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Pentagon Will Demand 'Fair Prices' From Commercial Vendors
By Sandra I. Erwin

The Defense Department spends $60 billion a year — nearly a third of its annual purchases — on everyday products sold in the open market by commercial companies. It also buys items that are not sold to the general public and fall into the narrower category of "commercial of a type."

Determining whether "of a type" products are being fairly priced has become a thorn in the side of Pentagon procurement officers, and has made negotiations with contractors increasingly contentious. Government officials are pressing vendors to provide detailed justification for their prices, and suppliers view these actions as intrusive and unwarranted. Some are contemplating whether to exit the military market.

Director of Defense Pricing Shay D. Assad says these complaints are a "smokescreen" that distracts from the real issue, which is that some vendors are abusing commercial "of a type" contracting and are overcharging for their products.

"Our policy is simple," Assad tells National Defense. "If you have a market based price that can be substantiated through sales in the commercial marketplace, we pay what the market pays."

While that sounds straightforward enough, things can get messy in the contracting trenches. Companies that develop high-tech products and customize them for the defense market, for instance, argue that their offerings are commercial because they were funded by the private sector. But unless they can document that the products were sold in the commercial marketplace and at what prices, the government is not satisfied that it is being charged a fair price.

In the 2014 National Defense Authorization Act, Congress mandated that the Pentagon provide clear guidance regarding commercial items. Assad has updated those guidelines, and they are now being reviewed by Undersecretary of Defense for Acquisition, Technology and Logistics Frank Kendall.  

"There are thousands of contracting officers in the field right now who do not believe they have gotten a good deal" from vendors over the past several years, Assad says. "So they are starting to challenge." Contracting officers across the military commands, he adds, believe they need to get a "better deal for the taxpayers."

The government is going to press vendors to provide foolproof evidence of what the market pays for the product, Assad insists. And vendors often cannot provide it in a satisfactory manner.

Contractors have raised hackles about what they regard as arbitrary application of existing laws that encourage the Pentagon to buy commercially available products instead of paying a traditional defense contractor to develop customized systems. They contend the Pentagon is driving a hard bargain by demanding "certified cost and pricing data" from commercial vendors as justification for their prices.

Manufacturers that for years have sold spare parts to the Defense Department under commercial deals have questioned why the Pentagon is changing their contracts to "military unique," even though nothing about the product, service or basis of pricing has changed. If the government determines that the company's commercial historical data is no longer valid, these suppliers say, it demands "certified cost and pricing data." Industry considers this impractical or even impossible because commercial products and services were developed under commercial rules and accounting systems. Most commercial firms cannot comply with accounting standards demanded by federal contracting regulations.
Assad pushes back on these claims. Defense contracting officers only ask for certified cost and pricing data from commercial companies as a last resort, when all other options have been exhausted. "The idea that we somehow don't know how to buy commercial things is fiction," he asserts. "The issue for us is when a company sets a price that it can't substantiate as a market based price, with no justification."

The Pentagon has no problems dealing with the vast majority of its commercial vendors, Assad says. The friction occurs within a narrow sector of the aerospace industry, "about 20 companies," that are unhappy about the government challenging their prices, he says. "This is not a massive [industry-wide] issue."

Based on feedback he has received from many of the Pentagon's 27,000 contracting officers, Assad believes the real reason for vendors' frustrations is that they are losing leverage in their negotiations with the government. In the spare parts business, it is not uncommon for defense agencies to pay whatever price is quoted to them by a supplier.  With the military at war for more than a decade, officials have been under pressure to have equipment ready around the clock, and when war funding was flowing unconstrained, it was easy to sign a contract and not spend too much time haggling over prices.

Assad says there have been cases of contractors overcharging for spare parts knowing that the government was under pressure to place the order. "Companies know exactly what they're doing," he says. "If you called 10 contracting officers from our buying commands they would say this is absolutely true."

Pricing disputes tend to escalate over products that might be commercially developed but are mostly sold to government agencies. Pricing justification based only on government sales is not sufficient proof that the price is fair, says Assad. Most likely, he says, those are inflated prices that are passing for market data. "The law is very specific. Price justification is based on sales in the commercial market, not to other government entities."

There might be cases when government sales data is credible if the "underlying basis for paying that price was reasonable," he says. "Just the fact that you sold it to a government entity doesn't make it right. But the contractor could offer the price data that was given to other government agencies. If that seems reasonable, we are good to go."

In order to stop overpaying for items, the Pentagon will issue new guidelines to contracting officers. "They will be out shortly," says Assad. Contracting officers are being instructed that it is "unacceptable to simply accept the price that is offered to you, irrespective of what your budget is." The revised policy will specify what pricing information will be allowed from commercial vendors. If the contractor provides "reasonable data," the contracting officer has discretion to agree to the price and there is no requirement for certified cost and pricing data unless all other options fail.

Any company that claims cost and pricing data are the default option is either lying or misguided, he says. "It's nonsense. We're not trying to do that. If a contracting officer out there does that, we find out and we stop it." The new guidance should help clear up current confusion about what can be bought as a commercial of a type item.

Some companies resent the government challenging their prices and allege the Pentagon wants to audit their costs but "that is absolutely not the case," says Assad. "The company needs to provide what the law defines as 'other than cost and pricing data' that proves it is charging a reasonable price.
How the Pentagon defines "reasonable," though, is not cut and dried. "The standard should be whether a reasonable business person looking at that data would conclude that it's a fair and legitimate price," says Assad. "The commercial companies we deal with, the vast majority of them, have no problems. They provide relevant pricing history, or purchase orders" to back up their bids. Relevant, in this case, means that purchase orders must be relatively recent and for comparable quantities. "I'll pay what the market pays," he says. "But if you can't provide data then it's up to you, contractor, to explain why I should pay that price."

Assad insists it is a misconception that just because a product was developed at company expense, the Pentagon should treat is as a commercial item. If there is no commercial sales history for that product, then the company is going to have to provide other rationale for its pricing.

Contractors that complain it takes too long for government officials to decide whether a sale should be commercial or commercial of a type do have a legitimate gripe, he says. "It shouldn't take more than 10 business days to figure out if it's 'of a type.'" Contracting officers should spend less time on that and devote more attention to pricing issues. "Don't spend months wrangling over whether this is a commercial item, and get to the point of why should I pay that price," he says.

A subtext to this discussion is that the Pentagon's procurement rules discourage companies from investing research and development dollars in products that might be useful to the military.

Assad recognizes that the Defense Department is seeking to attract nontraditional vendors to boost market competition. His boss Kendall repeatedly has called for the government to remove "barriers to entry" to newcomers. But this is a separate matter that has little to do with fair pricing issues, Assad says. "There are companies that have developed products we want but we can't buy." He blames this problem on a five-year old law that restricts the Pentagon from buying "non-development" items from the private sector unless there are multiple competitors.

"We have companies that have exclusively developed a product on their own nickel," he says. But if there are no other competitors, the Pentagon cannot buy it, according to section 831 of the 2011 National Defense Authorization Act, called "pilot program on acquisition of military purpose non-developmental items."

Under the MPNDI pilot program, contractors are not required to provide certified cost or pricing data but would have to provide other data for the purpose of determining price reasonableness.
Assad says this law “doesn't have any practical use” because there is usually no more than one bidder. “It would be better if it simply said the contracting officer can use his judgment" and award a sole-source contract, he says. "We've tried to compete but it doesn’t work. … That's the fundamental problem we have with that. We are going to ask that the law be modified."

In the 2014 National Defense Authorization Act, Congress extended the MPNDI pilot program until December 31, 2019. In its version of the bill, the House Armed Services Committee chided the Pentagon for not taking advantage of the program. “The committee is concerned that the program has been implemented in a manner that discourages use of the MPNDI authority,” the bill says. “The committee is aware that there may be confusion about the requirement that a contract under the MPNDI pilot program has to be awarded using competitive procedures.”

The bill points out that the competition requirement can be waived and suggests that Kendall review the MPNDI implementation guidance and clarify that exceptions to competition may be used as appropriate. “The committee is disappointed that the Department of Defense has not yet utilized the authorities provided.”

The Defense Business Board, made up of senior industry leaders, recently blasted Pentagon leaders for allowing regulations to increase barriers to innovation. In a recent report, the panel criticized the Defense Department’s bias toward "contracts by negotiation," instead of buying commercial products from the open market. "The Defense Department lacks sufficient understanding of business operating models and drivers of innovation," the panel concluded. If technological superiority is the goal, the Defense Department must "elevate mission above process."

Assad categorically disagrees. The Defense Business Board's rhetoric is off the mark, he says. He intends to talk to board members to present his side of the story.

In the private sector, there is growing exasperation about the Pentagon's approach to commercial procurements of high-tech products. Most of what the Pentagon buys commercially today are commodities like food rations and military uniforms. The issues raised by the Defense Science Board apply to commercial procurements of advanced technology, where the Pentagon has lagged.

Executives hear Kendall and other leaders warn about staid technology in the defense sector and the need to inject private-sector innovation, but they do not see that talk translate into action.

"Many times that action is walking backwards from the talk," says William J. Broderick, chief financial officer of AGI, a supplier of commercial modeling and analysis software for the space, defense and intelligence communities.

"What we have seen is the Defense Department narrow the definition of commercial of a type items and disincentivize the commercial industry from making R&D investments," Broderick tells National Defense. "That's a source of frustration for us."

The attitude seems to be that commercial companies are greedy, make too much profit and have to "open up their numbers," he says. The reality is that commercially funded products could save the Pentagon billions of dollars if the government were willing to give them a try. While Kendall is asking the Defense Department's acquisition workforce to encourage commercial procurements, officers in the field are doing the opposite, he says. Instead of trying to understand the features and capabilities of products, DoD officials will spend most of their time arguing "that we are not a commercial company because our predominant source of revenue is from government sales ... even though all our products were built at private expense."

Photo: Director of Defense Pricing Shay D. Assad (Defense Dept.)
At Upcoming NATO Summit, Countries Must Face Reality That Some Are More Equal Than Others

By Jarno Limnéll

Several NATO members have in recent months wondered whether the “One for all, all for one” principle applies to them equally.

The question about equality among 28 member states is timely as the NATO summit gets underway in Wales this week.

The Baltic states and Poland in particular have for several months asked for “additional security guarantees.” These countries want to be certain that in the case of possible military aggression they will be supported by other NATO countries.

German Chancellor Angela Merkel and U.S. President Barack Obama have in the past weeks tried to assure allies that NATO commitments do not solely exist on paper. Nevertheless, suspicion is in the air within NATO. At the same time, especially in Poland, there has been discussion about what each member state’s commitment — under Article Five to aid its victimized ally with “action as it deems necessary” — means in reality. Would, for instance, the United Kingdom be willing to send its elite troops to Poland or the United States to uncover its hidden offensive cyber capabilities in order to guarantee Latvia’s security?

U.S. military bases have been perceived as a way of receiving additional security guarantees. There is a strong belief, both in the Baltic region and Poland, in the logic that says the United States is more committed to defend an ally which hosts its standing troops. Even if in the past months NATO has added its military rehearsals, almost tripled the number of troops in the Baltic region and increased naval patrolling in the Baltic Sea, discussion within NATO about opening new military bases is lively.

The defense minister of Poland recently asked the United States to place 10,000 American soldiers in Poland. Similarly, according to the latest poll, 74 percent of Germans object to the establishment of standing NATO bases in the Baltics and Poland which, in the current situation, see themselves being treated as “second-class citizens.”

However, there are other perspectives as well. Estonian President Toomas Hendrik Ilves noted last week that “second-class members” within NATO are those that refuse to meet the recommendation of spending 2 percent of their gross domestic product on defense. For the past year, the main message of the NATO secretary general has been to press the European member states to meet this recommendation. It is also a question of Article Three of the North Atlantic Treaty, which states that the parties “will maintain and develop their individual and collective capacity to resist armed attack.”

In 2013, only four member states hit the 2 percent goal: the United States, the United Kingdom, Greece and Estonia.

How would NATO as an alliance defend its member states in a crisis situation? If, for example, Estonia faced a military attack and NATO did not react with strong measures, it would mean the end of the alliance’s credibility as a military and political alliance. It would also be very difficult for the United States to create or maintain credible security guarantees with any of its allies anymore.

Yet there is a more relevant question: With what resources and how quickly would other NATO members support their victimized ally? Would there be differences in this respect amongst member states?

There are four ways in which each NATO member state can best try to guarantee the certainty of support, its swiftness and sufficiency. One is by demonstrating both will and capability to defend others, also during difficult times. Another is by sufficiently looking after its own defense capability and meeting the 2 percent recommendation.

Another is by developing national capabilities on which the operations of the entire alliance depend. Members also should be active and cooperative toward strengthening the cohesion of the alliance.

The NATO summit in Wales is the last one before the alliance’s active military operations end in Afghanistan and the first summit after the shift in security situation in Europe. A communiqué of the summit will emphasize the most important task of the alliance – collective territorial defense which builds on credible physical and cyber defense capabilities against an attack or a threat thereof to any of its member states. Discussion about the parity of this principle amongst member states should continue even after the summit.

Jarno Limnéll is director of cyber security at McAfee and professor of cyber security at Aalto University, in Finland. The views expressed here are his own. You can follow him on Twitter @JarnoLim

Photo Credit: NATO
U.S. Debates Removal of Weapons Ban on Vietnam as China Asserts Territorial Claims
By Sarah Sicard

With relations warming, the U.S. ban on the sale of lethal weapons to Vietnam has come into question. Some government officials in both the United States and Vietnam are advocating for restrictions to be repealed, citing a need to boost Vietnam's defense capabilities in the face of a rising China, according to a recent think tank report.
Over the last decade, the United States has developed a close working relationship with Vietnam, and the two militaries have become strategically close. Chairman of the Joint Chiefs of Staff Army Gen. Martin Dempsey visited the country in mid-August and Defense Secretary Chuck Hagel is tentatively scheduled to go there in November, said a 
Center for Strategic a International Studies report, Washington Needs a Plan for Lifting Its Weapons Sales Ban on Vietnam authored by Murray Hiebert and Phuong Nguyen.

Despite progress, the United States still maintains the ban, reiterating that its removal will not be possible without Vietnamese cooperation in addressing its human rights violations, the report said. 

Consideration for lifting the ban has been gaining momentum since the beginning of the summer. With support from advocates such as Sen. John McCain, R-Ariz., and Ted Osius, nominee for U.S. Ambassador to Vietnam, talks about removing the ban have intensified, the report said. Vietnamese officials also favor a relaxation of the ban, with removal following close after, it added.

Daniel Darling, Forecast International's Europe and Asia-Pacific military markets analyst, said the process to ease the ban on the sale of lethal weapons to Vietnam has been a slow, but steady one since the middle of the past decade. 

Relations between the two countries have warmed considerably since the Clinton administration, with ties continuing to improve under both the Bush and Obama administrations, he said. 

"The United States and Vietnam share economic ties, maritime security concerns and, in particular, worries over the long-term ambitions of China," Darling said.
The issues involving China are of particular importance to U.S. maritime trade and security interests in the Asia-Pacific. Vietnam's location gives it a strong geographic foothold in the region. And while tensions between China and Vietnam have been longstanding, China's increased aggression in the South China Sea has served as a catalyst for discussion, the report said.
Darling said: "The competing territorial claims of Vietnam and Beijing in the South China Sea often serve as a touchstone for gauging how the two countries interact in the public eye, and the latest incident back in May involving China's state-owned national offshore oil company placing an oil rig in Vietnamese-claimed waters sparked a public outcry inside Vietnam."
However, there are some who suggest that Chinese aggression as a motivator for lifting the ban may not make for a fruitful alliance between the United States and Vietnam.
"There is no doubt that Chinese aggression will be a significant factor in the decision to lift the weapons ban against Vietnam, but it is not the only factor," said Olivia Enos, a research assistant with the Heritage Foundation's Davis Institute for National Security and Foreign Policy. "There is also the fact that Vietnam does not necessarily share a U.S. interest in balancing against China — the assumption that underlies so much of the advocacy on this issue."
According to the CSIS report, some officials in Washington are concerned that by lifting the arms sales ban in order to quell Chinese aggression, they risk losing leverage on human rights issues.
Those issues aside, Vietnam's military purchases will have little impact on the U.S. defense industrial base when paired with the fact that its budget leaves between $3 billion and $3.5 billion a year for extraneous defense purchases — meaning it has little purchasing p
ower to expand its arsenal extensively, said Darling. The country also maintains a close relationship with Russia when it comes to buying weapons.
"While Gen. Martin Dempsey's recent visit to Ho Chi Minh City was a good indicator that full normalization of ties are on the horizon, how soon remains a question," said Darling. "Many in Congress continue to question Vietnam's record on human rights, but the same concerns in the legislative body did not prevent the previous administration from lifting an embargo on Indonesia. If seen as a valuable partner in countering the rise of piracy, arms trafficking or a strategic rival, exceptions will almost always be made."

Photo Credits: Thinkstock, Defense Department
Islamic State Militants in Syria Now Have Drone Capabilities
By Yasmin Tadjdeh

Recently, video emerged that showed Islamic militants in Syria had acquired a surveillance drone. It marked the first time such technology has been used by the burgeoning terrorist organization, a RAND Corp. analyst said.

The consequences of the Islamic State — the terrorist organization known as ISIS that has been characterized by its increasingly violent tactics in the Middle East — acquiring such technology could be dangerous, Colin Clarke, an associate political scientist at RAND Corp. who researches ISIS, told National Defense.

“This is the first time I’ve seen ISIS showing this kind of capability,” Clarke said. “[But] it’s not a total surprise simply because we’ve seen other similar … groups like Hezbollah or Hamas using these drones.”

A DJI Phantom FC40 unmanned aerial vehicle took the footage seen in the video, which was published on YouTube on Aug. 23, he said.

“[It’s] a spotter mini-drone, so it’s … got a smart camera. It’s really used for surveillance purposes to spy on enemy positions,” Clarke said.

Militants used the footage to survey the Tabqa military airfield, a key Syrian air base, that the group later captured.  The base was the last government stronghold in the area.

“They … [used] this as a recon method to scout out what the base looked like before going in with a more kinetic attack,” Clarke said. “They used multiple suicide bombers to gain entry.”

Not only did the capturing of the base give ISIS a foothold in the northern Syrian city of Raqqa, but it may have acquired surface-to-air missiles known as man portable air defense systems, or MANPADS, Clarke said.

The shoulder-launched missiles are capable of striking airplanes or helicopters at altitudes of up to 16,000 feet, he said. That kind of capability in ISIS’ hands is “scary,” he said.

While the drone may not have been critical in taking the base, it gave militants situational awareness they wouldn’t have had otherwise, Clarke said.

“Any small advantage helps. I’d say it’s kind of a force multiplier,” he said. “Any time you can get advanced information by scouting out a position before attacking it is helpful because it helps you plan exactly what kind of resources you are going to need.”

For now, it appears that ISIS does not have access to a more advanced armed UAV, though that is not entirely out of the question, Clarke said.

Hamas and Hezbollah, Islamic militant groups in Palestine and Lebanon, respectively, have shown previously that they have drone capabilities, he said.

Hezbollah allegedly flew a UAV over the Israeli city of Haifa in April 2013. Israel destroyed the aircraft.

In July, Israel allegedly shot down a Hamas-owned drone during Operation Protective Edge. Shortly after, the group released an image of what it says was one of its armed drones, though specific capability details were not released.

Hamas’ military wing, the al-Qassam Brigades, has claimed it has engineered three drones — one that could be armed, one that could be used as a self-guided missile and one for surveillance, Clarke said.

Media outlets reported that these drones were variants of the Ababil-1, an Iranian-made UAV.

“If a group like Hamas has this kind of technology, then it’s inevitable … [and] only a matter of time before a group like ISIS gets this,” he said.

It is possible that groups such as Hamas or Hezbollah could one day acquire a more advanced drone if given to them by a state sponsor, such as Iran, Clarke said.

ISIS, on the other hand, does not have a state sponsor, which could make it more difficult to obtain an armed drone, he said. The group, which identifies as Sunni, lacks support from Sunni-backed states such as Qatar or Saudi Arabia, he said.

“Some of the traditional Sunni powers are very scared, … the Saudis, the Qataris and Kuwaitis, of what could happen if ISIS sets their sights on Riyadh [in Saudi Arabia] or one of these other places,” Clarke said.

The unmanned aerial vehicle used by ISIS in the YouTube video is not sophisticated, Clarke said.

“It’s a pretty basic drone. It’s pretty simple. I wouldn’t say it’s sophisticated any more than the drones that people use in the United States now to take pictures of their wedding,” Clarke said.

However, having this kind of technology increases the group’s credibility, he said.

“[This] plays into the … narrative that ISIS is building, which is that we’re a different type of insurgent group [and] you’ve never seen anything like us. You’ve never seen this kind of propaganda, with their media front. You’ve never seen a group with this much money, which is arguably true. Or this type of arsenal,” Clarke said. “The recruits that are pouring into Syria and Iraq are by and large flocking to this group mostly because it has been successful.”

James Carafano, vice president for foreign and defense policy studies at the Heritage Foundation, a Washington, D.C.-based think tank, said it was unavoidable that ISIS would get its hands on a UAV.

“The notion that the United States was going to be the only country using operational drones was going to be something that was going to come to an end fairly quickly,” he said.

However, that doesn’t mean ISIS has a real advantage.

“Just because you have … [a drone] doesn’t mean you have much of an operational capability,” Carafano said. “A drone is a low-end capability for us, a drone is a high-end capability for these guys. And the capacity of us to overmatch that is pretty significant.”

If ISIS deploys a UAV, the United States could easily deploy a fighter jet in response, he said.

Should ISIS continue to invest in UAVs, it can expect to have enemies attempt to jam them or strike them, which adds another layer of operational complexity, he said.

“As soon as you get in the drone business, you have to get into the countermeasures to protect the drone from being shot down or electronically interfered with. That’s a whole other level of sophistication you have to get through,” Carafano said.

Credit: Aerial footage from an ISIS drone (YouTube photo)
U.S., China in Race to Develop Hypersonic Weapons
By Valerie Insinna

On the heels of reports that China had successfully completed a second ultra-high-speed missile flight test, the Defense Department announced on Aug. 25 that it had aborted a test of its own hypersonic weapon.

The military is investigating the “anomaly” responsible for the test failure, but analysts told National Defense that the incident was not a major setback for the program.

"It's a glitch. These are weapons that operate under fantastic stresses,” said Rick Fisher, a senior fellow at the International Assessment and Strategy Center. “Failure is not necessarily a bad thing, especially if data can be gathered so that you learn from your mistake.”

“These weapons are traveling at such fantastic speeds and they are required to be capable of such accuracy that it is simply going to require an extensive development program to achieve a point where they can be considered ready for the field,” he added.

The Aug. 25 test of the advanced hypersonic weapon was aborted because of an unspecified flight anomaly, according to a Defense Department news release. “The test was terminated near the launch pad shortly after liftoff to ensure public safety. There were no injuries to any personnel,” the release read.

Testers made the decision to destroy the rocket within four seconds of its launch at the Kodiak Launch Complex in Alaska, said Maureen Schumann, a Pentagon spokeswoman. She was not able to provide additional information on what the anomaly was or how it was detected.

The advanced hypersonic weapon is just one of the technologies under development in the conventional prompt global strike program, she said. The goal is to create a menu of precision strike options that would be able to hit anywhere in the world in under an hour.

U.S. program officials are conducting an investigation to determine the cause of this Monday’s test failure, said Schumann. The investigation will likely take “weeks or months” to finish and will inform future tests and scheduling. 

The August test was the second flight of the advanced hypersonic weapon, Schumann said. “The objective of the test was to develop and demonstrate hypersonic boost glide enabling technologies and collect data on flight vehicle and test range performance for long-range atmospheric flights.”

The United States may not be the only country that has been testing high-speed weapons this month. China conducted the second test flight of its hypersonic glide vehicle — called the Wu-14 — on Aug. 7, unnamed U.S. officials told the Washington Free Beacon.

Schumann would not confirm whether the Chinese military had executed a second Wu-14 test in August. Earlier this year, the Pentagon confirmed the Wu-14’s first flight test in January.

Based on the available evidence, including Chinese reports circulating the internet, it seems probable that there was a second Wu-14 test recently, Fisher said.

"China and the United States are seeking to develop the same range of hypersonic weapons, both boost-glide or hypersonic glide vehicles, and future air-breathing hypersonic vehicles, such as scram jets,” Fisher said.

The U.S. program appears to have progressed further, “but the Chinese program may be better funded and have greater depth in terms of the commitment of intellectual and development resources,” he said.

Mark Gunzinger, senior fellow at the Center for Strategic and Budgetary Assessments, said he is skeptical that China’s development of hypersonic weapons has matured past that of the United States. 

“We hear about the successes and not the failures” of the Chinese program, he said. “They could have had dozens of failures that we know nothing about, at least in public.”

Hypersonic weapons could be operational within a decade, Gunzinger said. The challenge, especially in a budget-conscious environment, will be figuring out how to drive down manufacturing costs.

“Can we find a sweet spot in hypersonic weapons where the price point is right and we can buy enough of them?” he asked.

One of the reasons why hypersonic weapons are so highly coveted is because they are difficult to shoot down, Fisher said. Directed energy weapons, such as a hypersonic capable rail gun or laser, could offer a way to counter hypersonic missiles.

"If you have two to four rail guns for example, [and] you get maybe a two-minute warning that a hypersonic warhead is coming at you, that's enough time to put into the sky clouds of hypersonic rail gun rounds that are designed like shotgun shells,” he said. “They'll release into the air 100 to 200 tungsten pellets. Even if the hypersonic warhead is maneuvering, you're likely to knick it with one of these pellets, and that alone will make the warhead tumble out of control."

The United States appears to be further along in its efforts to develop directed energy weapons, although China’s program is not particularly transparent, Fisher said.

The Navy in April unveiled a high-speed electromagnetic rail gun capable of launching projectiles at speeds up to 5,600 miles per hour. The service has also tested its laser weapons system at sea, proving that it could shoot down small unmanned aircraft.

That laser currently lacks the power and range necessary to destroy a hypersonic glide vehicle, but it could become powerful enough in the next decade to shoot down such weapons, Fisher said. A hypersonic speed capable rail gun is possible in the early 2020s, he added.

Gunzinger said it may be too difficult to intercept a hypersonic missile with a high-powered laser, but rail guns could be well suited for those missions.

The advanced hypersonic missile was developed by Sandia National Laboratory and the Army. Its first flight test took place in November 2011 and was successful, with the missile traveling from Hawaii and hitting a target at the Reagan Test Site on Kwajalein Atoll, Republic of the Marshall Islands.

Photo Credit: The Advanced Hypersonic Weapon concept conducts its first flight in 2011 (Army photo)
Kendall Calls for Action After DoD Acquisition Competition Goals Fall Short
By Stew Magnuson

The Defense Department has not only failed to boost competition for programs, it is backsliding, a memo from a senior official said.  
In a memorandum dated Aug. 21, Deputy Under Secretary of Defense for Acquisitions, Technology and Logistics Frank Kendall issued a call to action after the department failed to meet its goals to increase competition among vendors.
“In fact, we have experienced a declining competition rate, and we must take action to reverse this trend,” he wrote in the memo.
“Given the declining trend in competition in the department and in light of today’s limited resources, we must maximize our use of direct and indirect competition,” he wrote in a memo obtained by the National Defense Industrial Association policy division. “Every dollar saved through competition benefits the war fighter and the taxpayers.”
Kendall in the memorandum calls for quarterly progress updates to be addressed at the business senior integration group. “We will collaborate to understand best practices that have been successfully employed to either achieve direct competition or realize the benefits and effects of indirect competition,” he wrote.
He is also issuing “Guidelines for Creating and Maintaining a Competitive Environment for Supplies and Services in the Department of Defense.” Further, a “DoD Competition Handbook: A Practical Guide for Program Managers” will be published in September, which will update a previous handbook last published in 1984.
For competitive solicitations in which more than one company expressed interest during the market research phase, but only one offer or a lesser number of offers were ultimately received, contracting officers will be asked to seek feedback to understand why companies declined to submit an offer, the memo said.
“We will use this feedback to consider how we might overcome barriers to competition for future requirements,” Kendall wrote.

The memo also changes the procedure for acquiring justification and approval documents that allow an official to solicit a non-competitive acquisition. Contracting officers will have to issue requests for information or sources sought notices before embarking on such an acquisition. “This technique is already used in many instances, but expanded use will inform our ability to maximize use of competitive procedures,” Kendall wrote. It will be possible to obtain a waiver for this requirement, but it must be obtained from a flag officer, he added.
Kendall is also amending a requirement in justification and approval documents that calls for agencies to explain what, if any, steps can be taken to overcome barriers in subsequent acquisitions.

There is no policy to track whether the plans or actions spelled out in the J&A documents to ensure that barriers are removed are ever attempted.
“As a result, approval authorities may be missing opportunities to learn why non-competitive acquisitions are not overcoming barriers to competition for subsequent acquisitions of the item,” he wrote.
The next J&A document asking for a non-competitive procurement must be approved at a higher level. The approving official will have the discretion to determine whether the planned actions were completed, the memo said.
Photo Credit: Defense Dept.

Navy Selects Five Vendors to Update its Ships Afloat Network
By Sarah Sicard

The Navy on Aug. 20 awarded five eight-year contracts valued at $2.5 billion a
s part of a continued effort to its update network systems for ships at sea

The Space and Naval Warfare Systems Command selected BAE Systems Technology Solutions & Services, General Dynamics C4 Systems, Global Technical Systems, Northrop Grumman Systems Corp. and Serco Inc. for the consolidated afloat networks enterprise services (CANES) production phase.

“Our goal is to see competition throughout the eight-year period of performance," said Capt. Ben McNeal, tactical networks major program manager. "Initially, each of the awardees is tasked to produce one destroyer production unit."

Afterwards, the five industry teams will be competing against each other for continuous firm-fixed-price production and training contracts.

The current network setup on naval ships consists of old technologies retrofit with new hardware and software in order to keep up with advancements in the field. The resulting effect is a slow system that is constantly in need of repairs and leaves the security of the cyber networks aboard ships at risk.

The solution is to replace ailing technologies by modernizing hardware and software through the CANES program. The end goal is a single shipboard network outfitted with the latest computing and cyber security technologies.

"The operating systems that exist today on some of those legacy networks are not sustainable," said Rear Adm. Christian Becker, program executive officer, command, control, communications, computers, and intelligence (C4I).
"CANES improves our operational capability at the same time decreasing our cost for sustainment costs caused by our legacy networks."

Some of the legacy systems have been around since 1999, and are experiencing end-of-life issues, said Becker.

Navy officials are hoping these vendors will allow them to upgrade key technologies by focusing on virtualization and consolidation, along with big data and cloud technologies.

"What we've incorporated in CANES is a robust systems management domain that is made up of a robust set of software and tools to allow us to be able to identify each of the components from hardware and software and cyber solutions within the architecture," said McNeal.

In the early stages of CANES, the Navy selected Northrop Grumman 
in 2012 for a design and development and limited deployment phase.

"CANES is a significantly faster, more secure and flexible network," Dave Wegmann, director, maritime command and control systems at Northrop Grumman Information Systems, said in a statement. "Our original network design remains important to ensure CANES affordability and agility in delivering the next generation of C4I capabilities."

In order to prevent these systems from becoming obsolete, CANES has created a timeline for upgrades.

"We have a two-year development cycle for software, and a four-year cycle for hardware, and in between those two periods the government will be taking on the effort of looking at issues, coming up with solutions," said McNeal.

CANES installations have been completed aboard nine destroyers, and the Navy hopes to equip 180 vessels by 2022.

Credit: Guided-missile destroyer USS Mahan (Navy photo)

Lockheed Martin Growing Its Cyber, Big Data Business
By Valerie Insinna

Rapid innovations in information technology and changes in the geopolitical environment — including events such as the conflict in the Gaza Strip and the rise of the Islamic State of Iraq and the Levant — all point to the military’s need for large amounts of quickly digestible data.

The challenge for the defense industry is drawing meaningful conclusions from that information, while at the same time safeguarding that intelligence from network intrusions. For Lockheed Martin, this means beefing up capabilities such as cyber security and big data analytics, company officials said Aug. 13 during a briefing to reporters.

"Despite the tight budget environment, the program reductions that are going on across the industry, we still need to be incredibly innovative, make sure we're investing in the future, developing the [research-and-development] capabilities that really differentiate us from our competitors,” said Tim Reardon, the company’s vice president and general manager of defense and intelligence solutions.

The company makes about $1 billion in revenue off its cyber products and services, Reardon said. A spokeswoman for Lockheed declined to provide figures for the amount of research-and-development dollars spent on cyber and advanced data analytics. She said, however, that consumer demands in both areas are growing in the defense and commercial markets.

The Defense Department and intelligence agencies already manage their own networks, said Darrell Durst, vice president of cyber solutions. What Lockheed can provide to the government is its expertise. “We’re here to assist them through … our tradecraft. It’s our people, it’s our process and the emerging technologies,” he said.

Things have changed in the commercial sector, where it was once difficult to get company executives to understand the dangers posed by cyber threats, Reardon said. Now, they understand the importance of cyber security, but they don’t know what to do to keep their networks safe.

“There’s an evolution in the perception of the private sector now that it’s not always sufficient just to buy a software defense software product, put it on your network and you’re good to go,” Reardon said. “I think there’s an appreciation that that’s not sufficient for advanced persistent threat and some really advanced adversaries.”

Commercial companies need to know the weak spots in a network’s defenses where adversaries are getting in, Durst said. Lockheed offers products and consulting services that can help businesses create better-protected network architecture, Durst said.

“One of those things is actually eliminating the number of [internet service provider] connections you have into your business. That’s one way for you to be able to control the ingest of information,” he said.

Lockheed decided 10 years ago to develop in-house cyber security capabilities to safeguard its intellectual property, Durst said. Since then, threats have changed from small, disruptive hacktivist groups to very organized entities that sometimes lay dormant for months before reappearing.

Attacks on the company have slowed since Mandiant put forward a 2013 report exposing a cadre of Chinese hackers with links to the People’s Liberation Army, said Charlie Croom, vice president for cyber strategy and government relations. Although Lockheed Martin does not focus on attributing cyber crimes, it can identify recurring hacker groups based on the target and the techniques used to try to exploit a network.

The company had been tracking the group exposed in the report, Croom said. "The bad news is, of the 10 original adversaries we've seen [since 2003] … we're still seeing eight of them. So they are persistent.”

It’s likely some hackers have shifted their focus from Lockheed Martin to a more vulnerable target: one of the smaller businesses in the company’s supply chain, Durst said. “What they'll do is they'll go to the supplier that has that connection to Lockheed Martin from an IT perspective or even in a sharing of documentation through USB or through an internet connection.”

The rapidly changing threat environment has triggered a bigger focus on advanced analytics in the Defense Department, intelligence community and in the commercial sector, executives said.

In order to acquire, manage and analyze data, Lockheed relies on sophisticated algorithms as well as intelligence tradecraft — “the detective work, if you will, to make sense of that data and present it to a customer in a way that’s meaningful,” said Jason O’Connor, vice president of analysis and missions solution.

The company uses a product it developed called LM Wisdom to comb through databases and cull information from public sources, media reports and social media. Most of its algorithms rely on making a correlation of some type, such as measuring a population’s sentiment in order to predict future behavior, O’Connor said. For instance, an algorithm can measure citizens’ attitudes about their country’s leader.

One of the challenges is focusing your analytics to the right things, Reardon said. “Its hard to have your analysts covering all topics across the world for all things that might happen. So they’re typically focused on whatever the hot spot is.”

O’Connor said, “We have analysts currently working for our customers ... assessing the situation in Syria and Iraq. They're using every available source of data and applying ... algorithms to provide meaningful recommendations, hopefully anticipatory recommendations to our customers in those areas.”

He stressed that the human analyst was integral to making recommendations using data. "We're not suggesting that an algorithm is the ultimate outcome.” False positives and negatives are a given, so having an analyst in the loop is important when drawing conclusions from the data, he said. “Our focus is on making that tradecraft that much more powerful, making the data visible, making it accessible, making such data make sense."

Drawing huge amounts of information from many sources can help analysts have confidence in their predictions, he said. "Data doesn't have to be as good if the data is big.”

In an internal exercise, Lockheed analysts were able to use trends in social media to predict which Arab Spring countries would have uprisings or overthrow their leaders six weeks ahead of those events, O’Connor said.

"We have a very high confidence in our ability to predict societal level changes and events ... with the right upfront planning, the right attention to it,” he said

The company was recently contracted by a pharmaceutical firm to find a criminal organization that was counterfeiting its products. In a couple days, Lockheed was able to uncover the key players in that enterprise and identify the flow of money.

Photo Credit: Thinkstock
RFP for Navy’s UCLASS Drone Waiting on Final Approval
By Valerie Insinna

Northrop Grumman's X-47B

Industry will have a finalized request for proposals for the Navy’s first operational carrier-launched drone by early September, its program officer said Aug. 17.

The final RFP for the unmanned carrier launched airborne surveillance and strike, or UCLASS, will be released only to the four companies competing for the contract: Boeing, Lockheed Martin, General Atomics and Northrop Grumman. 

“We have had continuous dialogue with our industry partners, and they have provided us feedback, corrections,” said Rear Adm. Mat Winter, program executive officer for unmanned aviation and strike weapons. 

“We are ready now to go forward to release the request for proposal that encompasses the technical strategy and design requirements as well as the business strategy, and we're on the precipice of releasing that RFP to the four vendors ... pending final senior Department of Defense discussions and final approval, which is now scheduled to occur over the next three weeks."

While many of its requirements are classified, Navy officials have publicly said that UCLASS must have an endurance of 14 hours and an internal payload of 1,000 pounds. It will initially operate in permissive airspace, but should be designed so that it can engage in non-permissive environments at a future date.

The program has repeatedly come under fire from legislators and defense analysts who claim the system is not ambitious enough. Rep. Randy Forbes, R-Va., chairman of the House Armed Services seapower and projection forces subcommittee, has been one of its biggest critics. 

In a July op-ed in The National Interest, Forbes stated that UCLASS’s emphasis on endurance and providing continuous intelligence, surveillance and reconnaissance comes at the expense of the vehicle’s survivability and weapons payload.

“I believe strongly that the nation needs to procure an unmanned combat air vehicle platform that can operate as a long-range surveillance and strike asset in the contested and denied A2/AD [anti-access, area-denial] environments of the future,” he wrote. “To achieve this, such a system should have broadband, all-aspect stealth, be capable of automated aerial refueling, and have integrated surveillance and strike functionality.” It appears the Navy is not taking that path, he added.

Winter contended that the scrutiny from the Hill and defense analysts is not unlike other high-profile programs.

"The fact that there's been a lot of external discussion, interest, dialogue from our friends in the legislative branch all the way to the folks in the intelligence community to other elements within the Department of Defense — I've had that on my [surface warfare] programs. I've had that on my other weapons programs — so I don't see that as necessarily something different,” Winter said.

The program has also received a fair amount of criticism from industry executives, who have said that UCLASS technical details have fluctuated during the preliminary design process.

Winter said the top-level “warfighter requirements” have been stable since April 2013, but the more detailed technical specifications have been modified since then.

"The design requirements have been continually refined to ensure that we had a technically feasible solution,” he said. “We don't want to provide something to industry that they technically can't accomplish. So we've spent the due diligence over the last nine to 10 months to get the technical requirements correct.”

The result was a back-and-forth between Navy officials and company engineers to optimize survivability, payload and endurance and ensure that design specifications were attainable, he said.

The UCLASS program has two objectives, Winter said. The first is to design, mature and integrate the air vehicle, command-and-control systems and the aircraft carrier itself. The second objective is to develop the concept of operations for carrier-launched unmanned aircraft.

"When we give this to the fleet, they will determine and make lots of assessments and analysis to determine how it will be used,” he said. “So, will it be a standalone squadron? Will there be air vehicles part of another squadron, E-2 or an F-18? Those are all things that will be identified."

The Navy has not yet decided who will operate UCLASS. Winter stressed that, unlike the Army and Air Force, there is no need to manually “fly” a naval drone such as UCLASS, Triton or Fire Scout. All three are equipped with advanced computers, sensors and algorithms that autonomously control the aircraft. The human operator’s role is simply to be a “man on the loop” that can step in during an emergency.

“We've already established our manpower profile for Triton,” he said. “We're looking at the commonality of manning, training and equipping across the Tritons, the Fire Scouts and the UCLASS, so we can be more consistent across our Navy from a total manpower [standpoint including] … recruiting, training, to bringing our sailors and Marines into the fleet to operate these things."

Capt. Beau Duarte, the program manager for the X-47B unmanned aircraft that is helping formalize processes for drone integration on a carrier deck, said that a basic UCLASS capability will be turned over to the fleet sometime around 2020. During its four-year “early operational capability,” the system will undergo fleet exercises and early deployments that will help finalize the concept of operations.

“The intent is, from a maintenance perspective, to have organic Navy capability. ... From an operator perspective, we'll see,” Duarte said. “It's an autonomous system, so you don't have a stick and throttle requirement for someone at the controls, but whether that person is a pilot, a naval flight officer, enlisted, we will figure it out and those early operational deployments will help inform that decision."

Because UCLASS and other naval drones are autonomous, it is critical that communications nodes and data links cannot be compromised by cyber threats, Winter said. Program officials are evaluating whether the UCLASS requirements meet the new cyber guidance standards released by the Defense Department.

“I don't have data to back this up, [but] I believe that we have to continue to mature our cyber design activities to ensure that our systems going forward are not vulnerable to this emerging — and yet to truly be defined — cyber threat,” he said.

The Navy may need to develop “network troubleshooters” to mange and safeguard the data links that enable control of unmanned aircraft like UCLASS. “Is it an adjunct to a current skill set that already exists, or is it something new?” he asked. “We've got the time to think that through, and we're thinking through it."

Photo Credit: Navy
K-MAX, Ground Cargo Robot Collaborate on Fully Autonomous Mission
By Sarah Sicard

The Army paired an unmanned air cargo aircraft with a ground robot to perform an autonomous resupply mission at Fort Benning, Ga., on Aug. 18.  

The test began with a K-MAX unmanned helicopter which carried a squad mission support system in a sling and delivered it to a mock battleground. The robot then performed resupply and surveillance missions.

The U.S. Army Tank Automotive Research, Development, and Engineering Center and Lockheed Martin sponsored the demonstration.  

“The synergistic use of unmanned air and ground vehicles will give warfighters a larger operational reach, and allow execution of missions that are currently performed at great risk to the warfighter,” said 
TARDEC Director Paul Rogers in a statement.

After performing the resupply mission, the robot was then tasked with finding a surveillance point wherein it raised its gyrocam sensor and scanned the area for enemy forces.

This demonstration was aimed at illustrating the impact of integrating unmanned aerial vehicles with unmanned ground vehicles on eliminating operator risk. In an actual combat scenario, the ground robot would be able to perform resupply tasks that would reduce the number of truck convoys, as well as allow for a remote operator to observe dangers in combat zones and assess situations accordingly, said the statement. 

A remote operations center equipped with satellite links as well as local line-of-sight communications systems controlled and monitored the vehicles’ activities throughout the demonstration. In future exercises, Lockheed Martin and TARDEC officials said the communications systems will become more integrated.

K-MAX business development lead John McMillan said in a phone interview that the operation went flawlessly, and that it worked to demonstrate the feasibility of such a concept as well as its implications for the future of unmanned systems in general.

The K-MAX, manufactured by Kaman Aerospace Corp., became the first unmanned aircraft system to execute deliveries in combat for the Marine Corps in 2011, while the 
squad mission support system is the largest unmanned vehicle ever deployed with U.S. ground forces. Both have been used as troop support in Afghanistan.

This was one of many tests for the K-MAX and 
squad mission support system carried out separately, but only the second time they performed a demonstration in tandem. Lockheed Martin and TARDEC have plans for a third demonstration in 2015.

“Fully autonomous capabilities as we’ve just demonstrated will allow service members to focus on important missions and remain out of harm’s way,” said Scott Greene, vice president of ground vehicles for Lockheed Martin missiles and fire control. “This successful demonstration with both unmanned air and ground vehicles shows us that these missions are not only possible, but can be available much sooner than you would expect.”

Though the mission was conducted as part of TARDEC’s “extending the reach of the warfighter through robotics” capability assessment for the Army, the application of such a concept has benefits for other branches of the military, and for commercial use as well, said the statement.

Natural disaster relief, firefighting and oil and gasoline delivery were some of the applicable areas for this technological integration outside of the military, said McMillan, but the possibilities extend well beyond even those.

“This demonstration signifies another use for robots and this brings us closer to the pinnacle of how we use unmanned systems,” said Dan Spoor, vice president of aviation and unmanned systems at Lockheed Martin’s Mission Systems and Training business.

Credit: A K-MAX delivers an SMSS unmanned ground vehicle during a fully autonomous mission demonstration (Lockheed Martin photo)

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