One of the prime movers behind the Pentagon’s Space Force plans, Deputy Defense Secretary Patrick Shanahan, gathered a few reporters on Wednesday where he disclosed new details on the legislative proposal that his team is working up to support the creation of a new service branch.
Space Force Budget Estimate: In the next eight to 10 weeks as it builds its fiscal 2020 budget request — one that is expected to include a plan for establishing a Space Force — the Pentagon is trying to make sure that plan is affordable and does not affect current operations. Asked about Air Force Secretary Heather Wilson’s Space Force recommendations — which estimates a Space Force would cost taxpayers an additional $13 billion over its first five years, Shanahan said: "The proposal that the Air Force — and I haven't gone through it in excruciating detail — is parametrically derived.…To me it was a number in which to really help facilitate a conversation as we put together the legislative proposal....My experience in business is: first number is just the first number. Any number that we’ll put forward, I know that Secretary Mattis will sign off, or I’ll sign off, is going to be affordable.…I’ve kind of kicked the can down the road on looking at headquarters or rank structure or all of those things until we’ve answered the most important thing: what do we put in the budget in terms of the capability we want to deploy.”
New Budget Report: During the hour-long roundtable discussion, Shanahan also talked about a glossy, 20-page report about how the Pentagon spent its money in the fiscal year that ended on Sunday. Shanahan — a former Boeing executive — compared the document to a corporation’s annual report that highlights milestones over the past year. “It seemed to me unusual that we would just jump in to FY19 without spending any time thinking about FY18,” he said. “In my previous life, when you finish out a year, you would make a report to the shareholders.” He characterized the previous fiscal year as “historic” and “the beginning of the retooling of the Department of Defense for great power competition.” The document is informally being called he “receipt report,” since it details where the Pentagon spent its money.
Foreign Military Sales: As of Aug. 30 — one month before the fiscal year closed out — arms-export deals totaled $54.45 billion in fiscal 2018, according to the new report.
Are the trade fights between the Trump administration and foreign government spilling over into the defense industrial base? “We haven’t seen that so far,” Shanahan said.
You’ve reached the Defense One Global Business Brief by Marcus Weisgerber. Special thanks to everyone who came out for this week’s Global Business Briefing with Mitch Snyder, president and CEO of Bell. Missed it? You can watch it all here. Thanks for reading and keep the feedback coming to: email@example.com or @MarcusReports. Check out the Global Business Brief archive here, and tell your friends to subscribe!
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How Bell CEO Is Approaching the Future
Mitch Snyder, the president and CEO of Bell, says he wants to “thrill” customers. As part of that, the Textron company dropped “helicopter” from its name earlier this year, to emphasize its future as a tech company, not just an aircraft maker. This week, Snyder joined me a for a Global Business Briefing at Defense One HQ in the Watergate. Here are some excerpts.
Q. How do you want to "thrill your customers"?
A. Every chance we have to interact with a customer we want them to walk away feeling like ‘They [meaning Bell employees] listened to us’. … I’m telling our employees we want to thrill our customers because we want them to walk away feeling like ‘They really care about us, they value us, and they’re definitely taking action to make us feel that way.’
Q. Tell us where you are in your V-280 tiltrotor development for the Army Future Vertical Lift / Joint MultiRole tech demonstrator?
A. I think Don Grove, our test pilot [and former U.S. Air Force CV-22 pilot], said it best, “The V-22 is a fantastic truck. This is a sports car.” The one thing that we went for in the V-280 is we want to specifically design it for that air-assault mission in the U.S. Army. We’ve achieved over 65 hours of flight. Our first flight was last December. We went to full airplane mode in less than five months. She’s pushed out to 250 knots in the last couple of weeks at 80 percent RPM. It’s doing everything and more than we knew we could do.
Q. What has been the toughest challenge technologically?
A. Taking a clean sheet [design] and then producing a flying aircraft inside of five years … and we proved we could do it.
Q. What would you like to see from the Army?
A. More of what they’re doing. The fact that they’ve said, “Here’s our top six priorities, [Future Vertical Lift] is No. 3.” they stood up an Army Futures Command. Everything the Army is doing is doing the right thing to get this quicker. If you talk to the senior leaders, they want it faster. I believe that the track record we just established shows it can be faster. The next thing is the budget and that’s what they’re working on aggressively and all the indications are they do want to get it faster.
Pentagon Reverses Course on Payment Proposal
The proposal — which could lower up-front payments to contractors — sent defense stocks sliding two weeks ago. Defense-industry groups were quick to denounce the proposed rule, and members of Congress followed suit. “Recently, proposed amendments to the Defense Federal Acquisition Regulation Supplement (DFARS) were prematurely released, absent full coordination,” Deputy Defense Secretary Patrick Shanahan said in a statement on Monday. "As a result, the Department will rescind the proposed amendments. In coordination with industry, the Department will create a revised rule to implement section 831 of the FY2017 NDAA.” The proposed rule was formally withdrawn today.
Big Contract Awards
Boeing Wins T-X: Boeing pulled off a sweep last week, capturing contracts for the T-X pilot training jet ($9.2 billion) and Huey replacement ($2.4 billion). As we told you last week, just a few hours before the T-X deal was announced, it was shaping up to be a good month for Boeing, something that has surely come to fruition. Jim McAleese, of McAleese and Associations in an Oct. 1 note to investors, said the deal is a “huge ‘affordability-win’ for” the Air Force. The 351 jets are expected to cost an “eye-watering” $19 million each, less than half of the estimated $45 million per-aircraft expectation, he writes.
Latest F-35 Deal Finalized: We’ve been waiting on this one since the Farnborough Air Show in July, when it was announced that the Pentagon and Lockheed Martin has a handshake deal for 141 jets, the 11th order placed by the U.S. military. Some number: $11.5 billion, the total cost of the deal. Jet prices: F-35A: $89.2 million (down 5.7 percent from last lot), F-35B: $115.5 million (down 5.7 percent), F-35C: $107.7 million (down 11.1 percent). Deliveries of these planes are expected to being next year. Here are our charts that detail the price tag of the F-35 over the years.
F-35 to get a new brain. F-35 builder Lockheed announced Sept. 27 that Harris will build the plane’s next computer processor, a deal it says will reduce cost, help the plane do more, and improve its reliability. Interestingly, the jet’s current processor is built by… Lockheed.
Destroyer Deals. The Navy awarded Huntington Ingalls a $5.1 billion multiyear deal for six Arleigh Burke-class Flight III destroyers. In addition, the Navy awarded General Dynamics Bath Iron Works a $3.9 billion deal for four Arleigh Burke-class destroyers.
Report: Boeing, Embraer in KC-390 Talks
Boeing took control of Embraer’s commercial business earlier this year and formed an alliance to “to promote and develop new markets and applications for defense products and services, especially the KC-390 multi-mission aircraft.” Building a planes in the U.S. would certainly take that joint venture to new levels. The Lockheed Martin C-130J is the only military cargo plane being built in the U.S. Here’ a Reuters rewrite of the report in Brazilian newspaper Valor Economico.
U.K. Nears Wedgetail Deal with Boeing
In July at the Royal International Air Tattoo and Farnborough Air Show, it was widely anticipated that the Wedgetail deal was imminent. Now U.K. Defence Secretary Gavin Williamson announced in advance of this week’s NATO ministerial that the Defence Ministry is in talks with Boeing. Wedgetail is a 737 airborne early warning and control aircraft flown by Australia, Turkey and South Korea. The plane the modern-day version of the AWACS flown by the U.S. military and others.
Robots to Monitor 3D Printing
Lockheed and the Office of Naval Research “are exploring how to apply artificial intelligence to train robots to independently oversee — and optimize — 3D printing of complex parts,” according to the company. “The two-year, $5.8 million contract specifically studies and will customize multi-axis robots that use laser beams to deposit material. The team will develop software models and sensor modifications for the robots to build better components.” Some background here on how Lockheed is 3D printing satellites parts (that are too big to hug, if you’re into that sort of thing).
AUSA Next Week
About 30,000 people are expected to show up at the Washington Convention Center for the annual arms show. More than 720 exhibitors are also expected for what Defense One Executive Editor Kevin Baron likes to call “the Auto Show on steroids.” While, AUSA is, dare I say, small, in comparison to IDEX in Abu Dhabi or DSEI in London. But it’s by far the largest in the U.S. Aside from the usual Army brass, speaker include Director of National Intelligence Dan Coats, Homeland Security Secretary Kirstjen Nielsen and Deputy Defense Secretary Patrick Shanahan. The full schedule is here. Pro tip: Traffic at the show is usually lightest on Monday, since it’s Columbus Day.
Buckle up, lots of them this week.
Michaela Dodge, a defense policy analyst at the Heritage Foundation, will soon become Sen. Jon Kyl’s senior defense advisor, according to several people familiar with the move. “Senator Kyl is likely to resume a leading role on missile defense and nuclear deterrence issues,” said Tom Karako, a leading missile defense analyst at the Center for Strategic and International Studies. “Michaela knows her stuff and putting her on staff is a smart move.”
Greg Grant, senior principal in MITRE’s National Security Sector, has joined the Center for a New American Security as an adjunct senior fellow in the Defense program. Grant, who was a special assistant to former Deputy Defense Secretary Bob Work, joins fellow Work alum Susanna Blume who focuses on budget, defense posture and force management, and strategy and strategic planning at CNAS.
Lockheed Martin has appointed Joseph Rank, a retired U.S. Army brigadier general, to lead its operations in Saudi Arabia. He takes over from Alan Chinoda, who Lockheed said will remain with the company in a U.S.-based post.
Travis Sharp, formerly at CNAS and the Center for Arms Control and Non-Proliferation, is now a research fellow at the Center for Strategic and Budgetary Assessments.
Richard McConn, chief executive officer of M International, and Arnold Punaro, CEO of The Punaro Group, have been elected elected chair and vice chair of the National Defense Industrial Association board
Guy Montminy has been named as president of BAE Systems Platforms & Services sector. He succeeds Erwin Bieber, who will remain an advisor to the company until his retirement in 2019, according to BAE.
Adam Hebert, former editor-in-chief Air Force Magazine and vice president for education and publications at the Air Force Association, has joined MITRE to lead its national security sector strategic communications team.