What to watch for in 2018; How to run a successful Pentagon program; Boeing unveils new drone, and more.

It’s time for our annual look-ahead edition of the Global Business Brief! Something missing from my list? Let me know. Now off we go...

The splitting of the undersecretary of acquisition, technology and logistics office into the undersecretary for acquisition and sustainment and the undersecretary for research and engineering on Feb. 1. Jim McAleese of McAleese and Associates writes in a note this week that there is “growing belief” that Ellen Lord, the undersecretary for acquisition, technology and logistics, will not have to undergo another confirmation hearing to become undersecretary for acquisition and sustainment. He also notes that undersecretary for research and engineering nominee Mike Griffin will have his confirmation hearing in January.

An assessment of the manufacturing capacity, defense industrial base, and supply chain resiliency of the United States — called for in a July 21 executive order — is due by April 17.  Now that the Trump administration has finished its National Security Strategy, there’s more ahead: a National Defense Strategy, National Military Strategy, Nuclear Posture Review and Ballistic Missile Defense Review are all expected in the coming month in advance of the fiscal 2019 budget request in February. We know the missile defense review will call for more interceptors because the Pentagon already started moving money around in recent months to begin work.

Big contracts: There are a bunch. The Air Force is expected to choose a winner to build new pilot training jets. Sticking with the Air Force for a minute, the fate of new JSTARS radar planes is up in the air and leadership couldn’t have been more clear in recent months that it wants to go down a different road on this one. Boeing is finally supposed to deliver the first KC-46 tanker to the Air Force after months of delays. The number of F-35 Joint Strike Fighter purchases will go up again; the question is: by how many? And will the Pentagon and allies start buying them in bulk via a multiyear contract? Meanwhile, Army leaders are about to solicit bids for a new light tank, while the Navy plans to award three conceptual design contracts for a new frigates in 2018. Naval leaders will also soon solicit bids for the new MQ-25 Stingray refueling drone (more on that below). Lastly, the Marine Corps plans to select a winner between BAE Systems and SAIC for a new Amphibious Combat Vehicle (it’s been putting prototypes from both companies through the paces this year).

Big industry changes: Most notable is that Chris Kubasik takes over as CEO of L3 Technologies. Also, don’t forget that Eric Fanning, the former U.S. Army secretary, will become the CEO of the Aerospace Industries Association, the defense industry advocacy group.

The November midterm elections are just around the corner. Will Democrats take control of the House? What would that mean for the planned military buildup?

Three Questions for 2018

Will Congress pass a budget deal? This is the Groundhog Day, broken record, need-I-go-on question of the past six years. Same year, same fundamental problems. I won’t bore you with the details (you can read them all here), but here we sit again after another year with little to show in terms of a grand deal that would add planning certainty to the long-term defense budget. For what it’s worth, the consensus from Wall Street watchers is that defense will grow, and the question is just: how much?

Will we start to see the Trump-promised military buildup? The fiscal 2018 budget was supposed to improve military readiness — a get-well budget, if you will. The buildup, the one with the 355-ship Navy, is expected in fiscal 2019. Without a budget deal in Congress, this will be no easy feat.

Will the M&A wave continue in 2018? In 2017, we saw two mega-deals — United Technologies bid for Rockwell Collins and Northrop Grumman’s bid for Orbital ATK — and a number of lower-tier deals such as Boeing’s acquisition of Aurora Flight Sciences. I keep hearing whispers about a big-name company looking to acquire a supplier or medium-sized firm. During a panel at the Reagan National Defense Forum earlier this month, Michael Strianese, L3 Technologies chairman and CEO, was asked “Do you think you could bring in more Tier 1 and 2 suppliers in house?” His response: “The door’s always open. We love technology and we have been a good partner for the entrepreneurial company where the founder would like to cash out, but still work.” L3 gobbled up a bunch of smaller companies that specialize in undersea technology this year.


You’ve reached the Defense One Global Business Brief by Marcus Weisgerber. Thanks for continuing to read each week! Don’t be a stranger! If you like (or don’t like) something, let me know at mweisgerber@defenseone.com or @MarcusReports. The entire Global Business Brief archive here, all 18 months of it! Lastly, tell your friends and colleagues to subscribe! It’s free!

From Defense One

The Pentagon's New Artificial Intelligence Is Already Hunting Terrorists // Marcus Weisgerber

After less than eight months of development, the algorithms are helping intel analysts exploit drove video over the battlefield.

Air Force Pays Out Government's Biggest Bug Bounty Yet // Jack Corrigan

White-hat hackers and military cyber specialists teamed up for the latest Hack the Air Force program.

What Does a Government Shutdown Mean for the Department of Defense? // Susanna V. Blume

Four years ago, this staffer for the defense policy undersecretary helped the Pentagon figure out the impacts of a shutdown. Hint: it wasn't pretty.

How to Run a Successful Pentagon Program

Typically, injecting change into the military, federal government, or [insert bureaucratic institution here], it takes heavy lobbying, billions of dollars in funding and a workforce spread across as many congressional districts as possible (see the F-35 Joint Strike Fighter).

That’s why it’s quite amazing that one of the biggest changes in decades is being carried out by a team of a dozen people. Back in May, I told you about Project Maven, an ambitious attempt to deploy artificial intelligence that could help intelligence analysts sift through thousands of hours of drone video. The program promised (by the end of the year) to deploy to the Middle East algorithms that would help analysts identify objects in the video. This month, it happened. And it’s about to expand and has far-reaching potential across the military.

Lt. Gen. John N.T. “Jack” Shanahan, an Air Force general in the Office of the Undersecretary of Defense for Intelligence, is overseeing the effort and is thinking big. So how has a team of 12 been so successful?

“It’s amazing how nimble and agile a small team can be when given the right resources and the topcover behind it,” Shanahan said.

The general had nothing but praise for the small team, whom he called “probably the most dedicated group of people I have ever seen work on a problem. I don’t know when they sleep, to be honest with you.”

Shanahan described Marine Corps Col. Drew Cukor, who runs the program (and who spoke at the Defense One Tech Summit last year), as tenacious. “He understands the importance of this to the department for many different reasons,” he said.

The project also has support from the National Geospatial Intelligence Agency, the Strategic Capabilities Office, U.S. Special Operations Command and DIUx, Pentagon outposts in Silicon Valley, Austin and Boston. They’re also using commercial technology, which is already being used by companies, and combining it with military systems.

“There’s so much that industry is showing us is in the art of the possible,” Shanahan said. “That’s what’s different today. This is now being driven on the outside and we’re watching and learning how to play catch up fast whereas opposed [to] 15 years ago the department was orchestrating a lot of this from inside. The world is changing around us and we’re understanding how we need to keep up.”

Now they need to make it stick. And how can they do that? By getting the military services to buy in and fund projects. We’re already seeing service chiefs, like Air Force Gen. David Goldfein thinking along these lines.

End-of-the-Year Speed Read

We started 2017 hoping to see Northrop Grumman’s T-X jet trainer prototype. Since the company pulled out of that competition in February, we had to settle for blurry video and some long-range pictures from spotters. But we did get to see one new aircraft in 2017, a Boeing refueling drone that it’s pitching to the Navy in the MQ-25 Stingray competition. The picture doesn’t show us all that much, but it shows Boeing has made a significant company investment in the project. Bids are due to the U.S. Navy on Jan. 3.

Bell Helicopter flew its much-hyped V-280 Valor tiltrotor for the first time this week. The aircraft — which it’s pitching to the U.S. Army for the Joint Multi Role Technology Demonstrator project — resembles the V-22 Osprey with one major difference. While its propellers rotate, its engines do not. As Aviation Week’s Tony Osborne observes, Bell has blurred the aircraft’s tilting mechanism in videos and pictures from this week’s flight. They’re clearly looking to protect their special sauce.

Lockheed Martin this week said it had met its goal of delivering 66 F-35 Joint Strike Fighters to the U.S. military and its allies in 2017. But Bloomberg’s Tony Capaccio reports that Pentagon’s Defense Contract Management Agency said eight of those planes were supposed to be delivered in 2016 and of the remaining 57, 23 were delivered late for their monthly contractual requirements. In all, Lockheed has delivered more than 265 jets to the U.S. military and international customers. Lockheed is planning about 90 F-35 deliveries in 2018, increasing to about 160 aircraft per year 2023, a company spokesman said.

Janus Global Operations, “a leading provider of integrated stability operations,” has been acquired by “an affiliate of DC Capital Partners Management,” a private equity investment firm in Alexandria, Virginia. Terms of the deal were not disclosed. We introduced you Janus in 2016, back when the State Department awarded the firm a contract to asses IED that ISIS used to boobytrap Ramadi.

See ya in 2018!

A brief programming note, I’ll be on vacation next week, so no Global Business Brief (and don’t be offended if I don’t quickly respond to email). Hope you and yours have an enjoyable and safe holiday season!