Frank Kendall dispels acquisition ‘myths’; How the service secretaries want to save money; New VC investments, and more.
Frank Kendall may no longer be the Pentagon’s top acquisition official, but he’s still passionate about the work being done by the military’s tens of thousands of weapon buyers.
When the word acquisition is thrown around in defense circles, it’s often preceded by “broken” — as in “broken acquisition system.” More recently, it’s been followed by “reform.” Lawmakers have been legislating major shifts and changes, most notably slicing the post of undersecretary for acquisition, technology and logistics — Kendall’s old position — into two new USD positions: one for research and engineering and the other for acquisition and sustainment.
In his final years at the Pentagon, Kendall says, he realized people were repeating several defense-acquisition myths as fact.
“I realized a couple of years ago I was losing the argument about whether we were on the right track or not,” he told me this week.
“Those myths are real and they drive policy,” Kendall said. “They’re real in that people believe them.”
So he’s written Five Myths About Pentagon Weapons Programs. They are:
- The defense acquisition system is broken.
- Excessive bureaucracy is the core problem with defense acquisition.
- Innovation is stifled by the acquisition system.
- Stronger “punishments” for cost overruns and schedule slips will lead to better performance.
- There is some new form of undiscovered “acquisition magic” that will fundamentally improve results.
His piece is only on Defense One, so make sure you check it out.
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From Defense One
Five Myths About Pentagon Weapons Programs // Frank Kendall
As the service secretaries converge on Capitol Hill to talk acquisition reform, it's important to sort fact from fiction.
Air Force Secretary: Boeing Is Giving Its Tanker Short Shrift // Marcus Weisgerber
Pointing to the KC-46 program's latest problems, Heather Wilson says the company is focusing too much on its civil aircraft.
The US Military Is Making Lasers That Create Voices out of Thin Air // Patrick Tucker
Within three years, the Pentagon's non-lethal weapons lab hopes to have a direct energy weapon that can produce an effect like a haunted walkie-talkie or the biblical burning bush.
It looks like Congress is hours away from passing a $1.3 trillion government funding bill, of which about $670 billion will go to the Pentagon. An additional $30 billion will go toward nuclear weapons related projects at the Energy Department for a grand total of $700 billion. Now, that number is no surprise since it’s what the already passed fiscal 2018 National Defense Authorization Act that already added planes, tanks and ships well above what the Pentagon asked for, but there are some differences at the program levels.
With the help from some of our analyst friends (looking at you, Byron Callan and Roman Schweizer), here are some of the large adds we’ve found so far:
- Appropriators funded 18 KC-46 tankers, one more than authorizers approved and three more than the Air Force requested.
- Appropriators funded 14 V-22 Osprey, two more than authorizers approved and 8 more than the Marine Corps requested.
- Appropriators funded 30 new AH-64 Apache attack helicopters, nine more than autorizers approved and 17 more than the Army requested.
- Appropriators funded two DDG 51 destroyers, one less than the authorizers approved. The Navy requested two ships.
- Appropriators sliced finding for the Army’s WIN-T network program to $102 million. The Army requested, and authorizers had approved, $420 million for the project.
- There appears to be no funding for the Air Force’s OA-X light-attack plane. Authorizers had approved $400 million.
Service Secretaries Talk Budget & Acquisition
As Congress prepares to (hopefully) pass that 2018 appropriations bill that will give the Pentagon a sizable funding bump this year and next year, it’s becoming apparent that this will be largest budget increase seen by the Defense Department in the near future. Remember, the Budget Control Act comes back into play in 2020 and 2021 if the law is not changed.
“The odds are, this is the largest the defense budget is going to be for, probably, about the next decade,” Rep. Adam Smith, D-Wash., ranking member of the House Armed Services Committee, said at March 20 hearing. “We have to make sure that we spend this money wisely and we also spend it in a way that doesn’t lock us into long-term obligations that can’t be met given the fiscal constraints that are coming.”
With that in mind, Smith asked the secretaries of the Army, Navy, and Air Force where they can save money, something that hasn’t received much focus amid the planned new rivers of cash. Here are their responses:
Army Secretary Mark Esper: “We’re looking to maybe save $1 billion-plus per year for a period of years just by consolidating and rationalizing our contracting services,” he said. Also: “We are looking at the entire range of 800-plus programs we have. I know that as part of our reform efforts we are probably going to look at the lower-end of that and assess each for return on investment and probably postpone or cancel some programs.”
Navy Secretary Richard Spencer said the Navy has found $600 million in deobligation. He also said the Navy needs to change “the thought process and changing the attitude on how we actually contract.” He also said money that is left over when a contract is finished should be “put them back in the bin.” And: “Small moves like that are starting to save us some big [money] going forward.”
Air Force Secretary Heather Wilson pointed to sustainment as an area ripe for savings. She reiterated comments she made last week about wanting to use “additive manufacturing as a substitute for very long supply chains.” And: “Increasing the speed also helps to drive down the cost.”
Everyone Wants a Little CSRA
“There’s something about CSRA,” as Citi analyst Jon Raviv wrote in a note to investors early this week about IT firm that is currently at the center of the defense M&A sphere. Let’s recap things, shall we. In February, General Dynamics made its initial bid for CSRA, a Virginia-based government-based IT firm. Fast forward to Sunday when CSRA confirmed it received an unsolicited bid from services-and-IT firm CACI. Two days later, GD upped its bid, which was accepted by CSRA’s board. The deal expires on April 2.
Why it matters: “The bid for CSRA is about more than the acquisition of a $6.7 billion company: it’s about taking firm control of the entire federal technology services market,” analytics firm Govini wrote in a report. “The acquisition of CSRA by either General Dynamics or CACI International would more than double the current federal technology services market share for each respective firm.”
Notable CSRA Board Members: Retired Army Gen. Keith Alexander, former NSA & Cyber Command boss; Michèle Flournoy, former undersecretary of defense for policy; and Sean O’Keefe, former NASA administrator, Navy secretary and chairman of Airbus Group.
Of note: Last week, two CSRA subsidiaries were among 20 companies that won chunks of the Defense Information Systems Agency’s $17.5 billion ENCORE III IT support contract for the military and other federal agencies.
Boeing Now Cool With UTC’s Buy of Rockwell Collins
Elsewhere in the M&A world, Boeing has reached agreements with two key suppliers: UTC and Rockwell Collins, withdrawing its opposition to the former’s bid for the latter. Also, Bloomberg reports: UTC CEO Greg Hayes plans to step down in the next three to five years.
Lockheed, Boeing Make VC Investments
Lockheed made a “strategic investment” in Mythic, an AI chip maker that just raised $40 million. “Mythic's game-changing technology will allow us to provide our customers with the unmatched ability to obtain timely, actionable information from distributed, power constrained systems,” Chris Moran, vice president and general manager of Lockheed Martin Ventures, said in a statement. What makes Mythic’s chips so special? They “perform computation inside memory cells — using analog currents and flash memory to perform the arithmetic of AI inference on a massive scale — leading to server GPU performance at 1/100th of the power draw and cost,” according to the firm.
Boeing’s HorizonX has made an investment in Fortem Technologies, a company that is developing advanced radars for drones and manned aircraft. The tech allows aircraft to detect and avoid other aircraft, “a key capability for future autonomous air vehicles,” Boeing said in a statement. “Fortem Technologies offers airspace awareness solutions using low size, weight and power radar to ensure safe operations of unmanned aerial vehicles.”
A Sign The Army is Fixing Readiness
A $3.5 billion deal awarded to Lockheed Martin to maintain more than 300,000 training devices is something tangible. What the contract covers: Training Aids, Devices, Simulators and Simulations, live-fire ranges and instrumentation systems. Notable companies on Lockheed’s team: PULAU Corporation and Cubic Global Defense.
- Tressa Guenov joined Lockheed Martin’s Government Affairs team after 14 years in intelligence, cyber, and national security strategy roles at the Pentagon, State Department, and Congress. Most recently, she served as the acting assistant defense secretary and principal deputy assistant defense secretary for Legislative Affairs. She’ll be on Lockheed’s National and Homeland Security team.
- Sam Locklear, a former admiral who led of U.S. Pacific Command, has joined the board at HALO Maritime Defense Systems, a marine engineering technology company.
- Keith Webster, a former Defense Department international policy and acquisition official, will lead the U.S. Chamber of Commerce’s new Defense and Aerospace Export Council within its International. Webster will serve as the council’s president. “The Defense and Aerospace Export Council will engage with domestic and international partners to strengthen the competitiveness of U.S. defense and aerospace exporters,” the Chamber said.
Dale Bennett is executive vice president of Lockheed Martin’s Rotary and Mission Systems, not a former holder of that post.