What the Pentagon’s nuke deals say about Northrop; Q&A with Erik Prince; Japan looks to boost defense; and a lot more.

By Marcus Weisgerber

August 24, 2017

August, despite what folks say, is rarely a slow news month. Even filtering out the politics of the day and a newscycle supercharged by presidential tweets, it’s really busy right now. This week:

The Pentagon dished out nearly $2.5 billion to the nation’s four largest defense firms to develop technology and build parts for new ICBMs and nuclear cruise missiles — a strategic upgrade that hasn’t been done in decades. For the cruise missile — formally, the Long Range Standoff Weapon — Lockheed Martin and Raytheon both received $900 million. On the ICBM side — called the Ground Based Strategic Deterrent — Boeing received a contract worth $349 million while Northrop’s was just shy of $329 million.

What’s with the $20 million difference in the ICBM contract? I asked Capt. Emily Grabowski, an Air Force spokeswoman, who said it’s “because the companies bid differently.” The three-year contracts are for the same type of work, so it appears that Northrop’s bid simply came in below Boeing’s. This may reflect a company-wide strategy; some have suggested that Northrop’s aggressive bidding helped it land the Air Force’s $80 billion B-21 stealth bomber deal.

Need more proof? Here’s Wes Bush, the firm’s chairman, CEO and president, on Northrop’s quarterly earnings call last month: “We are out there aggressively pursuing some businesses, some new business opportunities that are [developmental] in nature that we believe represent good, positive, value-creating opportunities for our company,” he said. “And to the extent that we are successful in capturing more new development work, that mix will continue to go up a bit. And as I've said in the past, I'm delighted to see that happening. We've been quite successful for a while in capturing the development work.”

This week’s ICBM deal is another example of that success.

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From Defense One

US Air Force Hires Two Firms to Start Developing America's Next ICBM // Marcus Weisgerber

Boeing and Northrop Grumman have each received deals to start developing a replacement for the Minuteman III.

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A June 2016 test showed that drones can track missiles, promising better protection for forces and allies under threat of a North Korean missile strike.

What the Announced NSA / Cyber Command Split Means // Patrick Tucker

Cyberwar and cyber intelligence are diverging, as are Cyber Command and the NSA. Here's what that means for the man who leads both entities, the future of signals intelligence collection, and cyberwarfare.


Q&A With Erik Prince

Blackwater founder Erik Prince’s pitch to privatize much of the U.S. military mission in Afghanistan appears dead, for now at least. But that hasn’t stopped him from pushing the plan. On Tuesday, the day after Trump announced his Afghanistan strategy, Prince spoke with my colleague Patrick Tucker. Here’s an excerpt from their conversation:

Q. Do you see an expanded role for more contractors under Trump’s plan?

A. “I really don’t. Again, I’m not talking about an expansion of contractors, I’m talking about a rationalization. You have 26,000 contractors now, another 9,000 active-duty, 4,000 NATO. This [is a] much more affordable…plan. [It] goes down to 5,000 and a couple thousand active duty and wherever contract support people they need to keep 2,000 SOCOM people there. That’s it. That’s why I am highly confident there’s at least $40 billion in savings. For people that want to throw stones at my numbers, I’d be happy to call them out and go head-to-head on that. Because I know what this stuff costs.”

Q. What do you do next?

A. “This is not my day job. I will continue to do my day job. I’m doing plenty of interviews. I think we’ve at least awoken people into realizing that there is a different way. When Congress comes back, I’m going to be talking to a lot of members about a better, smarter way for us to end the war in Afghanistan without the perpetuity. I’ve actually heard people from the Pentagon say well they view it like a South Korea occupation and they want to be there for the next 30 to 40 years. Maybe so, but let’s not spend $50 billion a year doing that.”

Q. Is there something that we can buy tech-wise, equipment-wise as we equip the Afghans?

A. “The ultimate way to Afghan-ize this is to let the Afghans hire or rent what they need. The premise of placing contractors at the battalion level if they work for the Afghan government. It’s the same for the aircraft. They have to [be] either leased to or sold to and operated by a professional provider, which can provide the safety pilot, and the maintenance, and the parts, the ordinance and everything else so they have a turnkey service. As large as the United States military was when they were there, they still hauled dozens of helicopters and fixed-wing aircraft to provide them lift and medevac and aerial resupply. The Afghans doing that should not be an alien idea.

Improving the Lethality of a Small Ship

The Navy’s Littoral Combat Ships, long criticized for not packing enough firepower, demonstrated a notable upgrade this week: firing a Harpoon antiship weapon from the USS Coronado (LCS 4) — and guiding it to a target beyond visual range with an MQ-8B Fire Scout Drone and an MH-60S Seahawk helicopter. Oh, and the test was done off the coast of Guam.

Japan Proposes Defense Budget Hike

Tokyo has proposed a $48 billion defense budget for 2018, up $1.19 billion increase from fiscal 2017, according to reports from the region. Among the U.S.-made weapons on the shopping list are Standard Missile-3 Block IIA interceptors made by Raytheon, six F-35A Joint Strike Fighters (Lockheed Martin), and Aegis Ashore (Lockheed).

As well:

Also reportedly under consideration: Killing a planned buy of thee Global Hawk drones, The Asahi Shimbun reports.

US Freezes Military Aid to Egypt

That’s over human rights concerns, according to multiple reports that say the U.S. will cut $95.7 million in military and economic aid from a planned $290 million. If Cairo improves its human rights record, it could get back the other $195 million, The Washington Post reports.

The US Is Approving Foreign Arms Sales Quicker, But …

It’s still well short of its goals, according to a new Government Accountability Office report. Let’s break it down. The State and Defense departments grip foreign sales into three categories, simple, standard and complex. The timing of U.S. approval for simple sales has improved. In 2016, 70 percent of simple sales were approved within the 45-day goal. That’s up from 57 percent in 2012. Next, let’s look at standard sales, which have an approval goal of 100 days. In 2016, 77 percent of them were completed in that time frame, up from 59 percent in 2012. Finally, there are complex sales, which have a 150-day approval goal. In 2016, they were only completed 61 percent of the time in that time frame. That’s down from a high point of 76 percent in 2015 (In 2012, these types of deals were approved within the time frame 64 percent of the time).

The Defense Security Cooperation Agency, the arm of the Pentagon that oversees foreign sales, blamed some delays on allies changing their requirements, policy shifts and financial reasons. Agency officials told GAO that other factors, like the U.S. putting deals on hold, impacted timing. The report said defense officials “reported that sales have been put on hold as the United States tried to influence human rights policies in some countries.” While it does not reference Saudi Arabia by name, it’s clearly referencing the Obama administration’s banning bomb and missile sales to the kingdom following widespread accounts civilians being killed in Saudi airstrikes in Yemen.


By Marcus Weisgerber // Marcus Weisgerber is the global business editor for Defense One, where he writes about the intersection of business and national security. He has been covering defense and national security issues for more than a decade, previously as Pentagon correspondent for Defense News and chief editor of Inside the Air Force. He has reported from Afghanistan, the Middle East, Europe, and Asia, and often travels with the defense secretary and other senior military officials.

August 24, 2017

http://www.defenseone.com/business/2017/08/global-business-brief-august-24-2017/140485/