Joint Chiefs chairman talks 2018 budget. Big contracts to ship small packages. Lettre joins Lockheed. And more.

The Joint Chiefs have been particularly focused on military readiness of late, so with the Pentagon’s 2018 budget request set to come out next week, I asked Chairman Gen. Joseph Dunford about it as we flew home from a NATO meeting in Brussels.

“What we began last year, and what I think you’ll see continue next year, is a recognition that we’ve got to start to look to the future as well as meeting our current operational requirements, Dunford said. “I think it’s fair to say that when we went through a period of unstable budgets, particularly starting in 2010, we delayed a lot of modernization that now has to be addressed.”

Areas that particularly need investment, he said, include electronic warfare, cyber, space, modernizing the nuclear triad, and maritime requirements.

Dunford alluded to Defense Secretary Jim Mattis’ three-step approach to repairing readiness: first, fill equipment and training holes, then increase the capacity of the military, and finally, grow its lethality.

“Readiness is not only getting the equipment that you have ready, not only providing training to the troops, getting the right number of people there, but it’s also recapitalizing and modernizing,” the chairman said. “Now you’re not buying yesterday’s vehicle, yesterday’s aircraft.”

Filling equipment gaps does not necessarily mean refurbishing battle-worn weapons. For example, if a fighter jet reaches the end of its life or is destroyed in battle, expect the Pentagon to buy a newer, more modern plane.

“I think in ’18, we’ll start to get a little bit closer to that, and really, as we go into ’19, ’20 and ’21, in my judgment, that’s really when we need to make sure that we’re attentive to our modernization requirements because not only then are we talking about readiness, we’re talking about modern capabilities that preserve a competitive advantage for those key areas,” Dunford said.


You’ve reached the Defense One Global Business Brief by Marcus Weisgerber coming to you this week from NATO headquarters in Brussels. As always, your tips, comments, and random thoughts are welcome at or on Twitter @MarcusReports. Check out the Global Business Brief archive here, and tell your friends to subscribe!

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Budget Watch

Expect the Trump administration to send its $603 billion 2018 budget proposal to Congress on Tuesday, May 23. If that topline sounds familiar, it’s because the administration walked us through its proposed overall spending levels back in February. Now we’ll get some more details (Bloomberg is already reporting a few more), but get ready to be underwhelmed. Remember, the Budget Control Act caps are still in play, so anything approved above the $549 billion cap — without modification of the law — is subject to sequestration. Moreover, the 2018 proposal is mostly an Obama-era creation; financial analysts and business executives say Trump administration’s own priorities will be better reflected in the 2019 proposal, which we’ll likely see in February 2018.

Make Me in St. Louis

Not a huge surprise, but Boeing said it would assemble its T-X pilot training jet in St. Louis, where it already makes the F-15 and F/A-18 combat aircraft. The company said the assembly line would support 1,800 jobs. With the older aircraft in the twilight of their decades-long production runs, it’s fair to assume that employees who build F-15s and F/A-18 would fill some of those jobs. And the other competitors for the Air Force contract? Lockheed Martin has said it would build its T-50 pilot training jet in Greenville, South Carolina, where it is moving its F-16 production line. Leonardo has said it would build a new factory in Tuskegee, Arkansas, to build its T-100.

Making Moves

  • Marcel Lettre, former undersecretary of defense for intelligence, has accepted a job with Lockheed Martin as the vice president for national security.
  • Carl Woog — former strategic comms director for the National Security Council, advisor to SecDef Ash Carter and deputy Pentagon press secretary — is now leading policy communications for Facebook’s WhatsApp Inc.
  • Mark Lippert, most recently the U.S. ambassador to South Korea, has been named vice president of international government affairs at Boeing International. Per his new company bio, he leads efforts in “developing and implementing country and regional government affairs’ strategies in support of the company’s non-U.S. operations and global growth plans.” Lippert has also served as chief of staff to Defense Secretary Chuck Hagel, and before that, as assistant defense secretary for Asia and Pacific security affairs.

TRANSCOM’s Huge New Contracts

Three massive new contracts that together top $4.9 billion caught my eye a few weeks ago. Deals that big are usually going to Lockheed Martin, Boeing, Raytheon, Northrop Grumman — you see what I’m getting at. But these contracts were with commercial shipping firms: FedEx and Polar Air Cargo/DHL.

U.S. Transportation Command — the organization that moves the military’s gear around the world — is overseeing a government-wide effort to consolidate the shipping of small packages.

The government ships about 36 million small packages a year. The contracts ($2.4 billion for FedEx, $2.4 billion for UPS, and $199 million for Polar Air Cargo/DHL) are expected to save the U.S. government $32 million per year over the next five years, TRANSCOM says.

“This is a commercial-based contract which leverages commercial small package shipping practices,” TRANSCOM officials said. “[Next Generation Delivery Services] is a fundamental change in acquiring package delivery services and capitalizes on key principles: leveraging the federal government’s buying power; reducing the number of contract vehicles; and strengthening demand management practices.”

Next Week

The 2018 budget release on Tuesday. There’s also President Trump’s first international trip, with stops scheduled for NATO, Israel, Saudi Arabia, and the Vatican. At least two of those — Israel and Saudi — could feature export announcements. Reuters has reported that the U.S. is “is close to completing a series of arms deals” worth more than $100 billion. But remember: such announcements do not necessarily mean bookable revenue. After all, in October 2015, the Obama administration approved an $11.25 billion deal for four Multi-Mission Surface Combatant ships. The kingdom has yet to purchase any of them.

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