500-ship Navy?; Lord's reforms; Interior's drone fleet; and more...

Lots of print — or electrons — are being spilled on the Defense Secretary Mark Esper’s call to enlarge the Navy past 500 ships, a plan called “Battle Force 2045,” dun, dun, dun. 

On the surface (see what I did there), it seems like a drastic uptick from the aspirational 355-ship Navy we’ve heard oh-so-much about over the past four years. So let’s unpack a few things. 

First off, given that this is a politically driven Office of the Secretary of Defense force structure assessment, one not led by the Navy, it could all go out the window if former Vice President Joe Biden wins the presidential election. Second, the public has yet to see the numbers that undergird what Esper called an affordable plan. And third, the defense secretary talked a lot more about shipbuilding than about the high cost of maintaining and manning them – even the unmanned vessels.

(Quick side note: Come hear more about the plan from Adm. Mike Gilday, chief of naval operations, during Defense One’s State of the Navy interview on Oct. 13.)

That said, Esper does propose some radical changes, like reducing the number of nuclear-powered aircraft carriers, which is considered blasphemy in many Navy circles, and buying more smaldeck amphibious carriers and adding some 150 unmanned surface and subsurface ships.

But reducing the number of aircraft carriers is typically a non-starter in Congress. Hours after Esper rolled out his plan, Rep. Rob Wittman, R-Va., dispatched a statement. I have concerns about the reorganization of our carrier force structure and the emphasis on unmanned and optionally manned platforms,” wrote the ranking member of the House Armed Services Seapower and Projection Forces subcommittee. (Wittman’s letterhead features the Virginia flag, the U.S. Constitution,and an aircraft carrier.)

The carrier lobby is strong, very strong. Put the carrier itself aside for a minute, reducing a carrier reduces the number of fighter jets, command-and-control planes, and more. While F-35B fighter jets can take off and land on small-deck amphibs, F/A-18 Super Hornets cannot, meaning Boeing would surely stand to lose if the number of aircraft carriers is reduced.

Meanwhile, we are waiting to hear how the Navy is going to crew and maintain the enlarged fleet of Battle Force 2045. Pentagon officials often note the sticker price of a warship or other complex weapon accounts for only a third or so of its overall lifetime cost. The other 70 percent goes toward sustainment. As we mentioned just last week, the Navy’s own shipyards don’t have the capacity or the infrastructure to maintain the current fleet of warships.

So who are the prospective winners and losers in Battle Force 2045? The shipbuilding industry writ large could expect decades of work for existing shipyards and probably some new ones.

“Shipbuilding spending could go up but it might go to nontraditional shipyards,” Cowen & Company analyst Roman Schweizer wrote in a Wednesday note to investors. “Smaller manned/unmanned ships means smaller shipbuilders with systems primes could build them.”

The plan will affect the long-term growth of the big shipbuilders, Huntington Ingalls and General Dynamics and nuclear propulsion provider BMX Technologies, Schweizer wrote. There are many new entrants in the unmanned space, including L3Harris Technologies, Boeing, Leidos and Textron, that stand to benefit.

“This is the most definitive Navy plan unveiled to date and broadly skews positive for Buy-rated GD/HII insofar as it highlights the strategic importance of the Navy in a budget-constrained environment,” Citi analyst Jon Raviv wrote in a Tuesday note to investors.

The plan calls for buying three Virginia-class submarines per year, which are jointly built by GD’s Electric Boat and HII’s Newport News Shipbuilding. Newport News Shipbuilding in Virginia stands to lose if the number of carriers is cut, not just from building the ships themselves, but also the mid-life nuclear refueling. But HII’s Ingalls Shipbuilding in Mississippi builds the non-nuclear amphibious carriers.

“[C]utting the fleet structure means carrier retirement instead of refueling, which puts ~5% of HII sales at risk,” Raviv writes. “But this gives time to transition [the] carrier business from Newport to Ingalls. Any Newport loss can be offset by more subs.”

Also standing to lose is General Dynamics Bath Iron Works, which builds destroyers.

“Bath Iron Works only has one line of business, so calling large surface combatants into question is a ... negative…but it is immaterial to GD-wide sales – especially so in the context of subs picking up, such as [Virginia-class submarines],” Raviv wrote.


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Lord Touts Her Acquisition Reforms

Ellen Lord, the defense undersecretary for acquisition and sustainment, this week said her overhaul to the Pentagon’s weapons buying system, known as the adaptive acquisition framework, would have a long-lasting impact.

“Coming into the job, I asked myself: how could we redesign our defense acquisition systems to incorporate the agility and best practices in industry, while also creating culture that not only facilitates critical thinking and creative compliance, but actually encourages it,” Lord said Wednesday. “I was looking for a way to shift our mindset from piecemeal reform in favor of true overarching innovation.”

Her comments were viewed by some defense observers as a jab at former Pentagon acquisition chiefs Ash Carter and Frank Kendall, who during the Obama administration created Better Buying, a series of acquisition reforms. Not so, says Lord.

“I have the utmost respect for everyone who has held this office. [Adaptive Acquisition Framework] enables acquisition at the speed of relevance, as required to meet [National Defense Strategy] objectives, and takes advantage of all the great work Ash Carter and Frank Kendell did with better buying power and improvements to the acquisition ecosystem,” Lord said in an emailed statement to Defense One.

Last week, Lord blamed the Air Force’s awarding a fixed-price development contract for Boeing’s woes while building the KC-46 aerial refueling tanker. Several former Air Force officials took issue with her comments saying that contract structure has saved taxpayers from having to pay billions of dollars to fix the troubled plane. In 2014, while CEO of Textron Systems, Lord advocated for more fixed-price competitions.

Interior Dept. to Create Fleet of U.S.-Made Drones

The department, which grounded its Chinese-made drones earlier this year, has given “clearance to buy American-made small unmanned aircraft systems (referred to as Blue sUAS), where there are needs to do so in the field for fighting wildland fires, conducting search and rescue operations, completing training exercises, and more.” The OK came in a memo from Interior Secretary David Bernhardt. “Other agencies across the United States Government should follow suit in order to protect U.S. national security and support American manufacturers,” Sen. Chris Murphy, D-Conn., said in a statement. Earlier this year, the Pentagon said government agencies could buy drones from five companies as part of push to remove small, Chinese-made DJI drones from their inventory.

Teal: Civil Drone Market Will Triple

Since we’re on the subject of drones, the Virginia-based Teal Group consulting firm says global civil drone production will triple making it “the most dynamic growth sector of the world aerospace industry this decade as commercial applications take off and civil governments adopt systems for new roles in border security and public safety.” Teal estimates non-military drone production will total $108 billion over the next decade. "The pandemic is reshaping growth in the industry, boosting support for delivery drones while hurting investment in some longer-term applications," Philip Finnegan, Teal Group's director of corporate analysis and author of the study, said in a statement. "On balance, the negatives appear to slightly outweigh the positives."

Of note: “Technology companies like Intel, Qualcomm, Microsoft, Apple as well as venture capitalists have poured more than $2.8 billion into drone startups from 2012 to 2019.”

Boeing Expects Aircraft Demand to Drop

The company’s 10-year outlook projects a global demand for 18,350 new commercial airplanes over the next decade — down 11 percent from the company’s 2019 projections — due to the coronavirus pandemic, which has led to record lows in passenger air travel. “The 2020 Boeing Market Outlook projects that the commercial aviation and services markets will continue to face significant challenges due to the pandemic, while global defense and government services markets remain more stable,” the company said. As the aircraft market recovers, Boeing projects the need for more than 43,000 new airplanes over the next 20 years.

Boeing Astronaut Bails Before Starliner Launch

Former NASA astronaut Chris Ferguson has withdrawn himself from Boeing’s upcoming Starliner spacecraft flight test. After being the face of the Boeing project to return humans to space for nearly a decade, Ferguson the company said he would not fly for “personal reasons.” In a video posted on Twitter, Ferguson said family commitment in 2021, when the launch is expected, led to his decision to pull out. Boeing said former NASA astronaut Barry “Butch” Wilmore has been nammed commander of the flight test.

Some background: Boeing’s Starliner, part of NASA’s effort to launch astronauts into space on commercial rockets, has experienced numerous problems and setbacks over the years. In December 2019, a crewless Starliner space capsule failed to make it to the proper orbit. The capsule successfully landed a few days later. Earlier this year, SpaceX beat Boeing when its rocket and Crew Dragon capsule ferried two astronauts to the International Space Station. SpaceX is scheduled to launch astronauts into orbit again later this month. Meanwhile, Boeing must still complete another unmanned flight test, scheduled for later this year, before launching astronauts next year. 

Making Moves

Todd West has been named vice president of in-service aircraft carrier programs at Huntington Ingalls Newport News Shipbuilding. He will succeed Chris Miner, who will retire Dec. 1.