is expected to be completed by June 2024. Fiscal 2019 aircraft procurement (Air Force) funds in the amount of $70,827,820, fiscal 2019 aircraft procurement (Navy) funds in the amount of $35,413,910 and fiscal 2019 aircraft procurement (Marine Corps) funds in the amount of $35,413,909 will be obligated at time of award, none of which will expire at the end of the current fiscal year. The Naval Air Systems Command, Patuxent River, Maryland, is the contracting activity. AAI Corp. (doing business as Textron Systems), Hunt Valley, Maryland, is awarded a $21,795,236 fixed-price incentive modification to previously awarded contract N00024-14-C-6322 for low rate initial production for the Unmanned Influence Sweep System (UISS) Unmanned Surface Vehicle Program. Work will be performed in Hunt Valley, Maryland (70%), and Slidell, Louisiana (30%), and is expected to be completed by August 2021. The UISS will allow the littoral combat ship to perform its mine countermeasure sweep mission and will target acoustic, magnetic, and magnetic/acoustic combination mine types. The UISS program will satisfy the Navy's need for a rapid, wide-area coverage mine clearance capability, required to neutralize magnetic/acoustic influence mines. UISS seeks to provide a high area coverage rate in a small, lightweight package with minimal impact on the host platform. Fiscal 2018 other procurement (Navy) and fiscal 2019 other procurement (Navy) funding in the amount of $21,795,236 will be obligated at time of award. Funds in the amount of $7,950,616 will expire at the end of the current fiscal year. The Naval Sea Systems Command, Washington, District of Columbia, is the contracting activity. ACE Maintenance and Services Inc.,* Austin, Texas, is awarded an $18,382,094 for an indefinite-delivery/indefinite-quantity (IDIQ) modification contract extension under an IDIQ contract for janitorial services at Naval Support Activity Bethesda. Work will be performed in Bethesda, Maryland. The work provides all labor, management supervision, tools, materials and equipment required for base janitorial services. After award of this modification, the total cumulative contract value will be $98,217,616 with an option period from March 2020 to February 2021. No funds will be obligated at time of award. Fiscal 2020 operations and maintenance (O&M), (Navy); O&M, (Army); Navy working capital fund; and fiscal 2020 Defense Health Program funds in the amount of $18,195,525 for recurring work will be obligated on individual task orders issued during the option/extension period. The Naval Facilities Engineering Command, Washington, District of Columbia, is the contracting activity (N40080-15-D-0305). PERC Water Corp.,* Costa Mesa, California, is being awarded a $17,209,469 firm-fixed-price contract for the operation and maintenance of the southern and northern tertiary treatment plants on Marine Corps Base (MCB) Camp Pendleton, California. Work will be performed in Camp Pendleton, California, and is expected to be completed by March 2025. The work to be performed provides for labor, supervision, management and materials to simultaneously perform the operation and maintenance services of the southern regional tertiary treatment plant and the northern regional tertiary treatment plant on MCB Camp Pendleton, including wastewater, custodial, pest control, integrated solid waste management, grounds maintenance and landscaping. Fiscal 2020 operations and maintenance contract funds in the amount of $2,930,349 are obligated on this award and will expire at the end of the current fiscal year. This contract was competitively procured via the beta.SAM.gov website with two proposals received. The Naval Facilities Engineering Command, Southwest, San Diego, California, is the contracting activity (N62473-20-D-0019). Lockheed Martin Rotary and Mission Systems, Liverpool, New York, is awarded a $16,388,917 firm-fixed-price contract for the procurement of towed arrays and provisioned item orders to support an indefinite quantity of spares; cost-plus-fixed-fee for engineering services for post-delivery support, including repairs and engineering upgrades, the array refurbishment program, cost-only for travel and material in support of engineering services and refurbishments. Work will be performed in Liverpool, New York, and is expected to be completed by February 2025 for the production, integration, assembly, test and delivery of towed arrays as well as engineering services for repairs and refurbishment of existing towed arrays. This contract includes options which, if exercised, would bring the cumulative value of this contract to an estimated $286,797,228. Fiscal 2020 operations and maintenance (Navy) funding in the amount of $300,000 will be obligated at time of award and will expire at the end of the current fiscal year. Fiscal 2019 other procurement (Navy) funding in the amount of $9,008,489 and fiscal 2020 other procurement (Navy) in the amount of $2,201,055 will not expire at the end of the current fiscal year. This contract was not competitively procured because it is a sole-source acquisition pursuant to the authority of 10 U.S. Code 2304(c)(1) with only one responsible source (Federal Acquisition Regulation subpart 6.302-1). The Naval Information Warfare Systems Command, San Diego, California, is the contracting activity (N00039-20-C-0003). VSE Corp., Alexandria, Virginia, is awarded a $10,034,417 firm-fixed-price contract with cost contract line items for materials, shipping and travel to support the procurement of equipment maintenance and test support services. This contract will provide vehicle maintenance and configuration support for the Assault Amphibious Vehicle and Amphibious Combat Vehicle family of vehicles in support of Program Executive Officer Land Systems, Quantico, Virginia. Work will be performed in Caroline County, Virginia, and is expected to be completed in April 2021. Fiscal 2020 operations and maintenance (Marine Corps) funds in the amount of $240,000, fiscal 2020 procurement (Marine Corps) funds in the amount of $2,772,662 and fiscal 2020 research development test and evaluation (Marine Corps) funds in the amount of $1,507,003 will be obligated at the time of award. Fiscal 2020 operations and maintenance (Marine Corps) funds in the amount of $240,000 will expire at the end of the current fiscal year. This contract 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 Marine Corps Systems Command, Quantico, Virginia, is the contracting activity (M67854-20-C-0030). RQ Construction LLC., Carlsbad, California, is awarded an $8,634,814 for a firm-fixed-price contract modification under indefinite-delivery/indefinite-quantity multiple award construction contract task order (N40085-19-F-7171) for construction services for the Mariner Skills Training Center at Naval Station Norfolk. Work will be performed in Norfolk, Virginia, and is expected to be completed by August 2021 and provides construction services for site work, rough grade, pile caps and grade beams. The total contract amount after exercise of this option will be $9,009,814. Fiscal 2020 military construction and Navy contract funds will be obligated on this award and will not expire at the end of the current fiscal year. This contract was competitively procured by a multiple award construction contract with six proposals received. The Naval Facilities Engineering Command, Mid-Atlantic, Norfolk, Virginia, is the contracting activity (N40085-19-D-9069). RIBCRAFT USA LLC,* Marblehead, Massachusetts, is awarded an $8,477,452 for a firm-fixed-price delivery order to previously awarded contract N00024-19-D-2220 for construction of 10 Expeditionary 11 Meter Rigid Hull Inflatable Boats (RIB). Work will be performed in Marblehead, Massachusetts, and is expected to be completed by April 2022. With these 10 boats, 17 of the 48 possible RIBs will be under contract. The base contract also included options for associated support efforts related to the construction and delivery for crew familiarization, special studies, engineering and industrial services and provisioned items orders. Fiscal 2020 other procurement (Navy) funding in the amount of $8,477,452 will be obligated at time of award and will not expire at the end of the current fiscal year. The Naval Sea Systems Command, Washington, District of Columbia, is the contracting activity. Bell Helicopter Textron Inc., Fort Worth, Texas, is awarded an $8,346,395 firm-fixed-price modification (P00013) to a previously awarded fixed-price-incentive-fee contract (N00019-17-C-0030). Work will be performed in Fort Worth, Texas, and is expected to be completed in December 2020. This modification provides for the production and delivery of a fully assembled flight training device for an AH-1Z attack helicopter, excluding software integration, for the government of Bahrain. Foreign military sales funds in the amount of $6,259,796 will be obligated at time of award, none of which will expire at the end of the current fiscal year. The Naval Air Systems Command, Patuxent River, Maryland, is the contracting activity. DEFENSE LOGISTICS AGENCY Medical Digital Developers LLC, doing business as D-Scope Systems, New Rochelle, New York, has been awarded a maximum $45,000,000 firm‐fixed‐price, indefinite‐delivery/indefinite‐quantity contract for supply integrated video imaging sharing systems and other available items for these systems. This was a competitive acquisition with five responses received. This is a five-year contract with no option periods. Location of performance is New York, with a Feb. 27, 2025, performance completion date. Using customers are Army, Navy, Air Force and other federal civilian agencies. Type of appropriation is fiscal 2020 through 2025 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pennsylvania (SPE2D1‐20‐D‐0004). White Hand Global LLC,* Harrisonburg, Virginia, has been awarded a maximum $8,698,744 indefinite-delivery/indefinite-quantity contract for Bradley Fighting Vehicle metering fuel pump. This was a competitive acquisition with five responses received. This is a five-year contract with no option periods. Location of performance is Indiana, with a June 29, 2025, performance completion date. Using military service is Army. Type of appropriation is fiscal 2020 through 2025 defense working capital funds. The contracting activity is Defense Logistics Agency Land and Maritime, Warren, Michigan (SPRDL1-20-D-0069). UPDATE: Rosenbauer America LLC,* Lyons, South Dakota (SPE8EC-20-D-0055) has been added as an awardee to the multiple award contract issued against solicitation SPE8EC-17-R-0006 announced April 19, 2017. *Small business https://www.defense.gov/Newsroom/Contracts/Contract/Article/2098309/source/GovDelivery/

  • Financing Capital Assets: The Missing Link in Defence Procurement

    February 28, 2020 | Local, Aerospace, Naval, Land, C4ISR, Security

    Financing Capital Assets: The Missing Link in Defence Procurement

    by Vern Kakoschke February 2020 Introduction Defence procurement in Canada has had some well-known challenges in recent years. Many commentators have suggested possible strategies for fixing the defence procurement system. The identified problems include overspending on defence programs, unnecessary and undue delays in re-equipping Canada's fleet of aircraft, ships and ground transport, and defence budgets that remain unspent. The problems also include procuring authorities experiencing a shortfall in manpower and expertise, the inability to execute on defence procurements, unjustified sole-sourcing without a proper competition, political interference in selection issues, and the list goes on. The proposed solutions often address process-related matters: establish a single agency responsible for defence procurement or perhaps a cabinet secretariat to manage the involvement of three of four government departments who are often not on the same page. To date, not much has been written or discussed in public policy forums on a critical question: How should the necessary capital assets be financed? At one extreme, Canada could simply write a cheque and pay for them up front, thereby placing the assets on Canada's balance sheet. At the other extreme, Canada could drop the financing obligation into the laps of private-sector bidders and let them worry about the most efficient way of raising the necessary capital. A middle-ground solution could involve a public-private partnership (P3) structure, a model which seeks to balance the interests of the public and private sectors in a manner that leads to a better solution for all parties. Any public policy discussion often begins with first principles. What is the government's policy objective? It is to procure the best available equipment, with the most benefit to the Canadian economy or local interest groups and at the lowest possible cost. All three goals must be balanced in a manner that is politically acceptable, meets budget constraints and withstands public scrutiny. In major procurements, capital can be the largest single cost of a defence procurement. Conventional wisdom is that Crown debt is by far the cheapest financing alternative for any new program that requires the acquisition of capital assets. The Crown issues Government of Canada (GoC) bonds for a term that matches the expected useful life of the capital assets and the interest rate does not include a risk premium or credit spread (often called “Canada's flat”). Canada purchases the capital assets and then, if necessary, makes them available for use by a private-sector operator under a lease or loan arrangement as government-furnished equipment (GFE). The fixed-wing search and rescue (FWSAR) program is an example of a procurement in which Canada simply paid for the aircraft up front with the related maintenance services (in-service support) for the assets being funded over a long period of time. The government ownership model is simple, straightforward and enjoys the lowest capital cost. But it has two serious drawbacks. First, the GoC bonds are consolidated on the Crown's balance sheet with other Crown debt. This brings them to the attention of the major rating agencies. If the total Crown debt increases beyond acceptable rating norms, rating agencies will typically downgrade Canada's credit rating with the result that the interest rate on future GoC bond issuances will rise. Increased Crown debt may also lead to a politically unpalatable higher budget deficit. Second, the Crown typically selects the appropriate capital assets, a decision that is fraught with risk and intense public scrutiny. Politicians likely dread having to make such decisions. In a scenario where the capital assets can be bundled with required services, the Crown may prefer to procure only the services and leave the related asset selection up to the successful proponent. If the service provider bears the debt service costs and they are simply embedded into the price for services, then the program's cost can be booked in the Crown's operating budget and not its capital budget. Capital budgeting decisions tend to receive a much higher level of public scrutiny than changes to the annual operating budget. Milestone payments made to the successful proponent that are tied to the delivery of a portion of the capital assets can be buried in operating budgets. Relatively low milestone payments may not attract public scrutiny whereas higher payments in a material amount likely would. Historical Perspective The financing for the NATO Flight Training in Canada program (NFTC) can offer some historical perspective. In 1994, Bombardier made an unsolicited proposal to provide contractor-supported jet pilot training in Canada.1 The proposal contemplated certain novel economies of scale for the high fixed cost of establishing a training program. The acquisition costs and non-recurring charges would be amortized over trainees from the Canadian air force and from the air forces of participating NATO nations, thereby resulting in a lower cost per student. Less well-known was the proposal's financing package: the program's entire capital cost would be financed in a manner that was “off-balance sheet” to Canada and to Bombardier. It became known as the Milit-Air financing as it involved the establishment of a special purpose entity (SPE) called Milit-Air Inc., a not-for-profit corporation. In 1997, the Canadian government awarded Bombardier a 20-year service contract for the NFTC program, valued at $2.85 billion. Under the service contract, Bombardier was responsible for providing fully serviced aircraft, flight simulators, training content, and airfield and site-support services to the Department of National Defence (DND). Milit-Air financed all the capital assets pursuant to a bond issue to institutional investors and then leased them to Bombardier. The Milit-Air financing was completed in two tranches: the first tranche in the amount of $720 million of amortizing secured bonds was issued in 1998 and the second tranche in the amount of $106 million was issued in 2002.2 The financings coincided with the obligations to pay equipment suppliers such as Raytheon for the T-6A aircraft and British Aerospace for the Hawk 115 aircraft that were required for the training program. The SPE purchased the capital assets and leased them to Bombardier who in turn provided services to Canada in exchange for firm fixed fees and variable fees. The fixed portion of the service contract payments were “hell-or-high-water” obligations of Canada and were assigned by way of security to the SPE so that it could service the debt on the outstanding bonds. The complex financing structure is described in detail in a 2002 decision of the Ontario Securities Commission.3 The OSC concluded that the distribution of the bonds was exempt from provincial prospectus requirements even though the financing did not fall within an exemption for government debt: “the arrangements do not constitute a direct obligation of Canada to make payments on the bonds or a collateral obligation of Canada in the nature of a guarantee.” In other words, Canada did not guarantee the payments to bondholders and hence under then-applicable accounting principles, the total debt of $826 million was not consolidated with Crown debt.4 The Milit-Air financing was widely considered in financing circles to be an innovative and cutting-edge transaction well ahead of its time. Why was it admired? Standard & Poor's (S&P) rated the Milit-Air bonds. S&P rated most financing transactions involving a service contract structure and an SPE as an accommodation party at one or more notches below the then-current rating of the sponsoring government.5 Milit-Air was a rare exception. S&P awarded the Milit-Air bonds a AAA rating, the same rating as GoC bonds.6 In other words, Canada and the procuring authority for the NFTC capital assets could have its cake and eat it too: the Milit-Air bonds were not shown in the consolidated accounts of Canada as Crown debt and yet the interest rate on the bonds was the same as what Canada would have paid if it had issued GoC bonds. This was an impressive result that likely resulted in interest cost savings over the full term measured in the millions of dollars. Unfortunately, the auditor general of Canada did not see it that way. In his 1999 annual report, the AG found that the decision to award a sole-sourced contract to Bombardier (which contract was assumed by CAE Inc. in 2015) “was not adequately justified”. The AG reviewed the financing arrangement and found it to be lacking, primarily due to the fact that Canada was on the hook for the debt servicing charges even if no services were being provided. The risks were not justified in the AG's view: “The main risk is that if Milit-Air Inc were ever to become insolvent, National Defence would face the drastic consequence of losing its access to the planes while continuing to pay the firm fixed fees.”7 Perhaps the AG did not appreciate that the SPE was designed to be bankruptcy-remote and that an insolvency of Milit-Air was highly remote. The AG would have much preferred if Canada had simply purchased the capital assets outright and supplied them to the contractor as GFE. The AG also failed to acknowledge that if Canada had used the GFE approach, it would have been responsible for the debt servicing charges on the GoC bonds in any event. On an incremental risk basis, it may be that the benefits of the financing in terms of lower interest costs outweighed the incremental risks. In subsequent years, the AG continued to criticize the NFTC program and its financing. In 2002, the AG concluded that the profit margin built into the NFTC contract was excessive and could not be justified. In 2006, the AG calculated that the Crown paid about $39 million for training that it could not use. In his 2006 annual report, the AG stated that the Crown was “less than successful in obtaining foreign student commitments”. The mandarins at Public Services and Procurement Canada (PSPC) likely got the message: they would probably never again attempt a highly structured financing such as Milit-Air in a defence procurement and risk incurring the AG's wrath. A chill fell on the procuring authority. In 2003, the pendulum in respect of defence procurement contracts swung in the opposite direction. Canada released a Request for Proposals (RFP) for a contract to provide long-term primary helicopter and multi-engine fixed-wing pilot training at Southport, Manitoba. The RFP incorporated the AG's recommendations that the next training contract should have payments tied to performance and value received. The AG reviewed the draft RFP for the primary training project and found that payments would be based on milestones: “If the contractor fails to achieve the milestones, this could result in payment holdbacks and forfeiture. Incentives are also in place for good performance.”8 In 2005, Canada announced that a relatively unknown Western Canada-based aerospace company was the winner and awarded the contracted flying training support (CFTS) contract, subject to confirmation that the winner (a relatively small private company) could raise the financing.9 Details of the CFTS financing are not publicly available, apart from the fact that a $137.5-million transaction was concluded at the time of contract award.10 The Enron Debacle The Enron scandal in 2001 changed the landscape for Milit-Air style financings.11 Enron filed for bankruptcy and its accounting firm, Arthur Andersen, was dissolved. The CFO of Enron went to jail. One of the causes of their downfall was Enron's use and abuse of SPEs that enabled the company to hide hundreds of millions in liabilities from its shareholders and lenders. Largely as a result of the Enron debacle, the U.S. accounting regulator (the Financial Accounting Standards Board) changed the accounting rules to make it more difficult, if not impossible, to use off balance-sheet financing structures.12 Most large Canadian corporations that had taken advantage of such financing structures promptly reversed course and consolidated their SPEs' debt. It is not clear from the public record whether the AG also responded to the change in accounting standards by adding the outstanding Milit-Air bonds to Crown debt in the Crown's audited accounts. Future Air Crew Training (FAcT) Program The competition for the next-generation training contract started in 2013. The Crown announced that it would combine the pilot training currently being provided under the NFTC program and the CFTS program together with air crew training for combat system officers and airborne electronic sensor operators into one massive procurement.13 A RFP is expected to be released in 2020 with a contract award expected in 2021. The Crown has made no mention in its public releases how the required capital assets are expected to be financed under the FAcT program. The four qualified bidders in the FAcT competition may be faced with uncertainty in bid preparation in that they may or may not be expected to provide the financing as part of the bidding process. The amount required to refresh or fund the FAcT program's capital assets will likely be significant: if the total capital cost of the two existing programs approached $1 billion over 20 years ago, the capital cost of a refresh could be well in excess of that amount. Such an onerous financing obligation could put smaller bidders at a disadvantage to larger multinational defence contractors. Public Private Partnerships (P3s) The P3 procurement model is an investor-friendly method of transferring risk for public infrastructure projects to the private sector and enabling a private-sector financing at an acceptable risk premium over GoC bonds.14 It is all about delivering value for money. Cash-strapped provinces have enthusiastically embraced the P3 model for the design, build, operation and maintenance (DBOM) of various projects in the health-care sector, social infrastructure such as hospitals, libraries and prisons, and transportation such as roads and bridges. Relatively few P3 projects have been completed at the federal level: the RCMP headquarters in Surrey, the Gordie Howe Bridge and the Communications Security Establishment Centre (CSEC) in Ottawa. It was unfortunate that the Liberal government in 2017 disbanded PPP Canada, a Conservative-created Crown corporation that encouraged P3s at the federal level. There is no reason why the P3 model could not be applied to defence projects, particularly if they involve a mix of capital assets and service delivery, as most P3s do. Security concerns can be overcome, as was evidenced in the CSEC project. There is no loss of government control over strategic assets in any P3 deal. Contracting practices for P3 deals have been well developed over the years and the investment community has accepted the risk allocation set out in commonly used P3 documentation. No need to reinvent the wheel with new and complex documentation when preparing a RFP. Other countries, such as the U.K. and Australia, have fully embraced the P3 model (known locally as PFIs or private finance initiatives) for defence procurement and yet Canada has not followed their lead, notwithstanding the demonstrable benefits that could be derived from such an approach.15 P3s are typically built on time and on budget as the risk of delays, cost overruns and non-performance are transferred to the successful proponent in the private sector. Lessons Learned When it is released, the RFP for the FAcT procurement will provide an interesting case study for whether Canada has learned any valuable lessons from the predecessor financings undertaken in the NFTC and the CFTS programs. Some shaping principles that could be helpful when designing a defence procurement involving significant capital assets (such as FAcT) include the following: Contemplate an investor-friendly financing for the capital assets. Unless Canada prefers to increase its budget deficit by a material amount, the RFP's terms should not scare off potential investors. By adopting best practices in the P3 industry, Canada could level the playing field when it comes to financing. Each bidder should have the same opportunity to raise the capital on the strength of the underlying service contract and not simply on the strength of its balance sheet. Unwind the Milit-Air financing. The Milit-Air bonds are nearing maturity but are still outstanding. The original purpose of the financing structure – off balance-sheet accounting treatment – has disappeared. The annual cost of maintaining a not-for-profit corporation cannot be insignificant. This cost could be avoided by unwinding the financing in a manner that involves Canada stepping up to assume the obligations under the bonds as a direct obligation of the Crown. This could well facilitate transition issues between the existing NFTC assets and the refreshed assets. Involve the auditor general in the RFP design process. The AG made numerous helpful recommendations in his reports regarding the NFTC program, many of which remain valid concerns today. Has the AG ever followed up and determined the current status of his recommendations? Better transparency would assist the bidders and their investors in risk assessment. Moreover, the expected accounting treatment for all parties concerned could usefully be reviewed by the AG and anticipated in the RFP. Reconsider the use of milestone payments. If Canada intends to partially contribute toward funding the capital cost in whole or in part, the contributions could take the form of progress payments rather than milestone payments. The former payments are considered to be earned when paid, whereas the latter are considered unliquidated advance payments (meaning the Crown could claw them back in certain circumstances). No investor will wish to invest in a project where the Crown has a prior claim on the same assets funded by an investor. The AG may also consider the accounting treatment of such milestone payments, as they may in some cases be treated as being on capital account rather than on income account and buried in a government department's operating budget. Provide certainty for bidders in the RFP process. Uncertainty is the enemy of a cost-effective program. If bidders are given advance notice of the essential terms of a procurement, they can plan accordingly, including preparing for a financing that will likely require substantial amounts of debt and equity from the investment community. Any necessary governmental approvals, including from Treasury Board, would be best sought at the start of a procurement process. Leaving the funding approvals to the end as an after-thought would not be helpful. Defence procurements are large and complex. Financing considerations should be taken into account as early in the procurement process as possible. The failure to consider the appropriate financing approach for major capital assets could well add millions to an already costly program. Conversely, a properly structured procurement and related financing could save the Crown many millions in terms of the cost of capital. End Notes 1 National Defence and the Canadian Armed Forces, “NATO Flying Training in Canada: An Innovative Solution for NATO Flying Training Requirements,” Sept. 7, 1998. Available at http://www.forces.gc.ca/en/news/article.page?doc=nato-flying-training-in-canada-an-innovative-solution-for-nato-flying-training-requirements/hnlhlxhd 2 Offering Memoranda dated May 5, 1998 and June 25, 2002 issued by Milit-Air Inc. and its financial advisor and underwriter, Scotia Capital Markets. 3 In the Matter of Scotia Capital Inc. and Milit-Air Inc. Available at https://www.osc.gov.on.ca/en/SecuritiesLaw_ord_200220628_2113_scotiacapital.htm 4 The auditor general concluded in his 1999 annual report that Milit-Air was an independent organization and not subject to the control of Canada or Bombardier. In the result, the debt appeared on the balance sheet of Milit-Air Inc., but not on any other party's balance sheet. 5 The reason for the lower rating is that the payment stream under the service contract could be caught up in a service provider's bankruptcy and hence the payment flows to the bondholders could theoretically be interrupted. 6 Standard & Poors Rating Direct Report (Oct. 11, 2007). 7 1999 September and November Report of the Auditor General of Canada – Case Study 27.1-NATO Flying Training in Canada. 8 May 2006 Report of the Auditor General of Canada. 9 National Defence and the Canadian Armed Forces, “Backgrounder on CFTS,” March 30, 2005. Available at www.forces.gc.ca/en/news/article.page?doc=contracted-flying-training-and-support-cfts/hnocfoke 10 McCarthy Tétrault LLP. Available at https://www.mccarthy.ca/ 11 Many corporations in capital-intensive industries were taking advantage of off balance-sheet financing structures at that time. In such financings, the debt was typically issued by a special purpose entity that was not controlled (de jure control) by the sponsoring corporation. Hence the debt that the SPE issued was not consolidated with the sponsoring corporation's debt even though the latter was indirectly responsible for the debt servicing, typically through lease payments to the SPE. As a result, the sponsoring corporation did not put any stress on its financial covenants with its lenders and it also avoided the payment of capital tax which was based on the corporation's stated liabilities. 12 In 2009, FASB issued Interpretation FIN 46(R) entitled “Consolidation of Variable Interest Entities”. If an SPE qualified as a VIE under a new substantive test (rather than control test), the VIE's debt would have to be consolidated with the debt of the primary beneficiary (i.e., the sponsoring corporation). The Canadian accounting regulator soon followed suit with the publication of Accounting Guideline AcG-15 (Consolidation of VIEs). 13 FAcT website: www.tpsgc-pwgsc.gc.ca/app-acq/amd-dp/air/snac-nfps/ffpn-fact-eng.html 14 Many P3 projects have been financed at interest rates based on the then-prevailing applicable GoC bond rate plus a credit spread of 150 -200 bps. 15 The benefits have been well documented by the Canadian Council for PPPs in numerous published studies. About the Author Vern Kakoschke is Managing Director of Gothic Strategic Solutions Inc. (www.gothicsolutions.ca). He provides consulting services in the aerospace and defence sector and advises on complex structured financings, including tax-advantaged financings. Vern has 30+ years experience practising law in Toronto and in the investment banking industry where he completed several novel financing transactions for major capital assets involving aircraft, rail, power and infrastructure assets. He retired last year from a senior management role at KF Capital (owner of KF Aerospace), including as a director of SkyAlyne Canada LP (one of the bidders for FAcT) and was formerly the finance lead on the SkyAlyne bidding team. https://www.cgai.ca/financing_capital_assets_the_missing_link_in_defence_procurement

  • Robots Autonomously Navigate Underground in DARPA Challenge

    February 28, 2020 | International, Aerospace, Land

    Robots Autonomously Navigate Underground in DARPA Challenge

    Whether robots are exploring caves on other planets or disaster areas here on Earth, autonomy enables them to navigate extreme environments without human guidance or access to GPS. The Subterranean Challenge, or SubT, is testing this kind of cutting-edge technology. Sponsored by the Defense Advanced Research Projects Agency (DARPA), the contest concluded its second circuit on Wednesday, Feb. 27. Taking first in the competition was CoSTAR, a 12-robot, 60-person team led by NASA's Jet Propulsion Laboratory (there were also winners declared for a separate, virtual competition). SubT is divided into four circuits spread over three years. With each, teams program their robots to navigate a complex underground course. The first contest, held last August, took place in a mine. For the most recent, called the Urban Circuit, teams raced against one another in an unfinished power plant in Elma, Washington. Each team's robots searched for a set of 20 predetermined objects, earning a point for each find. For the Urban Circuit, CoSTAR earned 16 points; the No. 2 team, with 11 points, was Explorer, led by Carnegie Mellon University. "The goal is to develop software for our robots that lets them decide how to proceed as they face new surprises," said CoSTAR's team lead Ali Agha of JPL. "These robots are highly autonomous and for the most part make decisions without human intervention." CoSTAR, which stands for Collaborative SubTerranean Autonomous Robots, brought machines that can roll, walk or fly, depending on what they encounter. Along the way, the bots have to map the environment and find objects like a warm mannequin that simulates a disaster survivor or a lost cellphone with a Wi-Fi signal. This particular course, which aims to simulate an urban environment, also included a carbon dioxide leak and a warm air vent. Joining the team for the Urban Circuit was a four-legged robot called Spot, which was provided by Boston Dynamics. "One of the two courses we had to run had multiple levels, so it was great that the Boston Dynamics robots were fantastic on stairs," says Joel Burdick, a Caltech professor and JPL research scientist. He is the leader of the Caltech campus section of the CoSTAR team. As the bots explore, they send back video and digital maps to a single human supervisor, who they remained in radio contact with for the first 100 feet (30 meters) or so of the course. They can extend that range by dropping communications nodes, a kind of wireless repeater. Once out of contact, it's up to each robot to decide whether to proceed or backtrack in order to update the team. Each must also rely on fellow robots to access different levels of the course. For example, a wheeled robot might request a quadrupedal one to climb or descend a flight of stairs. "These courses are very, very challenging, and most of the difficulty lies in communicating with the robots after they've gone out of range," Agha said. "That's critical for NASA: We want to send robots into caves on the Moon or Mars, where they have to explore on their own." Mapping caves on the Moon or Mars could identify good shelters for future astronauts. Moreover, if it exists at all, microbial life has a better chance of survival under the surface of Mars or within the icy seas of planetary moons, like Europa, Enceladus and Titan. NASA wants to search for life in these regions, where robots would be frequently out of contact. The next circuit in the Subterranean Challenge will be set in an undisclosed natural cave network this August. A final circuit that blends tunnels, urban environments and natural caves will take place in August of 2021. Teams competing in that final event have the opportunity to win up to $2 million in funding from DARPA. CoSTAR, includes JPL; Caltech, which manages JPL for NASA; MIT; KAIST (Korea Advanced Institute of Science and Technology); Sweden's Lulea University of Technology; and industry partners. News Media Contact Andrew Good Jet Propulsion Laboratory, Pasadena, Calif. 818-393-2433 andrew.c.good@jpl.nasa.gov 2020-041 https://www.jpl.nasa.gov/news/news.php?release=2020-041&rn=news.xml&rst=7607

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