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F-35 Program Manager: More Buyers Needed to Help Lower Production Costs
By Sandra I. Erwin

The Pentagon released new cost estimates for 78 major weapon systems that has a mix of good and bad news for the F-35 Joint Strike Fighter. While the long-term costs of the program are slightly down, production expenses have increased by $7.4 billion over the past year.

The 2013 congressionally mandated "selected acquisition report,” which the Pentagon submitted April 17, measures the performance of weapon systems from year to year, and projects future costs.

The officer who oversees the F-35, Air Force Lt. Gen. Christopher C. Bogdan, downplayed the significance of the report as a bellwether for the program. Aircraft procurement cost is up, Bogdan said, not because program expenses are out of control but because Pentagon budgets are down and the military services are buying fewer airplanes.

“It's a fact of life that when you move airplanes to the right, they are going to cost more,” Bogdan told reporters April 17. Another contributor to the price hike are higher labor rates charged by aircraft manufacturer Lockheed Martin Corp., engine maker Pratt & Whitney, and subcontractors BAE Systems and Northrop Grumman.

Bogdan predicted that an expected surge in orders from foreign buyers will help bring production costs back down. He said he also is putting continuing pressure on the contractors to squeeze cost out of the program.

The only bright spot in the SAR report is that F-35 operations and support costs — the cost of operating the entire fleet of 2,443 U.S. aircraft through 2065 — dropped $96.8 billion, or nearly 9 percent, from $1.1 trillion to $1 trillion. But acquisition costs from 2012 to 2013 increased $7.4 billion, or about 2 percent, from $391.2 billion to $398.6 billion. Aircraft production costs increased $3.1 billion (1 percent) from $326.9 billion to $330 billion. The F-35 engine costs climbed $4.3 billion (6.7 percent) from $64.3 billion to $68.6 billion.

The F-35 program includes 1,763 F-35A models for the Air Force, 340 F-35Bs for the Marine Corps and 340 F-35Cs for the Navy. Several hundred are being bought by foreign allies.

Bogdan said the SAR estimates do not tell the complete story of F-35 cost trends. “This is a very complicated program. It is where it is,” he said. He said the SAR does not show the true price of the airplane. “It is a projection out to 2065.” The per-unit price of the airplane last year was $112 million whereas the SAR said it was $123 million, Bogdan said. Higher procurement costs in the 2013 SAR is only a blip, he added. “I can explain it and understand it,” he said. The F-35 is “not a program out of control in terms of not knowing how and where costs are moving.” What the SAR says is that “this year, the rate at which I have to pay [contractors] in the future has gone up. Anytime anyone moves airplanes to the right, the price goes up.”

The surest way to lower cost, he said, is to bring in more foreign buyers into the program. The SAR estimates, he noted, do not include a possible order of 40 F-35s by South Korea, or anticipated future purchases by Singapore and Israel.

“We are pretty sure that Israel is not going to stop at 19,” Bogdan said. Another potential customer is Japan, which has a fleet of about 200 F-15s, half of which have been modernized. “At some point they will have to make a choice,” he said. “I can't influence that decision, other than keep driving the price of the airplane down. Then these FMS [foreign military sales] customers will make choices.”

Today, about 30 percent of F-35 components are made outside the United States, which exposes U.S. aircraft buys to fluctuations in foreign currency rates.

Bogdan insisted that the impact of budget cuts by the United States and other F-35 buying nations on aircraft cost projections should not be underestimated. In the Pentagon’s fiscal year 2015 budget proposal, the Navy delayed purchases of 33 aircraft and the Air Force postponed four. Turkey and Canada slipped their buys by one year, and the Netherlands slashed its order from 80 to 37. The cumulative effect of these changes, said Bogdan, is a cost increase of 2 to 4 percent to the price of each airplane. If sequester-level budgets are enforced by the Congress between 2016 and 2019, 17 fewer U.S. aircraft would be produced.

According to the SAR report, the average unit cost of F-35 aircraft is $131 million in 2012 dollars, and $162 million in “then-year” dollars, which projects what the aircraft will cost by the time the program is completed.

“This is always a tricky business,” Bogdan said of SAR estimates. Regardless, he said, “We have got to get the price of this airplane down, we have got to get the cost of sustaining the airplane down,” said Bogdan. “If it is not affordable, people will not buy it.”

He said he was encouraged that O&S costs are “trending in the right direction,” but disappointed that procurement costs are up. “It's not a surprise, and it's not a degradation of actual performance.”

The program still faces major hurdles, he said. “We are only 55 percent into flight testing.” During the next two to three years, the Air Force and Marine Corps variants are expected to be in full operation. The program overall has logged 15,000 flight hours so far.

High-rate production is scheduled to start in 2018, when 154 airplanes (90 for the United States) would be built. By 2019, production would rise to 168, of which 96 would be for the United States.

Bogdan set a goal of lowering the per-airplane price of F-35 to between $80 million to $85 million by 2019. That price would include the engine and contractor fees. Key to hitting that target is to ramp up production, he insisted. “For every dollar that we save in the production cost of this airplane, 80 percent can be attributed to economies of scale.” The other 20 percent comes from building airplanes and engines more efficiently. A case in point is the canopy that currently is manufactured with manual labor. “That produces scrap and rework and costs more than if you automated the manufacturing,” said Bogdan. The Defense Department and Lockheed are jointly funding a new system to automate the canopy assembly. “We have many projects on the books that are being implemented or about to be implemented,” he said.

Bogdan is asking Lockheed and Pratt to negotiate lower prices with their subcontractors. Both firms in the past have been reluctant to commit to long-term deals with suppliers, fearing that the F-35 was on fiscally shaky ground, he said. That “business risk” is not there anymore, said Bogdan, and he expects primes to “go to their supply base and make multiyear buys.” The Defense Department cannot by law sign a multiyear contract with Lockheed or Pratt, “but there's nothing to stop primes from going to their supply chain.”

The Pentagon has proved that it is committed to the program, he said. “We went through two years of sequestration and this program basically came out unscathed.”
Bogdan had harsh words for Pratt & Whitney and blamed the company for rising engine prices. The F-35 program office and the engine maker are still in negotiations for the next low-rate production lot. According to Bodgan, the company has not met cost targets that it had promised. “What they told me is, ‘when you buy more engines, the price comes down.’” That may be partly true, said Bogdan, although he suspects that the reason why engine prices are up is that Pratt has reduced engine production but not overhead costs. “I don't like that,” he said. “We'll be working with Pratt to continue the war on cost.”

Bogdan said he is frustrated by not having enough leverage with Pratt because the company is the sole manufacturer of the F-35 engine. A second engine manufacturer, General Electric, was eliminated from the program three years ago to cut costs. “There is only one engine, the F-135,” said Bodgan. “Whatever acquisition program you're in, when you are in a sole-source environment, it is difficult to find the right levers and motivation to drive cost out of a program,” he said. “One of the most effective ways to do that is through competition,” he said. “In my experience, contractors are slow to shed costs when their business base changes. … [Pratt] ought to rationalize their business base with their overhead.”

Photo Credit: Lockheed Martin
Plan to Deploy More U.S. Troops in Africa Faces Logistical Hurdles

By Sandra I. Erwin

Pentagon officials are finding that greater U.S. military involvement in Africa will be harder than they had imagined.

Despite an impressive logistics machine that regularly deploys and supplies troops around the globe, the U.S. military will have difficulties in Africa because it lacks the support infrastructure that the United States has in other parts of the world, senior officials said. 

The size of Africa, itself — twice as wide as the United States from East to West — creates a significant transportation problem, said Marine Corps Lt. Gen. Robert R. Ruark, director of logistics on the Joint Chiefs of Staff. 

U.S. forces currently are deployed in Niger, Mali, South Sudan, Somalia, the Central African Republic and Djibouti. The Republic of Djibouti is in the Horn of Africa, on the North East tip of the continent. The U.S. base there serves as the main hub for military operations because it is the only location on the continent that can provide the required services. This limits commanders' response time if they have to move troops to other regions of Africa, Ruark said. "We seem to be operating mainly from one enduring location."

Africa's size and geography "affect our response options and times," he said April 15 at the National Defense Industrial Association's logistics forum in Washington, D.C.

The Joint Chiefs are studying this problem, Ruark said. Officials believe that more work is needed to create a reliable network of suppliers and transportation providers that can support small teams of U.S. forces that may have to deploy on short notice.  

"The challenge is to develop a sustainment concept that supports distributed operations," said Ruark. Distributed operations is a term the Pentagon uses to describe the deployment of small military units. The U.S. government does not intend to send large-size forces to Africa but believes it needs a limited presence to help train local allies to fight extremist groups whose influence there is growing.

Among the obstacles for U.S. forces in Africa are limited access to sources of supplies and a distribution network that is not reliable, Ruark said. Unlike full-size Army brigades, smaller units must travel light and rely on outside means of support. "Distributed operations increase our self-sustaining requirements," said Ruark. 

Another weakness is poor communications systems, he said. "We need a robust and agile global distribution network with multiple nodes that are secure and resilient," he said. Decades of basing forces in Europe and the Middle East helped build a support infrastructure for the U.S. military that it lacks in Africa. The goal is to forge alliances with local governments there that can be trusted to provide the needed support, Ruark said. “We'll need healthy, multinational partnering agreements in the operating area.”

For operations in Africa, the military also will need more U.S. and local support contractors, said Ruark. As a former director of logistics at U.S. Central Command, Ruark was impressed by contractors’ abilities to deliver “door-to-door services” during the wars in Iraq and Afghanistan, he said. “Contractors picked up cargo in Fort Bragg [North Carolina] and took it all the way to FOBs [forward operating bases] in Afghanistan,” Ruark said. “I don't think that's ever been done before. I think that is fascinating. … It was the only politically acceptable solution. It keeps troops off the road,” he said. “We probably need to invest more in operational contractor support.”

The military’s expanded role in Africa is part of the Obama administration’s four-part strategy to strengthen democratic institutions, develop trade and investment, boost security and promote development. 

“DoD plays principally in peace and security, but will have a role to play in the other pillars as well,” said Deputy Assistant Secretary of Defense for African Affairs Amanda J. Dory.

“In times of fiscal austerity, some could ask how investing in African peace and security halfway across the globe is in our national interest,” Dory said recently at a Pentagon news conference. The answer is that terrorists, criminal organizations, militias and pirates “exploit ungoverned and under-governed territory on the continent and in its surrounding waters,” she said. “The potential for rapidly developing threats, particularly in fragile states, including violent public protests and terrorist attacks, could pose acute challenges to U.S. interests.”

The commander of Germany-based U.S. Africa Command, Army Gen. David M. Rodriguez, said between 5,000 and 6,000 troops are now under his purview. “It fluctuates based on exercises and training and the time of year,” he said. Rodriguez noted that Djibouti is currently a “huge strategic location, but not centrally located to all the challenging areas.”

The military is considering building a more permanent presence in West Africa. “What we're really looking at doing is putting contingency locating sites, which have some just expeditionary infrastructure that can be expanded with tents to put people in there temporarily to help support response to crises, and protect U.S. personnel,” Rodriguez said.

The picture in Africa is “not all bright,” he said. “In some regions, weak governance, corruption, uneven development, disease, food insecurity, crime, and violent extremism have contributed to instability and conflict.” Al-Qaida and its affiliates, he said, “have taken advantage of regional instability to continue to expand their activities.” 

U.S. Africa Command has been promoting “military-to-military relationships in a region where the United States has little forward presence,” he said. In Somalia, six African countries participate in the African Union mission that is fighting with the Somali national army against the Islamic group Al-Shabaab. 

African Union and European Union forces are training Somali national army forces, leading multinational counter-piracy operations and supporting other peacekeeping efforts, said Rodriguez. U.S. forces are helping provide maritime security in the Gulf of Guinea and involved in the fight against the Lord's Resistance Army in Central Africa. “The size of the continent alone poses challenges in this regard,” he said. “And just to remind you, the distance between Tunis, Tunisia, and the tip of South Africa is the same distance from Washington, D.C., to Honolulu.”

At the Pentagon, another ongoing discussion is whether the military will have sufficient logistics support forces to send to Africa. In the Army, 85 percent of logistics units are in the Reserve and National Guard. Ruark said the Joint Chiefs worry that the military services will not be able to keep enough reservists trained and ready to deploy on short notice. 

“If we're going to rely on reserve components to respond, they are going to have to have the capacity and the readiness,” said Ruark. “I have no problem with reserve components. They have served us very well. But to be responsive they have to be ready fast,” he said. “We have to address that readiness equation.”

Lt. Gen. Raymond Mason, Army deputy chief of staff for logistics, said there is a heated debate underway in the Army about the future readiness of reserve forces. The Army’s heavy dependence on the Reserve and the Guard could slow down the response to a crisis, he said. Reservists are responsible for essential jobs such as driving fuel trucks. 

“The challenge is they only get 39 days of training a year,” whereas the active-duty Army trains 300 days, he said. “They're just not going to be at the same level.”

The Army is working with regional commands, including AFRICOM, to arrange short deployments of reserve units so they can be better prepared in case of a crisis, he said. “Even if it's just for 14 days, we can gain from the readiness we invested in."

Photo: U.S. soldiers train Djibouti forces during an exercise at Camp Ali Ouney, Djibouti, Africa (Defense Dept. photo)

Kendall: Pentagon Learning to Live With Budget Uncertainty
By Sandra I. Erwin

Since the Defense Department’s budget proposal was unveiled March 4, Pentagon officials have harbored hope that, by now, they would have received a “signal” from Congress that it was willing to compromise and meet the administration halfway. But hope is fading fast, said Frank Kendall, undersecretary of defense for acquisition, technology and logistics.

A year ago, the gap between the funding the Pentagon wanted and the amount authorized by Congress was more than $50 billion. In budget year 2016, the Obama administration wants to shrink that gap to $25 billion. But even that is beginning to look like a bridge too far. “I don't see any political prospect of that any time soon,” Kendall said April 15 at the National Defense Industrial Association’s logistics forum in Washington, D.C.

“Whatever happens in the election coming up, I think we'll still be in the same position … probably for an indefinite period of time,” said Kendall.

The ups-and-downs of the past three budget years wreaked havoc on defense programs, said Kendall. “This is probably the worst budget environment I've seen.” Facing a political climate that is increasingly unfavorable, the Pentagon is bracing for an extended period of topsy-turvy budgets. “Uncertainty is something we are just going to have to manage our way through,” Kendall said. “We are trying to figure out how to manage.”

“At one point there was a $50 billion difference between the number we made detailed plans for, and the budget we might actually get. Our recent budget submission is less severe,” said Kendall. Last year’s Bipartisan Budget Agreement gave the Defense Department some stability for fiscal years 2014 and 2015 and softened the blow of the 2011 Budget Control Act. The bipartisan agreement, though, did not spare the Pentagon from deep automatic cuts from 2016 through 2021.

The fiscal year 2015 defense budget top line is $495.6 billion. The five-year plan for 2016 through 2019 included in the 2015 budget request exceeds the budget caps for those years by about $115 billion. For that additional funding to be appropriated in 2016 and beyond, Congress would have to ditch the BCA spending caps.

When those spending limits were enforced a year ago, the Defense Department was caught unprepared. It was hoping that sequestration would go away “if we just hang on one more year, until we get a signal from the Congress,” Kendall said. “But the problem is that sequestration is a 10-year law. It doesn't go away unless Congress does something to take it away.”

Although the specifics of the administration’s 2016 budget proposal will not be known until early 2015, Kendall said President Obama is unlikely to submit defense budgets to Congress that comply with BCA spending levels. “This is not definitive, and I don’t want to get ahead of the president, but I will tell you that it is extremely unlikely that we will ask for less money than the president thinks he needs to defend the country,” Kendall said. “We are not going to send budgets over, I believe, at sequestration levels. We are going to send budgets for the amount of money this administration thinks it really needs for defense. That is what we did this year and I suspect it's what we'll do in the future.”

A sequester-level 2016 budget, he said, would be “pretty unpleasant.” BCA-compliant budgets were examined under Defense Secretary Chuck Hagel’s “strategic choices management review” last year, and the conclusion was that the Pentagon could not absorb a $50 billion cut every year without gutting the military and turning it into a “hollow force,” said Kendall. “I lived through a hollow force in the 1970s as an Army captain in Europe,” he said. “We don't want to go back to that.”

Washington remains as divided over defense budgets as it was when disagreements over taxes and spending led to the Budget Control Act and the sequester as a mechanism to control spending. A recent budget proposal by House Budget Committee Chairman Rep. Paul Ryan, R-Wisc., seeks to restore $274 billion to defense over the next 10 years. But the plan stands no chance politically, and has been widely criticized for boosting the military budget at the expense of domestic social programs and other non-defense discretionary accounts such as homeland security and diplomacy.

Photo Credit: Army

Military Budgets Fall in the West, Rise in China, Russia, Middle East
By Sandra I. Erwin

The United States still is by far the world’s largest military spender, with a budget of $640 billion in 2013. But U.S. defense spending is down from a a year ago, while the next three largest military powers — China, Russia and Saudi Arabia — have made substantial increases, according to new data by the Stockholm International Peace Research Institute.

SIPRI estimates China’s military budget at $188 billion, Russia’s at $87.9 billion and Saudi Arabia’s at $67 billion. Saudi Arabia leapfrogs the United Kingdom, Japan and France to become the world’s fourth largest military spender, said SIPRI. China, Russia and Saudi Arabia are among the 23 countries around the world that have more than doubled military budgets since 2004.

China’s spending increased by 7.4 percent in real terms since a year ago, said Sam Perlo-Freeman, director of SIPRI’s military expenditure program. “While China has been behaving more assertively in recent years in territorial disputes with Japan in the East China Sea, and with the Philippines and Vietnam in the South China Sea, these heightened tensions do not seem to have changed the trend in Chinese military spending, which represents a long-term policy of rising military spending in line with economic growth,” he said.

Russia upped defense spending by 4.8 percent. Its share of defense as a percentage of gross domestic product (4.1 percent) exceeded that of the United States (3.8 percent) for the first time since 2003, SIPRI noted. Russia’s spending is fueled by its so-called “state armaments plan” that calls for investment of 20.7 trillion rubles ($705 billion) on new and upgraded armaments, the report said. The goal is to replace 70 percent of equipment with modern weapons by 2020.

For U.S. defense contractors that are eyeing new markets, there are good and bad news in SIPRI’s military-spending rankings. Rising powers’ China and Russia defense defense markets are not accessible to U.S. suppliers, although their expansionist policies are fueling regional military spending by countries that are U.S. allies.

Saudi Arabia has become a key customer for U.S. arms suppliers. Its projected expenditures on Boeing-made F-15 SA fighters could total $10.6 billion through 2019, according to the consulting firm Avascent. “It is the largest ongoing procurement initiative and also the largest foreign military sales transfer to Saudi Arabia,” said Avascent analyst Sebastian Sobolev. Sales of munitions for the F-15 SA could mean an additional $6.8 billion in sales. The Saudi Air Force is also expected to begin taking deliveries of the Lockheed Martin-made C-130J and KC-130 cargo aircraft, a $6.7 billion deal announced in 2012. “Though much of the recent investment has focused on airborne and ground platforms, Saudi Arabia seems set to shift focus to naval modernization,” Sobolev said. “Though requirements remain ill-defined, this program could include the procurement of large surface combatants and submarines.”

Saudi Arabia and Iraq dominate arms spending in the Middle East, which increased by 4 percent in 2013, to about $150 billion, SIPRI estimated. Saudi Arabia’s spending alone soared by 14 percent, to reach $67 billion, said Perlo-Freeman, “possibly due to tensions with Iran but also the desire to maintain strong and loyal security forces to insure against potential Arab Spring type protests.”

SIPRI analysts said 2013 saw falling defense budgets in Western countries, led by the United States, while military spending in the rest of the world, excluding the United States, increased by 1.8 percent. Global military expenditures reached $1.75 trillion in 2013, a drop of 1.9 percent in real terms since 2012.

A 7.8 percent slide in U.S. spending in 2013 is the result of the end of the war in Iraq, the beginning of the drawdown from Afghanistan, and the effects of automatic budget cuts passed by the U.S. Congress in 2011, Perlo-Freeman noted. “Meanwhile, austerity policies continued to determine trends in Western and Central Europe and in other Western countries.”

Chart credit: SIPRI

Congress Takes Another Stab at Fixing Pentagon Procurement
By Sandra I. Erwin

Congressional oversight committees have asked industry groups to help pinpoint specific trouble spots in the military procurement system. Frustrated by decades of failed reform efforts, lawmakers are taking a different tack and, instead of piling on new rules, they are first investigating why current laws and regulations have not worked as intended. They also are scrutinizing overhead costs as one of the root causes of soaring weapon prices.

“People are seriously looking not only at the cost and schedule of weapon systems but also at the administrative costs of the acquisition process itself, and the time involved,” said Jon Etherton, industry consultant and former staff member of the Senate Armed Services Committee. He is now a senior fellow at the National Defense Industrial Association and is coordinating industry input for an upcoming congressional review of the weapons acquisition process.

Etherton was involved in previous efforts to reform Pentagon procurement over the past two decades. The new congressional initiative is not more of the same, he said. “The conversation we are having this year is different than the one we were having a year ago, or the year before.”

When Congress last passed sweeping procurement reform legislation — the Weapon Systems Acquisition Reform Act of 2009 — the Pentagon’s budget had reached record levels and the mood at the time was to crack down on procurement fraud and abuse. Military spending has since plummeted, although the cost of major weapon systems has continued to rise. The Pentagon has warned it will have to terminate programs to free up funds for other portions of the military budget. This has compelled members of Congress, Pentagon acquisition officials and defense industry to join forces and figure a way out of the perpetual cycle of buying less for more.

Lawmakers are asking, “Can we afford to have the system that we have now, and are there alternatives?” said Etherton.

Rep. Mac Thornberry, R-Texas, who was put in charge of the HASC procurement reform review, told National Defense last month that the committee feels a sense of urgency. “I haven't found anybody who says the current system is working well,” he said. “What I hear is skepticism. We've tried this many times. Why is this going to be any different?” The answer is that “we don't have a choice,” Thornberry said.

In its most recent report card on Defense Department acquisitions, the Government Accountability Office credited the Pentagon for slight improvements in the performance of major weapon systems, but cautioned that trouble still lies ahead. “While many of the recent efficiencies achieved by programs decreased their costs without reducing quantities, it is unclear how much more savings can be obtained in this manner," wrote Gene L. Dodaro, comptroller general of the United States.

The Defense Department and Congress have taken “meaningful steps to improve the acquisition of major weapon systems, yet many programs are still falling short of cost and schedule estimates,” GAO said.

The estimated cost of 80 programs that GAO studied has increased by $14.1 billion, although 50 of the 80 have seen some cost reduction. The Pentagon will need about $682 billion to complete these programs, of which 45 percent represents cost growth from initial estimates. GAO called this a “clear indicator that the Defense Department needs to do more to control cost growth.”

The leaders of the Senate and House armed services committees from both sides of the aisle have asked nine industry associations to submit “recommended steps” to improve defense acquisitions. They also asked for these proposals to specify whether they would require changes to existing statute or regulations. Responses are due July 10.

If any of the suggestions are adopted by the committees, they would be part of the legislative debate leading up to the fiscal year 2016 National Defense Authorization Act.

Industry officials see this as a rare opportunity to tackle festering problems in the acquisition process. “When you look at the current acquisition system, it’s not how far we’ve come but how far we have to go,” said Retired Marine Corps Maj. Gen. Arnold Punaro, chairman of the National Defense Industrial Association. “We haven’t seen an opportunity for serious, thoughtful reform for a long, long time,” he said.

The industry is enthusiastic about the chance to work with the armed services committees and the Executive Branch on this issue, Punaro said. The Pentagon’s top weapons buyer Frank Kendall has been “very proactive,” he said. “They understand that they need to work collaboratively with the Congress. Rarely have we seen the two sides moving in the same direction,” said Punaro. “Typically it’s the Congress doing reforms and forcing them on the Pentagon. We haven’t seen this level of dialogue in a very long time.”

Etherton cautioned that the devil will be in the details. “I don’t think it will be smooth sailing,” he said. While everyone agrees that change is needed, each industry association and trade union has different priorities that will have to be reconciled. “There will be a lot of discussion about individual proposals,” he said.

“It is really fruitless to spend time worrying about political or structural factors we cannot change,” Etherton said. “We need to focus on what is within the realm of the possible, identify who has the authority to make needed changes, and suggest to them what specific changes to make, how to make them, and the outcomes we predict could occur.”

One of the toughest nuts to crack in military acquisitions is the lack of coordination within the Defense Department between the organizations that oversee weapons requirements and budgets, and those that are in charge of acquiring those systems. “One reason why past reform efforts were not successful is that we didn’t link requirements, acquisition and budget process as well as we should have,” Etherton said. “We dealt with each one separately,” he added. “Trying to get a sense of organic entity is going to be one of the biggest challenges.”

Close coordination among the three entities was one of the recommendations that the Defense Business Board — an industry advisory panel — included in a 2012 report, said Punaro, a former DBB chairman. “The service chiefs need to be more involved in linking the three and managing the careers of the military acquisition workforce which is now run by civilians,” he said. “Those items are worthy of serious consideration.”

The issue of bureaucratic bloat also will be part of the upcoming debate on defense procurement. According to various estimates, the goods and services the Pentagon buys carry a cost premium of 20 to 40 percent from overhead expenses such as administration and contractor oversight. Kendall has appointed Assistant Secretary Katrina McFarland to work with prime contractors on ways to lower administrative costs.

High overhead expenses are troubling, said Punaro, because they are eating into the Pentagon’s buying power. Even though the Pentagon’s overall budget is projected to be relatively flat over the next five years, the actual funds that will be paid out for contracts will plunge. Disbursements for weapon modernization programs will be dropping by $118 billion between 2012 and 2016. “We’re still in decreasing outlay mode for the next couple of years,” said Punaro. “We have to get more bang for the buck for the dollars that are available.”

Photo Credit: Thinkstock

Study Raises Red Flags on California Aerospace Industry
By Sandra I. Erwin

A combination of unfriendly tax policies, military budget cuts and cutthroat competition is wreaking havoc on California’s storied aerospace industry, a new study cautions.  

“Aerospace is one of California’s most important sources of jobs and revenues. The state must take steps to support it into the future,” says a report recently published by the consulting firm A.T. Kearney.

While military budget cuts have hit aerospace manufacturers nationwide, California is being disproportionately affected because state tax and industrial policies make it difficult to compete against other U.S. and foreign firms, says Randall Garber, partner at A.T. Kearney public sector and defense services.

“California ranks 48th among U.S. states in terms of cost competitiveness and overall ease of doing business,” he says. Major corporations have relocated their operations to new states, including Northrop Grumman Corp., which moved its headquarters to Northern Virginia; Raytheon Space and Airborne Systems, which moved its headquarters to McKinney, Texas; and The Boeing Co., which moved two aircraft modernization programs — the C-130 Hercules transport aircraft and the B-1 bomber — from Long Beach to Oklahoma City.

Other recent setbacks include Boeing’s decision to shut down the C-17 military cargo aircraft plant in Long Beach due to a lack of orders. The unmanned aviation industry in California also was disappointed for not making the cut of drone-testing facilities that the Federal Aviation Administration selected earlier this year.

Garber says that while industry revenues and employment have been stable in recent years, the future is uncertain, and executives worry that aerospace and defense are underappreciated industries in a state that is better known for Hollywood films than for making aircraft and rocket engines. Aerospace is one of California's largest industries, with annual revenues equal to agriculture and entertainment combined, he says.

With $62 billion in revenues and $38.8 billion in indirect revenues it feeds to adjacent industries, the  aerospace sector's total economic impact is more than $100 billion, says Garber. “The message to the government is, ‘Don't take it for granted.’”

The state legislature since 2009 has passed several laws to make aerospace firms more competitive via tax relief and hiring credits, but there is still not enough awareness of what the state stands to lose if more companies depart or go out of business, he says. “It is the best kept secret for many politicians. They are not aware of the size of the industry.”

In the space sector, dominated by giants Lockheed Martin and Boeing, there is concern that a new procurement strategy for future satellites could mark the end of big-ticket spacecraft manufacturing in Southern California. The buzz in the industry is that the Air Force wants a “disaggregated” space architecture made up of less expensive, smaller satellites and hosted payloads. “What does that mean for the big space players in California?” Garber asked. In the rocket launch sector, the good news is that California-based SpaceX is expected to become a major player in the space industry. It is now focused on commercial business but soon will be challenging the Boeing-Lockheed joint venture, United Space Alliance, for military satellite launches. The downsize, says Garber, is that if SpaceX takes business away from ULA, it would be a loss for another California firm, Aerojet Rocketdyne, a key supplier to ULA.

In 2012, California’s $62 billion in aerospace industry revenues accounted for 9 percent of the global market and 21 percent of the U.S. market. The sector employs 510,800 workers in California — 203,400 directly and 307,400 in indirectly related industries such as finance, real estate, construction and transportation. Aerospace wages rate in the top 3 percent of all industries

“The aerospace industry has enjoyed tremendous success in the state, but competitive challenges exist, including high corporate and personal income taxes, a difficult regulatory environment and an aging skilled workforce,” the A.T. Kearney study says. “While recent state legislation is a step in the right direction, to grow its aerospace footprint, California should proactively pursue competitive policies that encourage commercial investment as well as investments in STEM instruction for its students.”

Credit: A C-17 Globemaster III aircraft nears completion in the Boeing assembly plant in Long Beach, Calif. in 2009 (Defense Dept. photo)
Marine Forces Japan Commander Raises Concerns on Amphibious Ship Numbers, Readiness
By Valerie Insinna

While the Marine Corps has enough amphibious ships to support a singular engagement in the Asia-Pacific region, it currently does not have enough of them to deploy multiple amphibious forces concurrently, said the commanding general of Marine Forces Japan.

Lt. Gen. John Wissler, commanding general of the III Marine Expeditionary Force, said the Marine Corps would be able to perform a lone mission in the Asia-Pacific region. “Will we be able to do it in multiple places simultaneously, or on a scale that would allow us the rapid kind of build up that we would want? No."

Throughout his comments April 11 during a media roundtable, Wissler reiterated assertions made by other service leaders who say that the Navy and Marine Corps do not have the amphibious ships necessary to meet their needs. With a requirement of 50 amphibious vessels and fiscal pressures mounting on the military, that is unlikely to change any time soon, he said.

Chief of Naval Operations Jonathan Greenert has stated that the force can meet most requirements with 38 amphibious ships, Wissler noted. But the service can only afford to grow its current 29-vessel fleet to 33 ships over the next decade.

To meet requirements in the Pacific, Wissler said he would need two full-time amphibious ready groups, which typically include an amphibious assault ship, an amphibious landing ship and a dock landing ship along with aircraft and a Marine Expeditionary Unit.

“That would be six amphibious ships afloat all the time,” he said. “Admiral Greenert has committed to sending a second amphibious ready group to the Pacific in 2017, but in order to maintain six amphibious ships afloat all the time, you would need probably 24 amphibious ships on a one-to-four rotation in order to do the proper maintenance.”

The service is already struggling to ensure its aging amphibious ships are ready for action. When Typhoon Haiyan devastated the Philippines on Nov. 8, the Marine Corps sent two squads of MV-22 Ospreys in the following days to deliver supplies.

However, “we didn’t have the amphibious ready group readily available,” Wissler said. “All four of the forward deployed naval force amphibious ships were in maintenance when the typhoon struck. It was an unfortunate bit of timing, and it was what it was.”

The ships were going through maintenance in order to be ready for their spring patrol, he said.

On Nov. 22, The USS Ashland and USS Germantown dock landing ships arrived at the scene and replaced aircraft carrier USS George Washington. The vessels brought supplies ashore and delivered equipment such as dump trucks to remove heavy debris, National Defense previously reported. About 450 Marines from each ship carried out relief operations, including evacuating survivors.

Because of the aircraft’s speed and agility, the service would have sent the Ospreys ahead even if amphibious ships were ready to set sail, Wissler contended.

However, he remains concerned about amphibious ship availability. Marine Forces Japan only has a full, three-ship amphibious ready group at hand 60 percent of the time, he said.

The maintenance burden will only worsen should fiscal pressures continue and sequestration returns in 2016, he added. “We have run those ships really, really hard and they are an aging fleet, and so there just are natural challenges.”

Credit: Amphibious assault ship USS Essex (Defense Dept. photo)
Marine Corps Preparing For Expanded Role in Africa
By Dan Parsons

Since the end of World War II, U.S. foreign policy in Africa has been based on diplomacy and international aid rather than military presence.
That paradigm shifted as a result of the Arab Spring movement. Both the Marine Corps and Special Operations Command have plans to increase troop strength to deal with instability and terrorist threats on the continent.
U.S. military planners see Africa as a region where small units of U.S. troops, operating in concert with — and in support of — indigenous forces, can have a big impact. Special Forces have proven their worth as trainers and reinforcements for African troops in regional conflicts there.
The Marine Corps expects to have a larger role in crisis response. That was driven home for the Marines when the U.S. consulate in Benghazi, Libya, was attacked and Ambassador Chris Stevens and three other Americans were killed, Maj. Gen. Raymond Fox, commander of II Marine Expeditionary Force, said April 9.
That event “changed AFRICOM forever,” he said at the Navy League’s Sea-Air-Space conference at National Harbor, Md.
The Arab Spring toppled several governments in the region — some of which were U.S. allies — and created widespread instability that has been exploited by extremist groups, said Lt. Gen. Robert Neller, commander of Marine Forces Central Command.
Since Neller took his current job in September 2012, there have been violent regime changes in Tunisia, Libya, Egypt and Yemen. Syria exploded into a violent civil war that is nearing its fourth year. Al-Qaida has migrated to the Magreb and the Arabian Peninsula, he noted, while affiliated groups are training, recruiting and wreaking havoc in both Somalia and Nigeria.
U.S. Africa Command originally was modeled on foreign policy in South America where the State Department, the Agency for International Development and non-governmental organizations took the lead in maintaining relative stability, Fox said. U.S. military involvement on the continent has been limited since the incursion in Somalia in the 1990s ended in disaster. A single base in Djibouti that is primarily focused on the Middle EAST is the only permanent U.S. presence there.
“That certainly has changed as al-Qaida started leaving places like Afghanistan and Syria, and picking up weapons in Libya and moving down into the Magreb and other places,” Fox said.
After Benghazi, the Marine Corps was tasked with increasing protection at dozens of other U.S. embassies and consulates on a continent that is more than three and a half times the size of the United States. Just finding all the U.S. corporations, government installations and non-governmental organizations is difficult, Fox said.

"The maps are all deceiving,” he said. Africa “is a lot bigger than you could ever imagine.” It takes eight hours to fly from Frankfurt, Germany, to Lagos, Nigeria, and 13 hours to fly from Lagos to Atlanta, he said.
The MV-22 Osprey has changed the equation on how a relatively small military force can respond to crises on a huge continent like Africa, Neller said.
“The ability to go 250-260 knots, aerial refuel and carry 20 armed and combat-ready Marines across a combatant command [area of responsibility] is a significant strategic capability,” he said. “Yes, it would be nice if we had ships, but ships are expensive.” Ospreys can reach much of the continent, but need aerial refueling to fly longer distances.
Currently 90 Marines are on the ground at the U.S. Embassy in Tripoli, Libya. They rotate in every six months.  The embassy would not be open without that force, Fox said.
Marines also are stationed in Liberia. Others rotate into places like Uganda. When Fox assumed command, there were about 150 Marines focused on Africa. Now there are about 2,000, not counting the Marine Expeditionary Units stationed periodically nearby at sea, he said. MEUs can provide air superiority, ground forces and logistics capabilities to support them ashore. But crises in Africa rarely require such a large combat force, Neller said.
Col. Scott Benedict, commander of 24th Marine Expeditionary Unit, said Marines are suited to responding to crises in Africa because their units can be scaled to provide anything from high-end forcible entry and combat operations to humanitarian assistance missions.
Marines were unavailable to respond to the Benghazi attack because of a lack of amphibious ships in the Mediterranean, he said. The service’s immediate response was to set up a smaller force based in Europe that is not reliant on ships.

The special purpose Marine air-ground task force — a two-company unit with MV-22s and aerial refueling tankers — stationed in Spain and Italy filled that gap, Benedict said.
Several Fleet Antiterrorism Security, or FAST, teams have been stationed in the region, said Col.  James Bright, commander of the Marine Corps Security Force Regiment.
The teams are specially trained during a yearlong pre-deployment program and stationed at Maron, Spain, in Bahrain and Yakuska, Japan. Since 1987, FAST teams have deployed on more than 70 missions, Bright said. In recent years, they have deployed to Sanaa, Yemen; Cairo, and Tripoli.

Plans are to continue pushing forces south so they can more quickly respond while expending less fuel and putting less stress on troops, Fox said. “We need to move south. Maron was the starting point because we didn’t have anywhere else to go,” Fox said. “It would certainly be ideal, assuming that Africa is important to the U.S. and assuming there are going to be stability problems in Africa, that we slowly … start operating in places like Senegal and maybe go a little further south.”
Fox said that certain governments are supportive of hosting Marines, and the State Department is “warming up to the idea” of an increased military presence on the continent.
“We have to get used to operating in Africa and they have to get used to us,” Fox said. "We want Marines to be as familiar with Africa as they are with Iraq and Afghanistan. I don’t want the first time they see that place to be when they’re going in there for real. So we’re going to deliver a path where Africa sees more of us and we see more of Africa.”
Neller said there are no plans to establish permanent bases on the continent. That’s one reason why the Marine Corps would like to have more amphibious ships available off the coast of a country in crisis.

See the May issue of National Defense for more on the future of U.S. Special Operations Command forces in Africa.

Photo Credit: Defense Dept.
China Knows No Sequestration, Navy Acquisition Head Warns
By Valerie Insinna

Sean Stackley

The U.S. military will be in danger of losing its asymmetric advantage should sequestration be reinstated in fiscal year 2016, the Navy’s acquisition chief warned.

"We must rid ourselves of any complacency built upon our past success, because the threat is rising," Sean Stackley, assistant secretary of the Navy for research, development and acquisition, said April 9 at the Navy League’s Sea-Air-Space conference in National Harbor, Md. "China knows no sequestration in their budgets. They’re rising rapidly. So we'll need to do better, whatever our budget."

Throughout the speech, Stackley praised recent milestones of naval programs such as the first deployments of the littoral combat ship and P-8 Poseidon multi-mission aircraft and inaugural flights of unmanned aircraft such as the MQ-4C Triton and X-47B demonstrator.

All of those programs contribute to the U.S. Navy’s superiority, he said. But that could trickle away if funding is stripped from procurement and acquisition accounts through mandatory cuts.

It doesn’t matter whether you measure "numbers of ships or aircraft ... or flight hours or trained sailors and Marines, numbers of S-band radars or Tomahawks or standard missiles or signal-to-noise ratios or ordinance on target,” he said. “Whatever method you choose to count, by whatever measure you choose, if our budget is sequestered … that measure will be less — and in certain cases, much less.”

“The politics are simple,” he said. While it is Congress’ responsibility to appropriate a budget to maintain the Navy, industry and government must take it upon themselves to “do all within our power to drive down the cost of doing business, to rid our budgets of any burden that does not go directly to building seapower."

That means that the Navy must be more exact in determining what weapons systems it needs and how much it can afford to pay for them, he said. The service must also find innovative ways to use them.

The topics of affordability were hammered home by many of the Navy’s top leaders during the conference.

Although the service’s unmanned aviation and strike weapons portfolio still has a “considerable budget,” its program executive officer Rear Adm. Mathias Winter stressed that technologies must be within the Navy’s means.

"If you take one word away from this talk, affordability is paramount to ensure that we are getting the maximum effort out of the intellectual capital workforce and the maximum product and capability out of the bended metal and written code,” Winter said April 8.

Rear Adm. Mathew Klunder, chief of naval research, reiterated that it is not enough that a technology be lethal and survivable. In order to receive funding from the Office of Naval Research, it must also be low cost, he said in a speech earlier in the week.

Photo Credit: Navy
Marine Corps Gets Creative in Solving Ship Shortage, Vehicle Needs
By Dan Parsons

The Marine Corps has fewer amphibious ships than it requires to maintain a global presence and the vehicles it needs to get ashore during battle are nearing a half-century of service.

With dwindling funds to buy more ships or replace its ship-to-shore connectors, officials have had think creatively about how they will achieve their vision for providing a global scalable sea-based crisis response force, which they call Expeditionary Force 21.

Military Sealift Command has been tasked with providing ships to help the Marine Corps achieve its goal of maintaining "a force that is naval in character and capable of conducting amphibious operations” while “meeting current commitments and preserving readiness,” as Marine Corps Commandant James Amos wrote in the forward to the 48-page plan.

Rear Adm. T. K. Shannon, chief of Military Sealift Command, outlined several options for repurposing non-combatant ships as complements to sea-basing and expeditionary operations.

“To complement our Navy’s extremely capable amphibious ships, we need to look at alternate platforms from which we can conduct some Marine Corps operations,” Shannon said April 9 at the Navy League’s Sea-Air-Space conference at National Harbor, Md. “Military Sealift Command has a host of platforms that can be used in new and creative ways in support of Expeditionary Force 21.”

Shannon has no intentions of attempting to replace amphibious assault ships. But if they are thought of as the starters in a basketball game, Military Sealift Command ships can take on some missions to let them catch their breath during a fight, he said.

The USS Ponce, an old amphibious ship due for decommissioning in 2011, was converted into an afloat forward staging base and deployed in 2012 to the Middle East. It most likely will stay there until at least 2016, Shannon said. This ship operates as a test platform for weapons and a staging base for special operations and other forces.

“We are just starting to scratch the surface of what we can do with platforms like this,” Shannon said.

The afloat forward staging base — a mobile landing platform hull with a flight deck above the docking bays for landing craft — will handle a wide range of aircraft to include the V-22 Osprey, CH-53 heavy lift helicopter and possibly the F-35B jet fighter.

Plans are to repurpose two ships as mobile landing platforms, not counting the USS Ponce, which is a proof-of concept vessel. The USNS Montford Point has just left a West Coast shipyard after conversion to a mobile landing platform and will undergo sea trials this summer, Shannon said. The second ship in the class, USNS John Glenn, will follow Montford Point into the yard for installation of its mission package. In early 2015, work will begin on USS Chesty Puller to convert it into the first floating staging base.

The third and fourth hulls in the class will be outfitted as afloat forward staging bases with flight deck capabilities, Shannon said. Navy officials hope to eventually purchase a fifth hull in the class, but do not yet have funding for it.

The joint high-speed vehicle, or JHSV, is a shallow-draft troop transport with a flight deck that could be used to facilitate Marine Corps landings. Vehicles can also roll into and out of the vessel’s cargo bay, Shannon said.

“Perhaps a joint high-speed vessel with an adaptive force package of Marines could free up a multi-mission combatant or a big-deck amphibious ship to execute the more complex missions they were designed for,” Shannon said.

The JHSV in 2016 will carry the Navy’s new electromagnetic rail gun for test firing. Officials at the Office of Naval Research chose the vessels because it was available and had ample room on its flight deck and in its cargo hold to house the rail gun components. Testing the system aboard a destroyer would have taken one of the combatant vessels out of active service for months, Shannon said.

“Listen, please. MSC can’t and won’t replace amphibious ships,” Shannon said. “But we can operate in a way that complements them and helps relieve the stress on our combatant Navy and on our amphibious ships.”

 Another example Shannon gave of taking existing ships and employing them in new ways was repurposing large gray hull cargo ships in support of expeditionary maneuver.

The Navy has taken its TAK-E dry cargo and ammunition ships and landed a V-22 on its aft flight deck. The aircraft, when its wings are folded, will be able to fit inside that ship’s hangar once the door is widened. It has also been used and a command-and-control ship during Marine Corps expeditionary warfare exercises and to house Marines for transport.

Other large 900-foot-plus cargo ships equipped with heavy duty cranes could serve similar purposes, Shannon said. Large medium-speed ships have 392,000 square feet of cargo capacity, he said.

“Let’s think about the flexibility of using this incredible platform,” he said. “Think of the capabilities we could add if we, for example, removed the cranes and put a small flight deck on there that could operate V-22s.”

Shannon said the conversion of the motor vessel Cape Ray last year is a perfect example of the versatile capabilities of sealift ships. The Cape Ray was turned into a floating chemical weapons neutralization platform in 90 days in response to the use of such weapons by the Syrian government.

“We can take a traditional platform … and use it in a non-traditional way to help meet our nation’s needs. We can do it quickly. We can do it effectively. We can do it efficiently.”

MSC operates 110 ships daily around the world. It has another 22 ships in reduced operating status, most of which can be brought back into operation within five days, Shannon said. Another 46 ships are available from the command’s maritime division, which is under the Department of Transportation. Those ships are crewed by civilians but are part of the Navy’s ready reserve force and can be rushed into service when needed.

Once the Marines are in position near a crisis, they must get from ship to shore, which leaves the force reliant on a fleet of aging “connector” vehicles.

“With the fiscal situation being what it is, it is starting to narrow the options with regards to what were going to be able to do with pursuing capabilities,” said Brig. Gen. William Mullen, director of the Marine Corps Capabilities Directorate.

The Marine Corps has most notably had to temper its appetite for a high-speed swimming tracked vehicle. It has spent $3 billion over 26 years trying to replace its amphibious assault vehicles, or AAVs, that launch from the well deck of amphibs and deliver Marines ashore into combat.

“High water speed is tremendously important to us, so much so that we went after it for 26 years,” Mullen said. “We need to get from ship to shore as fast as we possibly can.”

The latest failed development attempt, called the expeditionary fighting vehicle, achieved the desired speeds through water, but made “unacceptable tradeoffs” in troop protection and weapons, among other attributes. It was canceled and revived as the amphibious assault vehicle, which has lagged and is being revised as a phased acquisition.

The ACV will now be wheeled instead of tracked, at least in the first phase of procurement. Such a vehicle is readily available off the shelf, Mullen said.

Up to 392 AAVs that are approaching 45 years old will be upgraded as a near-term solution to the need for connectors, Mullen said. The Marine Corps needs to replace a total 1,058 AAVs, Mullen said.

The Marine Corps will then buy 204 ACVs in the first phase of procurement, he said.  They will be personnel-carrier variants only. Mullen called it the “good enough vehicle given fiscal realities.”

BAE Systems, General Dynamics Land Systems, SAIC and Lockheed Martin have each offered ACVs that have undergone preliminary testing by the Marine Corps. The ability of these vehicles to match or improve upon the AVV’s performance at sea has not been established, Mullen said.

The second phase will include mission-role variants and weapons variants, of which the Marine Corps plans to buy 490. Those variants may reintroduce tracks or could remain wheeled, Mullen said. That phase will likely take place around 2025.

Photo Credit: Marine Corps
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