Peering ahead; Taiwan drone-sale OKd; Boeing’s nautical divestment; and more...
As we write, the Senate is deadlocked: 48 Democrats, 48 Republicans, with one, possibly two, Georgia seats headed for a runoff in January. Democrats have retained control of the House, though their margin has slimmed. While we wait for the presidential race to conclude, let’s contemplate one possible scenario: President Biden, GOP-controlled Senate, Dem House.
Wall Street likes this setup, which could reduce the chance of deep defense-spending cuts. But it might constrain the new president’s ability to get Cabinet picks past the Senate.
We’ll save the who’s jockeying for cabinet and top political positions until we have a winner, but Axios reports that a Republican Senate would only consider centrist appointees, not “radical progressives.”
Congress still has a ton of business it must get through before the end of the year. It is already late to pass spending bills for fiscal 2021, which began on Oct. 1. The current stopgap funding measure expires on Dec. 11. Lawmakers also still need to pass the fiscal 2021 National Defense Authorization Act.
The prospect of divided government might scuttle suggestions that a Biden administration would cancel the Pentagon’s plans to replace the Minuteman III intercontinental ballistic missiles.
“Any serious push to retire the ICBM force and do away with the Ground Based Strategic Deterrent program would not be supported by the Senate,” Cowen & Company’s Roman Schweizer wrote in a Nov. 4 note to investors. “We did not think that would've happened anyway with a Democrat sweep, but we think it is very unlikely now. We see the election as positive for the Ground Based Strategic Deterrent program awarded to Northrop Grumman.”
Foreign military sales could also be an area ripe for changes. A bipartisan group of lawmakers have opposed the Trump administration’s efforts to sell weapons to Saudi Arabia and the United Arab Emirates. The Trump administration has recently been pushing the sale of 50 F-35 fighter jets to UAE.
“If the sale is going to happen, it will need to be jammed through a Lame Duck before Biden takes office,” Schweizer writes.
A Democratic administration could place more scrutiny on large mergers and acquisitions. Recall that Frank Kendall, who led Pentagon acquisition policy during the Obama administration, voiced concerns about consolidation among the top-tier of defense firms.
“Defense M&A volume is usually low during U.S. election years given the uncertainties a new Administration may bring and 2020 has fit that pattern,” Capital Alpha’s Byron Callan wrote in a Nov. 1 note to clients. “However, we would expect a pick-up in 2021 and beyond. Services consolidation is likely but portfolio shaping will also be likely.”
Shipbuilding is another area that could see changes. The Navy has its 355-ship goal, then there’s Defense Secretary Mark Esper’s Battle Force 2045 calling for more than 500 ships, both manned and unmanned.
“We think a Biden presidency would walk away (sail away?) from a large fleet size target (355-500) but a Republican Senate would still be a strong backer of key shipbuilding states,” Schweizer writes. “We also think the Navy's desired push into unmanned/smaller ships would draw more scrutiny and be tempered.”
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From Defense One
Would Biden WH, GOP Senate Prevent Defense-Spending Dip? // Marcus Weisgerber
As the nation waits for election results, some analysts are looking ahead.
The Best Tech for Troops (Needs an Easier Path to Reach Them) // Tony DeMartino
The Pentagon must keep lowering barriers for startup companies, especially in artificial intelligence and machine learning — and help them stay in the game.
Time to Rethink Arms Sales to Taiwan // A. Trevor Thrall and Jordan Cohen
Once, they might have tilted the military balance. Now they just destabilize the region.
Boeing Sells Yacht
Named Daedalus, the yacht recently sold to a California developer for $13 million, according to the Puget Sound Business Journal. “The Boeing yacht has been used for entertaining and hosting the airplane giant's corporate customers, strengthening corporate relationships and philanthropy,” the paper writes. “In the summers, the Daedalus was often based at Vancouver Island, where its primary role was as a small floating hotel, providing a way for Boeing sales teams and airline customers to get away for fishing trips and conversations in a private setting.” The coronavirus pandemic combined with the fallout from two deadly 737 Max crashes has prompted tens of thousands of layoffs at the Chicago-based firm.
On the company’s quarterly earnings call last week, CFO Greg Smith said: “We're reviewing every piece of real estate, every building, every lease, every warehouse, every site to look at how we can be more efficient, and we'll share our decisions as we make them.” Daedalus was clearly grouped in there.
Bonus: Kudos to The Warzone blog for this headline: “Boeing Just Sold The Superyacht You Didn't Even Know They Owned.”
US Approves Taiwan Drone Sale
The State Department said Taiwan could buy up to four MQ-9 Reaper drones. The sale, with ground control stations and other support equipment is factored in, could be worth $600 million. No bombs or missiles are included in the proposed sale; however, the Defense Security Cooperation Agency notification statement says the drones will be “Weapons-Ready.” “If concluded, the proposed sale of this system will counter threats to Taiwan by improving Taiwan’s Intelligence, Surveillance, and Reconnaissance capabilities,” a State Department official said. “Taiwan intends to use its own funds for this purchase.” The approval comes in addition to four weapons deals worth nearly $4.2 billion that State approved for Taiwan over the past three weeks.
Unveiled: New Small Drones That Fly for a Day
French firm Elistair says it has made a small, tethered drone that can remain airborne for 24 hours, allowing it to record video or carry a communications relay for the military or law enforcement. “With its micro-tether of 330 feet (100 meters), the Orion 2 flies higher than its predecessor and surveils more ground. It can also carry up to 2kg (4.5 pounds) of payload, so it can serve simultaneously as an ISR and telecom platform. The Orion 2 can also stream georeferenced electro-optical and infrared imagery at the same time, and it can deploy 4G/5G communications nodes thanks to a new fiber optics cable option.” Here’s a video of the drone.
GDIT Wins $4B Cloud Computing Deal
The General Services Administration and the Defense Department the 10-year deal to Dynamics Information Technology last week. Per our sister publication NextGov: The company “will provide an enterprisewide set of business cloud capabilities including productivity tools, email, collaboration, file sharing and storage through a Microsoft Office 365 cloud environment.” Last week’s contract award “follows a years-long procurement marred by changes in acquisition strategy and multiple bid protests filed by Perspecta.”
Blue Angels Say Goodbye to Hornets
- The Pentagon created an assistant defense secretary for space policy and an associated Office of the ASD(SP) on Oct. 29, Justin Johnson has been designated as the official “performing the duties of the ASD(SP)” until a formal nomination is made by the White House. Gregory Pejic has been named the principal deputy for space policy.
- Maj. Gen. Michael Langley has assumed command of U.S. Marine Corps Forces Europe and Africa on Nov. 3. The former commander was fired last month after allegedly using a racial slur.
- Peraton has named Kevin Meiners — former deputy director of National Intelligence for Enterprise Capacity — to its advisory board. Meiners served in leadership positions involving intelligence, surveillance and reconnaissance systems in the IC and Defense Department.
- Israeli defense firm Rafael has named Moshe Lipel its chief financial officer. Lipel was previously CFO of Elta Systems, an IAI subsidiary.