Earnings Week preview; Living with 5G; More Space Force trouble; DOD tries haute couture contracting
There’s nothing quite like a custom-tailored suit, so when Will Roper, the head of U.S. Air Force acquisition, used a sartorial analogy to describe the Pentagon’s relatively new buying authorities, he had my attention.
Roper compared the Pentagon’s traditional buying regulations (called DoD 5000), to an off-the-rack suit. “It’s never going to fit perfectly,” he said in an interview last week at the Space Symposium expo in Colorado Springs.
By comparison, the new regulations (called Section 804 and approved by Congress in 2016) — allows the Pentagon to award contracts faster by cutting bureaucratic red tape. That’s your custom suit.
“All we’ve done with 804 is give the tailoring scissors to our program managers and said: ‘Make the program fit the specifics of what you’re buying,” Roper said. “When I look at all of our 804 programs, they fit perfectly. There’s no wasted time. No wasted effort.”
In many cases, the traditional buying process takes about “18 months of paperwork” before the Pentagon can award a company a contract. “I never found that statutory paperwork necessary to be done before you get industry working,” Roper said. “You tend tend to have a good sense of what you’re going to do and those assessments help guide you, but they can guide you in month nine [or] month 10.”
The new-ish regulations are “letting us get on contract in month one while we work on cost estimates and risk assessments because we have a fairly bounded view of what we’re going to be doing,” Roper said.
The Air Force wants to use the new go-fast rules to speed up buys of new engines for the B-52, the backbone of the U.S. military’s long-range bomber fleet.
“We know who owns the plane,” Roper said. “We know the engine vendors and specifically what engines they’re going to propose.” (The unknowns: which companies’ engine is most efficient and which of those engines is easiest to install on the B-52.)
That means, the Air Force can put B-52-maker Boeing on contract, and get the engine-makers working on their proposals.
“I’m going to put Boeing on contract; I’m going to put the engine vendors on contract,” Roper said. “I’m going to have them compete, do a digital twin fly off, do an integration digital thread and then select [a winner].”
Roper said “the response has been great” to using the new buying authorities he’s like to see them be used to speed larger efforts.
“I’d argue they’re the programs that need this the most,” he said. “They need the most flexibility, especially up front when you’re doing engineering.”
You’ve reached the Defense One Global Business Brief by Marcus Weisgerber. Writing to you this week from the middle seat of a bumpy flight. Send along your tips and feedback to firstname.lastname@example.org or @MarcusReports. Check out the Global Business Brief archive here, and tell your friends to subscribe!
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A New Consensus Is Emerging On How to Handle The Risk from China's 5G // Patrick Tucker
Chinese telecom tech is invading the physical world, but Europeans and industry have strategies to contain the threat.
The Latest in the 5G Debate
My colleague Patrick Tucker reports how U.S. allies, perhaps staring at the inevitable, are quarantining Huawei 5G tech away from vital parts of infrastructure, or military and intelligence networks. The article comes just days after President Trump and the FCC announced initiatives to speed 5G growth in the U.S. The creation of global 5G telecommunications network has become a hot topic in recent months — as GBB readers know — largely because top U.S. national security officials fear Chinese made electronics could allow Beijing to spy on America and its allies.
Want to get smart on 5G? It’s more than just improving your smartphones data speeds. 5G will connect all sorts of new technology, like driverless cars and smart cities that make up the “Internet of Things.” Here’s some background on the FCC’s plans to sell off government-owned spectrum, the radio bands where 5G data will flow, and how the Pentagon is planning experiments to see if the new tech can improve military communications.
Bonus: The Center for a New American Security this week announced a new project: Securing Our 5G Future. “The project will offer actionable recommendations for how U.S. policymakers can partner with the private sector and collaborate with allied and partner nations to ensure the development of secure 5G networks,” think tank officials said in a statement.
General: Airmen Can ‘Take Action’ Against Hobby Drones
Amid reports of small drones flying near nuclear weapons facilities, Gen. Timothy Ray, the head of Air Force Global Strike Command, said airmen guarding nuclear intercontinental ballistic missiles can “take action” if they encounter a threatening drone. “We have rules of engagement that ... give us the latitude, but there’s always gray zones,” Ray said Wednesday. “At the end of the day, I’ll take my thumping from the [Federal Aviation Administration] or somebody else in the name of protecting the most lethal things that we have.” The military’s authority to shoot down drones in the U.S. has been the subject of bureaucratic debate. “We’re in a good place, but [the] rules of engagement are complicated,” Ray said. “So we gave pretty clear guidance, when in doubt, do what you need to do to preserve the sanctity of those weapons and the people that are taking care of them.”
The Latest in the Space Force Debate
Brookings’ notable Michael O'Hanlon argues against creating a Space Force, a new sixth branch of the military wanted by President Trump, in the Washington Post. He writes: “Yes, there is lots of military work to do in space, and yes, we need to devote more military attention and resources to this region. But a Space Force is not the best solution to this problem.”
Also, additional members of Congress have spoken out to oppose the new Space Development Agency, a group stood up by Acting Defense Secretary Patrick Shanahan to create a new web of hundreds of small, easy-to-build satellites that would augment larger traditional military satellites that defense officials argue are at risk of being shot down. Reps. Ted Lieu, D-Calif., and Ken Calvert, R-Calif., argued in an April 16 letter to Shanahan that the new agency “risks creating duplicative layers of bureaucracy while undermining the existing organizations with a proven track record.” That existing organization they’re referencing is the Space and Missiles Systems Center, the Air Force’s satellite buying group, which happens to be in Lieu’s district, which is not too far from Calvert’s district. “We urge you to modify [the Space Development Agency] so that we build upon [the Space and Missiles Systems Center] rather than undermine it.”
ICYMI: At last week’s Space Symposium, I chatted with a handful of space industry executives about how companies are responding to the proposed Space Force and new Space Development Agency. Check it out here.
Earnings Week on Tap
The “Big 5” defense firms all report 2019 first-quarter earnings next week. When CEOs chat with Wall Street analysts, it’s the first time we’ll get a reaction to the Pentagon’s fiscal 2020 budget proposal, which was sent to Capitol Hill last month. Expect to hear more about how there’s great support for defense despite the potential for budget caps to take a sizable cut from that $750 billion spending request.
- Textron already reported earnings on Wednesday, which beat revenue, but missed estimates.
- Lockheed Martin reports next Tuesday. It’s the first time we’ll hear new CFO Ken Possenriede brief on an earnings call. We’ll be listening to how executives react to the Pentagon’s plans to buy new Boeing F-15 fighters and fewer Lockheed F-35s than Congress appropriated in 2019. (Recall that it sparked a lobbying war.)
- General Dynamics, Boeing, and Northrop Grumman report on Wednesday. On the Boeing call, we’ll be listening for the latest on the 737 Max. Also, we’ll be listening for executives reaction to the Air Force’s latest decision to suspend deliveries of new KC-46 tankers because of debris being found in the aircraft. We hear that deliveries are expected to resume on Friday.
- Raytheon reports on Thursday. We’ll hear reaction to being edged out by Palantir in the first round to provide the Army with a new battlefield intelligence system.
- L3 Technologies and Harris, report earnings on May 1. We’ll be listening for the latest on their merger, which shareholders approved on April 4.
Jennifer Whitlow, who left the top communications position at Lockheed Martin last month, has a new job, senior vice president and chief communications officer at UnitedHealth Group.