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Pentagon IG Seeks to Raise Awareness of Contractor Whistleblower Rights
By Sandra I. Erwin

An employee of a Defense Department contractor or subcontractor may not be discharged, demoted or discriminated against as a reprisal for disclosing suspected fraud or waste.

This is the law that was enacted a year ago, following a lengthy debate within Congress and the Obama administration on how the government could better protect industry whistleblowers. The office of the inspector general — which investigates not the actual fraud but reprisals against whistleblowers — worries that many defense contractors are not aware of these new protections.

The Defense Department's inspector general for years had argued that federal whistleblower laws had huge loopholes because they only protected prime contractor employees from reprisals, but subcontractors were not covered.

"Subcontractors are doing the bulk of the work and see a lot of things, and might be afraid to come forward from fear of losing their subcontract work," says Rich Leatherman, outreach official for whistleblower reprisal investigations at the Defense Department's IG office.

The 2013 legislation extends protection to subcontractors. "Getting the subs covered was huge," Leatherman said during a recent meeting of IG officials and reporters.

Marguerite Garrison, deputy inspector general for administrative investigations, said the changes in the law have not been sufficiently publicized, so the IG office is stepping up its outreach campaign. As more contractors become aware of their legal protections, she said, they might be more inclined to expose fraud, waste and abuse within government programs.

"Inspectors general need sources," the IG website states. "Our investigators, auditors, evaluators and inspectors rely on whistleblowers to provide information as a source of allegations and as original and corroborating evidence."

Garrison said it is too early to tell whether the new law is prompting more industry employees to blow the whistle.

The IG office has relied on traditional and social media to get the word out, Leatherman said. IG hotline posters are sent to contracting officers who must ensure that any company that has more than $5 million in Defense Department contracts displays that poster at work sites. Contractors are required to notify every employee in writing of their whistleblower rights.

The outreach efforts appear to be working, said Patrick Gookin, whistleblower ombudsman and hotline director. Before he joined the IG office in August 2013, the ombudsman received four to six contacts per month on average. The number has jumped to 270 so far this year.

An amendment to Title 10, United States Code, Section 2409, in the 2013 National Defense Authorization Act, called, “Contractor Employees: Protection From Reprisal for Disclosure of Certain Information,” expanded whistleblower protections to employees of subcontractor firms that receive federal funds either from Pentagon contracts or grants.

Another significant provision is that contractor employees who report suspected waste, fraud and abuse to their company’s chain of command, rather than directly to the government, also are protected by the new statute.

“There is a lot of whistleblower protection out there, but [this amendment] moved the Defense Department into modern standards of whistleblower protection that already exist for federal employees,” said Garrison. The provisions in the law make it “easier to prove whether there was reprisal" for disclosing improprieties.

Since the late 1980s, Congress has authorized the Defense Department IG office to investigate or oversee investigations of allegations of whistleblower reprisal.

While the False Claims Act provides a financial reward for those who disclose wrongdoing in government contracts, the whistleblower law offers no such incentives. It only assures employees that if they disclose illegal activities, they will still be able to keep their jobs.

Sequestration Could Hinder Acquisition Reforms, Pentagon Official Says
By Valerie Insinna

Defense Department leadership has emphasized the importance of defining requirements and starting testing as early as possible, but putting that into practice will be difficult if sequestration goes back into effect in fiscal year 2016, a Pentagon acquisition official said.

"We will not be able to afford all of the programs that we're even doing right now if we go into sequestration the next year and that continues. That's a fact," said Darlene Costello, principal deputy assistant secretary of defense for acquisition.

Through the Better Buying Power 2.0 initiative and new Defense Department acquisition instructions, Frank Kendall, under secretary of defense for acquisition, technology and logistics, is pushing for processes to begin earlier. Formulating requirements and reviewing a request for proposal are two actions that could be moved to the left, Costello told industry at NDIA’s testing and evaluation conference held July 23 in Washington, D.C.

“It doesn’t mean everything is done at the beginning, but it means that we’re thinking about it earlier,” she said. “We’re thinking about what would be our testing strategy. We’re going to understand the [concept of operations] that we’re going to be putting a new weapon system in." 

However, sequestration will probably be reintroduced in fiscal year 2016, meaning that acquiring new systems will become even more difficult. In an optimal fiscal climate, officials will often opt to spend more money at the beginning of the program, Costello said. That could be a challenge if additional mandatory budget cuts are reintroduced.

“We're not looking to kill programs, but we really need to shave, I think, about as much as you can off the edge,” she said.

When crafting fiscal year 2016 budgets, acquisition officials should consider what activities could be delayed in order to cut costs, but “if it makes sense to spend a little bit more up front to save [money] over the ... program, we have to keep considering that,” she said.

Because testing and evaluation often comes later in the acquisition process, funding for those activities may take a bigger hit, Costello said. Program managers looking for funding could choose to move money from testing to other areas with the hope that more will be available in future years.

In this current budgetary climate, however, such thinking is optimistic, she said.

“It's hard to argue that you might be able to get more money the next year. But it's just the reality [that] it's not likely,” she said. “It's going to be just as hard the following year."

It is important for everyone within the acquisition process to challenge excess bureaucracy and find new ways to save money, Costello said. That includes the testing and evaluation community, which must think about more efficient ways to put new systems through their paces.

"Anything we can do to make our process more efficient and find some savings would be very beneficial to the whole enterprise,” she said.

The push to start certain acquisition activities earlier will necessitate that officials ensure that a system’s requirements are still relevant in the current threat environment, Costello said.  

"That's hard for the program managers, because they've been given a charter to go off with something on day one that they're going to execute, and it could be equally challenging for industry,” she said.

“That's something we have to — at every milestone at least — be touching on,” she added. “Are we still working to the current set of threats? Do we need to make any changes in the course because of the change in threat? And do we need to address funding differently as a result, and do we need to address our test plan differently?”

Credit: Photo-Illustration from Defense Dept. photo
Fewer Drone Strikes, More Foreign Training as Obama’s Term Winds Down
By Chelsea Todaro

The remaining years of the Obama administration will be marked by fewer drone strikes, an increase in foreign military sales and an emphasis on training allied military personnel, a Massachusetts Institute of Technology scholar said July 22.

Jonathan Caverley, a MIT research associate, and former Navy officer said, President Obama signaled this shift to soft power in May at a West Point speech where he said there would be an emphasis on foreign military training and sales because they have the potential to create larger and long-term impacts.

“The effects of drones and special operations forces are fairly short term. They are not really going to transform the world and other countries,” Caverley said during a webinar organized by the Medill National Security Journalism Initiative.

Drone strikes have decreased over the past two years because the military has shifted its priorities to soft power and building up allied militaries, he said. The majority of foreign training has occurred in Eastern Europe and is spreading to Asia, the Pacific and Africa, he said.

Special Operations Command wants to focus on building relationships with other militaries so, when trained, they can do the work for them.  “We are now focused on sending other men to do the job rather than ourselves,” Caverley said.

There has been a marked decrease in drone strikes recently, he noted. The bases they fly out of are not permanent facilities, he added.
“We are not going to be involved in large-scale wars anytime soon,” Caverley said. “The United States military is pretty capable and understands very quickly where the wind is blowing in terms of priorities.”

However, he said the overall effectiveness of military training efforts are unknown because there are no databases tracking those who have graduated from these courses “We really have no idea how many students are being trained. There is almost no accountability in the sense of what happens to our alumni once they leave,” Caverley said. “The United States [government] really believes that these programs are working but we have no idea whether or not they are.”

Arms sales are a priority because of the United States’ dominance in the market This is despite the fact that it faces more competition, he said. “The U.S. has a luxury because it builds such good weapons and fights all the time,” Caverley said.

The goal is to minimize the influence of other manufacturers such as Russia, but also to ensure that arms races don’t escalate in various regions, he said.

To facilitate arm sales, the United States needs stable relationships with other nations, and foreign military training is a means to accomplish this, he said.

“The whole point of these weapons is to have a relationship and to make sure the capability of that weapon is [being used] in your interest,” Caverley said.
Photo: Defense Dept.

Army Takes Steps to Shore Up Industrial Depots
By Sandra I. Erwin

While the Army is shrinking and buying less equipment, it will continue to invest in its industrial depots and recruit foreign customers in a bid to drum up business.

Despite a considerable slowdown in equipment repair work and manufacturing orders across the Army's 10 major industrial facilities — three manufacturing arsenals and seven maintenance depots — there are no plans to shut any of them down, said Gen. Dennis L. Via, commander of U.S. Army Materiel Command.

There is virtually no chance that Congress will greenlight any closures, but even if that were a possibility, the Army believes it needs to keep its depots in business in order to preserve unique industrial skills that would be needed for the next war.

The Army's organic industrial base is a "national asset that we have to have available," Via said July 23 during a breakfast meeting with reporters in Washington, D.C.

One of the lessons from the past decade of war is that depots are essential, he said. The workload at Army facilities more than doubled from 2001 to 2008, and exceeded production levels not seen since the Vietnam War. Armoring Humvee trucks was a key contribution the depots made in recent conflicts, he said. "We would not have been able to do that without the organic base."

The workload at Army depots collectively peaked in 2008 at 45 million direct labor hours, compared to 15 million before the war. Since then, however, business has been on a downward trajectory. An uptick is projected, though, as $10 billion worth of war-torn equipment returns from Afghanistan and is sent to the depots for repairs and upgrades. Another potential source of new business are private-sector companies that would use the depots to manufacture equipment. Foreign governments that buy U.S.-made weaponry also are invited to send it back to the depots for regular maintenance and repairs.

The Army in 2013 signed 207 "public-private partnerships" between depots and private firms that generated about $200 million in revenue, Via said. "We are reaching out to industry to use our facilities," he said, and noted that capital investments also are planned.

Current law requires that no less than 6 percent of the average workload for the past three years at all depots be set aside for capital investment programs and modernization of facilities. The Defense Department's logistics office recently requested a study on how private industry manages capital investment. The study will analyze how companies involved in the maintenance, repair and overhaul business go about funding and investing in capital improvements.

In the wake of recent cancellations of major vehicle programs, experts have predicted the Army's excess industrial capacity is only going to grow. The Army's surviving vehicle programs — a new armored multi-purpose vehicle to replace aging M-113 armored personnel carriers and upgrades to existing M-1 tanks and Bradley fighting vehicles — do not provide enough work to sustain private sector suppliers and organic depots.

The Army's decision to cut back on purchases of new ground vehicles and helicopters means there will be a greater need to maintain current equipment for years and decades to come. That could be a boon for the depots, but it is not yet clear how much of that work will be shared with the private sector. Most weapon systems' design blueprints and intellectual property rights are owned by the original manufacturers, which usually guarantees them follow-on maintenance and upgrade work.

"That is a challenge that we have: Not having technical data rights and not being able to establish our own sustainment," Via said. The Army wants to bring more maintenance work in-house, he added, although it will seek a "balance" between the public and private sectors, especially in systems that are software-intensive and require more skilled technical support. Contractors, he said, are "expensive."

Under a law known as the “50-50 rule,” no more than 50 percent of depot maintenance funds provided to a military service or defense agency can be expended for private sector work.

Foreign military sales are viewed as a bright spot for the depots during these lean times, said Via. "FMS is growing," he said. The Army forecast up to $24 billion in orders over the coming years. "As partner nations come in and acquire equipment from the Army, we encourage them to use our industrial base to reset it, to keep the lines working," he said. "We are doing quite a bit of FMS work."

The Middle East is the busiest FMS region now, he said. Via cited Qatar's recent order of $10 billion worth of Patriot missile-defense systems, Apache attack helicopters and Javelin missiles. "I continue to see that increase," said Via. The United Arab Emirates is another key customer that is eyeing purchases of U.S.-made armored trucks. There is "increasing interest" from other regions, including Africa and Asia.

The Army also is courting U.S. manufacturers to set up shop at the depots, which helps lower the Army's overhead costs. Ammunition makers, for instance, can manufacture products at the Army's depots and sell them to commercial buyers. "We are looking at our depots to be more efficient," he said. "We have to be competitive. It's very challenging to bring in a partner to do business when the [overhead] rates are as high as they are."

Without congressional approval to close bases, the Army can still shed excess capacity, he said, although it is "very challenging with a declining workload."

One way to slash unneeded capacity is to mothball lines, even if fixed costs to keep the facility open still have to be paid, said Via. "We will determine the minimum workload we need to sustain depots, arsenals and ammo plants."

Political support for all Army depots is deeply rooted, Via noted. They are "economic engines" in their communities. He estimated the depots return $1.83 to the local economy for every $1 invested.

Army Industrial Facilities

• Sierra Army Depot in Herlong, California, specializes in petroleum and water distribution systems.
• Red River Army Depot in Texarkana, Texas, works on ground combat and tactical system sustainment.
• Joint Systems Manufacturing Center in Lima, Ohio, manufacturers, repairs and tests combat vehicles.
• Tobyhanna Army Depot in Tobyhanna, Pennsylvania, specializes in electronics and tactical communications systems.
• Corpus Christi Army Depot, in Texas, does repair and overhaul of helicopters, engines and components.
• Anniston Army Depot, in Alabama, refurbishes tanks and other equipment.
• Letterkenny Army Depot in Chambersburg, Pennsylvania, is known as the Army's "capabilities based depot."
• Pine Bluff Arsenal, in Arkansas, produces renovates and stores munitions and chemical/biological defense systems.
• Rock Island Arsenal, in Illinois, manufactures weapons, artillery components, gun mounts and other small arms systems.
• Watervliet Arsenal, in New York, is the nation’s only large-bore cannon production facility.

Image Credit: Army

Replacing Russian Rocket Engine Could Be Tougher, Costlier Than Imagined
By Sandra I. Erwin

Gen. William Shelton

Administration officials, lawmakers from both parties and space experts stand together on the issue: The U.S. military should no longer rely on a Russian rocket engine for critical space launches.

How to go about replacing the RD-180 rocket engine, though, is now the subject of much study and debate within the U.S. government. And it is becoming increasingly apparent that the effort will take more time and money than politicians in Washington expected. Among the concerns are the timeline and potential cost of producing a substitute engine, as well as the technical challenges of integrating it with existing launch vehicles.

Although deliveries of RD-180 engines still continue as scheduled, the Defense Department and NASA are contemplating a menu of “mitigating strategies” to cope with a potential disruption if the current crisis over Ukraine continues to escalate.

“This is a real concern to us,” said U.S. Air Force Gen. William Shelton, chief of U.S. Space Command.

The RD-180 powers the Atlas V family of space launch vehicles made by the United Launch Alliance, a joint venture of Boeing and Lockheed Martin. ULA has 15 engines on hand. Two more are scheduled to be delivered in August and three in October. Six more would be ordered next year. The engine deal dates back to 1997, when Lockheed Martin inked an agreement with NPO Energomash, Russia’s top manufacturer of liquid propellant rocket engines, to acquire engines for the Atlas launch vehicles. The Pentagon not only depends on Russia for the engine but also for engineering and technical support.

So far, it’s “business as usual,” Shelton said July 22 at a Pentagon news conference.

Other than off-the-cuff threats by Russian Deputy Prime Minister Dmitry Rogozin, there is no factual indication that supplies are being cut off, he said.

If the situation deteriorates, the Pentagon is preparing contingency plans to deal with engine shortages, said Shelton. If and when engine supplies might be disrupted is still unknown. “How are we going to proceed in our relationship with Russia at this point? This is a question for the nation’s leadership,” he said. “The events of the past two weeks certainly aren’t confidence builders.”

The current supply of RD-180s would last about two years if every launch in the government’s manifest is executed, said Shelton. Among the available options if supplies were cut off is to stockpile the engines and delay some launches. The engines have to be shared with NASA and the National Reconnaissance Office, so a high-level decision would be needed to allocate them. If satellites have to be parked indefinitely as they wait for launch availability, the cost of storing and maintaining sensitive spacecraft on the ground could range from $1.5 billion to $5 billion.

Another option is to ramp up production of the more expensive Delta IV rocket engines, which are manufactured domestically. Shelton estimated that would cost about $1.5 billion. The addition of newcomer SpaceX as a provider of military space launches also could help fill the gap, but the company’s rockets are not expected to be certified to fly military payloads until next year. The possibility of developing an engine comparable to the RD-180 in the United States also is on the table.

“This is a hydra headed monster,” Shelton said of the task the Defense Department faces.

Shelton said he would like to see the United States build a rocket engine comparable to the RD-180, but cautioned that it would be a tall order. The U.S. government and industry have lagged in liquid rocket propulsion research and manufacturing, said Shelton. “I don’t think we build the world’s best rocket engine.” The RD-180 is the best in advanced materials, performance and thrust-to-weight ratio, he said. “I would love for us as a nation to regain the lead in liquid rocket propulsion.”

Whether the effort would be led by the government or the private sector, or both, is part of the ongoing discussion.

“We’ll know more in the next couple of months,” said Shelton. “We still have in the United States some expertise in liquid rocket engines.” But no new rocket engine has been built domestically since the early 2000s. “That doesn’t bring in the new talent,” he said.

The Senate Armed Services Committee approved $120 million, and House Armed Services $220 million, to begin the development of a new engine. But many more billions would be needed to bring it to fruition, experts said last week at a joint hearing of the Senate Armed Services and Commerce, Science and Transportation committees.

Shelton and other space officials offered lawmakers a sobering reality check.  

“We could develop an engine with sufficient time and money,” said Daniel Dumbacher, professor of practice at Purdue University Department of Aeronautics and Aerospace Engineering. “There are development risks. ... There are technical issues to be addressed. I think we can overcome those but it's a matter of time and money required to do that.”

Principal Deputy Defense Undersecretary for Acquisition, Technology and Logistics Alan Estevez said it would take up to eight years and $2 billion to develop a new engine. “We're looking at this as a whole-of-government issue,” said Estevez. “We would look at what NASA capabilities are, as well as what we have inside the Department of Defense, and what the commercial sector is also doing,” he said. “We haven't decided what the best way forward is.”

Retired Air Force Maj. Gen. Howard “Mitch” Mitchell recently offered several recommendations for how to tackle the engine shortage, including major investments in research and development and a deeper examination of the technologies available in the commercial space industry.

“There are some risk reduction activities to bring the technology levels up in hydrocarbon engines that need to be invested in,” he said. “That will take a year-and-a-half or so, or two years to bring those technologies up. ... The risks have to do with the materials, they have to do with the modeling of the combustion instability, and some of the parts of the engine itself, injectors and other components that need to be matured.”

Mitchell’s study concluded that a disruption of RD-180 deliveries would have a significant impact on the U.S. ability to launch on Atlas V through 2020. “Neither the Delta IV nor new entrants can help mitigate that impact until 2017 and beyond,” he said. In the 2022-2023 timeframe, with “appropriate near-term funding for technology maturation, the nation could have new launch capabilities based on liquid oxygen/hydrogen engine technology that do not rely on foreign sources.”

Even if a new engine were designed successfully, its integration into existing launch vehicles could be a daunting challenge, said Robert Lightfoot, NASA associate administrator. “We have to look at the impacts on not just building an engine and having an engine to use but the impacts on the launch, the infrastructure that goes around that,” he said. “Can we do it? I'm sure we can, with the right resources ... but I think we have to make sure we understand the other pieces that come with that as we go forward.”

Dumbacher warned that the U.S. government’s spotty track record with space programs could result in further delays and rising costs as this technology quest moves along. He suggested greater private sector involvement and competition to keep pressure on costs. 

“The U.S. leads the world in these propulsion systems. However, we need to reduce the costs of these systems,” he said. “In my opinion, the United States should build upon its long investment in solid and liquid oxygen/liquid hydrogen propulsion systems, and allow the marketplace to provide viable choices for use by NASA and the Department of Defense,” he said. “Competition will incentivize industry to develop efficient management models, use the new technologies that will reduce costs, and continue to search for and develop technologies necessary to reduce development and operations costs.”

The Government Accountability Office estimated that defense and civilian government agencies expect to require nearly $44 billion for the next five years for launch activities. GAO analyst Cristina Chaplain cautioned that programs could benefit from greater efficiency. “Our past work has found that launch acquisitions and activities have not always been well-coordinated, though the Defense Department and NASA have made progress on that front,” she said.

A new Air Force study scheduled to be completed in September will recommend the most “affordable — within a time frame  — course” for a new engine, said Estevez. It will consider public-private partnerships, internal government development and commercial outsourcing.

Shelton said a domestic engine program would be a boon for the industry. “I think we can certainly help our liquid rocket engine industrial base by moving into such a program. I think we need to study the requirements. I think we need to look at what kinds of technologies we need to develop.”

The Mitchell review concluded that nobody in the public or private sector has all the necessary technology ready to start a full-scale development program. “We think that that's going to take some investment and time to get the technologies up to where you could actually do a full-scale development and commit to actually procuring a new engine.”

As to who ultimately will decide when to move from the RD-180 to another engine, that also is unclear, Shelton noted. “I would speculate that what would happen is the executive branch would bring a proposal to the Congress, and then the Congress ultimately has to decide whether or not to spend the money.”

Photo Credit: Air Force
U.S. Military Stepping Up Space Cooperation with Japan, Australia
By Chelsea Todaro

The U.S. military plans to strengthen its alliance in the space realm with allies such as Japan and Australia in order to help it cover the vast expanses of the Pacific Ocean, a senior Defense Department official said July 17.
Jessica Powers, director for space policy engagement in the office of the deputy assistant secretary of defense for space policy, said representatives of the three nations first discussed closer cooperation in 2012. The topics were improving space situational awareness, and satellite communications coverage in remote regions.

The strategic shift to the Asia-Pacific has called into question the ability of the U.S. military to link with its forces where there is little, if any, military or commercial communications satellites.

The key to improving the space architecture is to use more affordable and more resilient space systems provided by the commercial sector, said Powers. The United States cannot pay for these systems on its own, and needs to collaborate with other countries, who can provide needed funds, she said at a Future Space Leaders Foundation panel discussion on Capitol Hill.

“This resilience cannot be achieved only by U.S. investment. We have to partner with others,” Powers said.

Col. Alan Rebholz, chief of the Air Force space operations division, said the Pacific Ocean covers half of the Earth, which creates a tyranny of distance for many militaries in the region. An enemy obtaining further access to space is a threat, so it is important to prevent them from tampering with existing U.S. space assets, he said.

“It’s not about China,” Rebholz said. “This is about activity of distance … of what I can do uniquely from space that nobody else can do, which is intelligence, surveillance, reconnaissance.”

Cooperating with the private sector is the future of military space, he said. There needs to be changes in policy to enable the services to interact and take full advantage of what commercial space service companies have to offer, he added.

Commercial satellite companies, which provided the U.S. military with extra capacity over the Middle East during recent conflicts, are not motivated to build and launch satellites over regions that are sparsely populated — at least not without guarantees that the military will be a long-term customer, industry representatives have said repeatedly in recent years.

“We have a lot of work to do, … the commercial market doesn’t exist in the Pacific and we don’t have the terminals that can support [satellite transmissions], and it’s expensive,” said Rebholz.

Space is also a contested environment, with adversaries’ spacecraft, and millions of pieces of so-called space junk, orbiting the planet. Both are threats to U.S. military satellites.

The talks with Australia and Japan also addressed how the three countries can cooperate when it comes to space situational awareness, Powers said. In 2013, the United States moved a Defense Advanced Research Projects Agency telescope to Australia to conduct space surveillance, she said. The United States is also collaborating with Japan’s civilian space department, the Japan Aerospace Exploration Agency, and its counterparts in the Ministry of Defense, to write new space defense guidelines, she said.

“Space is a domain that no nation owns and something we all must abide to,” Powers said.

The United States is also reaching out to other allies including Canada, the United Kingdom and South Korea, to boost space cooperation, she said.

“We got a lot on our plate and we continue to look for further opportunities,” Powers said.
Credit: Wideband Global SATCOM (Air Force photo)
Marine Corps Commandant Nominee Supports Russian Helicopters for Afghan Forces
By Christina Munnell

Gen. Joseph Dunford, Jr.

The nominee to lead the Marine Corps said at his confirmation hearing before the Senate Armed Services Committee that he supported the Defense Department purchase of Russian-made helicopters for the Afghan national army.

Gen. Joseph Dunford, Jr., current commander of the international security assistance force, said July 17 that proposals to cancel a contract with a Russian company to buy Mi-17 military attack helicopters could have “catastrophic” impacts on the efforts of local special operations forces to complete future counterterrorist missions.

“In 2015, Afghan security forces will contribute to the forces and coalition forces. Their ability to do that will be significantly degraded without the Mi-17,” he said.

Committee Chairman Sen. James Inhofe, R-Okla., acknowledged that some members of Congress had asked the Defense Department to halt its purchase of Mi-17 helicopters on behalf of Afghanistan. Pressure has built to end the sales in the wake of Russia’s involvement in the Ukraine.

“We right now are not are not confident that the Afghans can take up complete control of their own security,” said Sen. John McCain, R-Ariz.

Committee members’ questions focused on Dunford’s experiences in Afghanistan rather than his thoughts on the future of the Marine Corps. Gen. James Amos is set to retire as commandant of the Marine Corps this fall.

Dunford said there were substantial improvements in both the Afghan forces and the daily lives of civilians. The United States must continue to have a strong presence to finish the work it started 13 years ago, he said.

McCain said the committee would re-address budget issues such as sequestration, and prioritize funding to ensure the United States is “getting it right” during the Afghanistan drawdown. Otherwise, the country could end up like the current situation in Iraq, he said.

“We knew when we left Iraq, that there was work remaining to be done. In Afghanistan, we have a chance to get that right,” Dunford said.

Sustainability and political security are now the primary focus overseas, Dunford believes. But budget constraints and continued troop drawdowns have hindered the services’ ability to help allies and build relationships. “It requires us to break programs,” he said.

Dunford said his greatest challenge in assuming his role as commandant would be readiness and response in accordance with modernization and technology, as sequestration reduces Marine Corp modernization efforts.

After 13 years at war, Dunford said the morale of the men and women serving in Afghanistan exceeds expectations and is “something we can all be very proud of.” What’s lacking is the modern equipment and technology necessary to finish the mission, he added.

“You need to come back to us and tell us if we’re not getting it right,” said Sen. Roger Wicker, R-Miss.

When members asked about the U.S. relationship with Pakistan, Dunford said its army recognized the existential threats that came with extremism. Despite Pakistan’s determination to fight terrorism, he was not confident it could handle these threats.
Photo Credit: Senate, Defense Dept.
Pentagon’s Strained Relationship With Vendors Getting Worse
By Sandra I. Erwin

Like many Pentagon contractors, Robertson Fuel Systems prides itself on its long history of selling hardware to the U.S. military.

But the company says it is now on the verge of exiting a presumably lucrative market because the burdens increasingly are outweighing the benefits.

Robertson makes auxiliary fuel tanks that are installed in helicopters to extend their range and endurance. The company has sold the tanks to the Defense Department for nearly four decades, and it is now questioning whether it should continue to bid on military deals following the adoption in recent years of stringent contracting policies.

The Defense Department had previously purchased the fuel tanks as commercial commodities that are sold on the open market. Over the past couple of years, the Pentagon determined that the fuel tanks do not fit its definition of “commercial” products and therefore the Defense Department has to conduct a full audit of the company’s expenses so it can verify that it is not being overcharged.

Companies such as Robertson, which design and manufacture products at their own expense, see these cost-accounting demands as unwarranted government overreach. They contend that the Defense Department has plenty of other means to verify whether a price is fair without examining a company’s internal costs, particularly when none of the products in question were built, tested or qualified at taxpayer expense.

When major defense contractors design and produce military-unique equipment with Pentagon funding, they are subject to cost auditing under federal procurement regulations. Companies that predominantly do business with the government employ armies of accountants and procurement specialists whose sole job is to produce “certified cost and pricing data” and respond to contracting officers and auditors’ questions. That cost is counted as overhead expense.

Commercial companies, conversely, are not organized to comply with government auditing. Standing up a cost-accounting compliance operation, commercial firms contend, would saddle them with extra costs and would drive up the prices they charge for products, thus undermining their ability to compete with leaner suppliers.

Pentagon officials defend these contracting policies as necessary to prevent price gouging. Still haunted by past procurement embarrassments like $600 toilet seats and $800 coffee pots, the Defense Department prefers to err on the side of caution.

This month, the Defense Department’s inspector general reported that the Army Contracting Command overpaid up to $3.3 million for communications equipment from Datron World Communications Inc. The Army bought the equipment for the Afghan National Security Forces. “This occurred because the contracting officers did not verify that proposed prices were fair and reasonable in accordance with the Defense Federal Acquisition Regulation,” the IG said in a July report.

The Defense Logistics Agency also was called out for paying excessive prices for commercial aviation spare parts made by Bell Helicopter. In this case, the IG said the contracting officer did not perform an adequate analysis of commercial parts, and used the previous purchase price without performing historical price analysis. DLA potentially overpaid Bell about $9 million on 33 of 35 sole-source commercial spare parts reviewed by the IG.

Confronted on this issue by members of the House Armed Services Committee July 10,  the Pentagon’s top weapons buyer Frank Kendall said the IG findings are an “ongoing and difficult problem to address.”

How to buy commercial items at fair prices has been challenging, he said, because many contracting officers might not be trained or skilled at pricing.

Even within the Pentagon, agencies disagree on what constitutes a fair price. The Defense Logistics Agency vehemently disagrees with the IG findings that the agency overpaid Bell Helicopter. DLA insists it paid less for parts than Bell's commercial customers. The agency "successfully negotiated a 35 percent discount off Bell's commercial price list,” DLA spokeswoman Mimi Schirmacher said in a statement to National Defense. The current contract requires a further reduction in DLA's price if a commercial customer is charged a lower price for the same item, she said. “The prices on this contract were determined fair and reasonable in accordance with current regulations for buying commercial items.”

Kendall said managers are encouraged to negotiate the best possible deals and to ensure contractors do not overcharge. But he conceded that demanding certified cost and pricing data might be counterproductive. “Our policy right now is fairly flexible. It says that the government can rely on commercially established prices for commercial products.” If the price is not found to be acceptable, the government can request certified cost and pricing data, which is a “very high requirement for people to meet, and which commercial companies normally are not in a position to provide,” said Kendall. “So that puts a burden on industry.”

Kendall recognizes that these demands on suppliers could drive some out of the defense market. “I have had companies, large companies who do a lot of commercial aerospace work, for example, say they will walk away from DoD business if they're forced to put certified cost and pricing data on all their commercial products,” he said. “It's just too big a burden for them, and the business isn't worth it to them.”

Short of auditing the company’s costs, there are other ways to verify prices are fair, Kendall said. “If there's an off-the-shelf product that meets our requirements, we do an analysis of the business environment.” When a product is widely sold, the market is efficient at setting the price, he said. “Where we get into trouble is with things that are kind of on the margins, where there may be a modified commercial product that even though it may be sold through a GSA catalogue, it's really unique.”

It has been difficult for the Pentagon to strike a balance between accepting commercial prices and doing due diligence to make sure those prices are reasonable, said Kendall. “We need some way to determine it's a fair and reasonable price. It doesn't have to be fully certified cost and pricing data.”

Kendall’s take on the issue should please executives like Owen Paepke, who is director of strategic planning at Robertson Fuel Systems in Tempe, Arizona. In the contracting trenches, government officials are not always willing to see both sides of the coin, Paepke said. Relationships between vendors and procurement officials have rarely been more adversarial, especially over questions of pricing and of what constitutes a fair profit for the industry.

Robertson’s fuel tanks fit the definition of a commercial item that Congress instituted in 1994 when it passed the Federal Acquisition Streamlining Act,
Paepke said. But starting about two years ago, Defense Department officials started questioning the proposed prices and demanded to see the company’s cost data. “That’s a big problem for a company like us, where cost is embedded in the development of new products, testing and qualification expenses.”

Under the rules, the Pentagon would pay for the production cost, plus a negotiated profit margin, but the company would get no credit for the research and development investment, he said. “Why would we ever develop another system for the U.S. military under the current situation?”

The Defense Department contends that Robertson’s fuel tanks are sold only to government buyers, and therefore it cannot treat them as commercial items. The company counters that the tanks are commercial in nature because they were developed with internal funding and have been sold over the past 25 years to defense contractors like Boeing and AgustaWestland as well as to foreign governments. “That is a huge pricing history,” Paepke said. “How plausible is it that all those buyers were overcharged?”

The government dismisses all this as irrelevant, he said. “They claim it does not meet the criteria for a commercial sale.”

Robertson executives, many of whom are military veterans, are disappointed, Paepke said. “We were always friends [with the Defense Department]. Now it' s turning into an adversarial relationship.”

If the government decides it will not buy Robertson’s products unless it has certified cost data, the company might have to walk away, he said. “Our business is very much on a commercial model. We develop products at our own expense and our own risk.” Allowing the government to audit internal costs, he said, “requires a great deal of overhead and expense and inefficiency to track your costs in specific projects.”

Contracting officers, although aware that the company developed the product at its own expense, will demand cost data even if the market price is always the best indicator, he said. “The issue is bubbling up. Industry will have to decide whether it can live with this guidance or not. We are not going to reinvent the company around one customer.” For Robertson, it would be “very painful to lose the U.S. military as a customer. … But policy makers are not considering our business model.” Large defense contractors, like utilities, have a business model that is based around cost, plus single digit profit margins. Commercial companies, he said, cannot operate that way.

Industry experts worry that the Defense Department’s zealous approach with commercial vendors might do more harm than good. “We never faced anything like that before,” said Jonathan L. Etherton, industry consultant who served as a staff member of the Senate Armed Services Committee and helped write the 1994 federal procurement legislation.

The Defense Department has tried to open the market to commercial items over the years, but its interpretation of what is truly a commercial item has varied, Etherton said. “They're really narrowing what they consider to be a commercial item in ways we haven't done in the past,” he said. “The law itself has a broad definition. There's a lot of discretion there,” he added. “The intent of Congress was to have an open approach to commercial technologies.”

There are several techniques for determining price reasonableness, but the Defense Department often does not use them, said Etherton. Increasingly more companies are told they have to provide certified cost data for products that were developed with private funds. If these companies leave the market, it will undermine Defense Department efforts to recruit vendors that can supply innovative technology developed at their own expense, he said. To their credit, senior Defense Department officials under Kendall have “made a real effort to meet with companies and discuss commercial acquisitions,” Etherton added. “They're taking the issue very seriously.”

In the day-to-day procurement business, meanwhile, tensions are not likely to ease, industry insiders said, as there are deep-seated animosities between procurement officials and contractors.

A cultural gulf exists because government officials do not always understand the motivations of the private sector,
said Mack McKinney, of Solid Thinking Corporation. The North Carolina-based company provides training courses on government procurement.

“They teach contracting officers that contractors only care about profits, that they don't care about the country, and that's not true," he said. The changing demographics of the Defense Department workforce also are a factor, as hordes of experienced managers retire and are replaced by largely inexperienced workers. The less experienced managers will impose every restrictive federal acquisition regulation clause they can think of to try to protect themselves from contractors overcharging, said McKinney. “Attorneys have created this adversarial environment. And contracts reinforce that.”

Photo Credit: Thinkstock
Future Marine Corps Missions Depend on New Ship-To-Shore Connectors
By Dan Parsons

Until it can develop a long-range, speedy ship-to-shore connector, the Marine Corps is putting crisis response ahead of combat operations as its most important mission, a top Marine capabilities officer said July 15.
The service’s emphasis in the current fiscally constrained environment is “crisis response at the expense of combat operations,” Brig. Gen. William Mullen, chief of the capabilities development directorate at Marine Corps Combat Development Command, said at a forum hosted by the Center for Strategic and International Studies in Washington, D.C.
“If we absolutely had to do it, we would,” Mullen said. “But it would be a stretch. … The capabilities we need to do crisis response are not as robust as what we need to do major combat operations.”

Marine Corps leaders have said the days of high-casualty frontal assaults from the sea like the iconic beach landings in the Pacific during World War II are over. No more will the service seek to pour men and materiel onto defended shores, but it must maintain the ability to launch such operations if called upon, Mullen said.
“The United States will never do something like that again,” Mullen said of those bloody battles. “We don’t want to do that again. That’s not how we want to conduct operations. We want to be where somebody is not.”
But Mullen said the Marine Corps must maintain the ability to conduct forcible-entry operations if called on to do so as a last resort. Marines have the capability to go ashore from amphibious assault ships now, but the amphibious assault vehicles, or AAVs that transport them are becoming obsolete, he said.

AAVs are not very capable, he said. Some entered service in 1972. Some are undergoing a limited force-protection upgrade and systems improvement program. But retrofit work on existing vehicles cannot commence until fiscal year 2019, he said.
“We have issues with them launching outside of three miles and, they’re just old,” he said. “We’re facing parts obsolescence, but they’re what we have and they get the job done one way or another for what we’re doing right now.”
To conduct ship-to-shore operations, whether in a disaster relief scenario or in wartime, the Marines must have a vehicle that can travel quickly in the water, he said.
The Marine Corps requirement for what is now called the amphibious combat vehicle is technically feasible but costly, he said. A previous iteration, called the expeditionary fighting vehicle, was canceled because industry could not balance the need with high speed through the water with sufficient armor and armaments.
“We have spent 26 years and $3 billion [on developing such a vehicle] and it’s not because we’re stupid. It’s because that’s how important it is to us to have that capability. It remains a requirement to have that capability,” Mullen said.
The low weight requirement for a vehicle that planes like a speedboat required sacrifices in weapons and troop protection that Marine Corps officials found unacceptable.
“It’s pretty doggone expensive and that’s not a good thing these days or for years to come,” he said. “It’s also very, very complex and due to weight restrictions, it can’t be above a certain weight or else you’re not getting a high-water-speed vehicle.”

The Marine Corps has therefore altered its plans for ACV acquisition to include an initial “limited buy” called ACV 1.1. The idea is to field an operational, commercially available vehicle in as little time as possible while performing the necessary testing to ensure its suitability, he said. The service has also ditched its desire for a tracked vehicle in favor of wheels, at least in the first iterations.
“We’re going to get them out to the operating force, let the Marines use them, while still the majority of our fleet are the AAVs,” he said.
The service already has planned to buy a wheeled Marine personnel carrier, or MPC, with limited swimming capabilities in the out years beyond acquisition of the joint light tactical vehicle and ACV. It is now planning to purchase one of the commercial MPC vehicles currently under testing as the first iteration of the ACV.
“Which means, in my mind, we have to keep control of the requirements … in order to get that first group of vehicles out there,” he said. “Our emphasis is that has got to be a good-enough-to-operate vehicle, not 100 percent of our requirement. We’re looking for good enough. 1.2 will be a much better vehicle.”
By the time the Marine Corps reaches the third phase of ACV procurement, it might be able to purchase a high-water-speed vehicle, but technology must mature to the point where that can be achieved at an acceptable cost without sacrificing armor and weapons, he said.
“When you start trading things away like armor, lethality, that’s a problem,” he said.
The service intends to find out what desired capabilities are achieved with the commercial vehicle, then make engineering and design changes for a second lot buy, called ACV 1.2, when it plans to buy to “about half our requirement,” he said.
“If [1.1] is not able to do much, then the engineering change proposals for the second group of vehicles we’re going to buy need to improve our ability to do some of those things,” he said.

The ACV will have a high-ground clearance and a V-shaped hull like a mine-resistant, ambush protected vehicle. With multiple wheels, it also would be able to keep going if a roadside bomb blows one off, Mullen said.
“It’s designed to operate more like an MRAP than a tracked vehicle is,” he said.
Preliminary engineering specifications on candidate vehicles indicate it could swim as well as the AAV currently in service, Mullen said. That attribute still need to be tested and confirmed, which will be part of the ACV 1.1 evaluation.
The service’s future requirements for connectors are not limited to the ACV. The proliferation of anti-ship cruise missiles means that Marines will have to ride ashore from much farther at sea, perhaps beyond the range even of an ACV, Mullen said. The service needs other vehicles and vessels that can quickly deliver amphibious troop carriers to within range of shore, drop them in the water and retreat, he said.
The Navy is sending its fleet of landing craft air cushions, or LCACs, through a service life extension and has longer-term plans to replace them outright. The larger service is also getting underway with a plan to replace its landing craft-utility boats, or LCUs, some of which are 54 years old, Mullen said.
A ship-to-shore connector, or SSC, will replace existing hovercraft, which ride on a cushion of air over land and sea. The Textron-built SSC will essentially be the same vessel with incremental capability improvements, Mullen said. The first eight are already under construction but do not have the ability to launch vehicles into the water, an essential capability in ant-access, area-denial environments, he said. Beginning with the 10th craft, plans are to introduce that capability and then retrofit the previous nine vessels, Mullen said.
“The connectors we have, the LCACs, the LCUs, the joint high-speed vessel … none of those things will go into an unprotected beach, even if … it’s someone with an RPG or a machinegun,” he said. “Which tells us that we have to have the ability to bring that thing in to just outside small-arms range and then get off it and swim ashore via our own means.”
Engineers at the Office of Naval Research are developing a ramp for the joint high-speed vessel so ACVs can drive right off into the water instead of onto a pier. Each JHSV, three of which are already in service, can hold about 20 amphibious vehicles.

Other options for delivering men and materiel ashore include the ultra-heavy amphibious connector, or UHAC, which runs on two tracks outfitted with massive buoyant treads that can paddle through water and drive on land. A half-scale model recently underwent operation testing as part of the Rim of the Pacific international military exercises based in Hawaii.
The Marine Corps is reaching as far back as the 1980s to potentially revive a platform called the HAVIC, a self-propelled aluminum sled, Mullen said. After vehicles drive onto it, it acts like a temporary boat hull for the ride to shore. The driver then jettisons the sled on the beach and rolls inland, leaving the HAVIC to be picked up by another unit for reuse.
“The prototype was scrapped in the 1990s. What’s the potential there? We don’t know. But we’re going to explore it,” he said.

Ship-to-shore connector (Textron photo)
Energy Sector Leaders Still Not Taking Cyber Threats Seriously, Survey Finds
By Christina Munnell

Companies and organizations in the energy sector remain vulnerable to cyber attacks, which could result in the loss of intellectual property and leave critical infrastructure prone to damage, according to a recently released study.

Many of the world’s utility, oil and gas, energy and manufacturing companies have immature cyber security programs, according to a survey sponsored by Unisys and conducted by the Ponemon Institute. It polled 599 info-tech executives in 13 countries. Most respondents reported that security programs in their companies were unorganized and ill-equipped to handle network and other kinds of computer intrusions.

“As the findings reveal, organizations are not as prepared as they should be to deal with the sophistication and frequency of a cyber threat or the negligence of an employee or third party. In fact, the majority of participants in this study do not believe their companies’ IT security programs are ‘mature,’” the report said.

Although IT security executives are aware of the threats to industrial control systems (ICS) and supervisory control and data acquisition systems (SCADA), the IT professionals in the organizations said their companies are not fully committed to preventing attacks. The companies included utilities, oil and gas companies and manufacturers of alternative energy products.

The data revealed that as a strategic priority, reducing the risk of cyber threats is low across the energy sector.

A majority of respondents — 57 percent — said they believed the cyber risks to ICS and SCADA systems have increased, yet only 28 percent ranked security as one of the top five strategic priorities for their organization.

Over the last 12 months, about two-thirds of these global industries claimed they have had at least one security compromise that led to the loss of confidential information or to the disruption of operations.

Negligent employees were a root cause of security breaches, the report said. And while insider threats are recognized as the greatest risk to cyber security, only 6 percent of the organizations said they trained their employees to spot such threats.

In general, network security professionals lack confidence in the ability of their organizations to combat these attacks. According to the survey, most leaders believe the IT security programs at their organizations are stuck in the middle stages of maturity. Unisys defines the “middle stage” as having IT security program activities clearly defined, but only partially deployed.

Fewer than 20 percent said IT security programs at their respective organizations were fully deployed.

Many enterprises had few resources for addressing the dangers of cyber attacks — either by design, lack of experience, or budget constraints, the study said. The writers of the report suggested that unwillingness to allocate resources would continue until the world suffered a major cyber incident.

To reduce attacks, the report proposes that companies implement more agile and non-disruptive security networks and enforce user credentials policies.
Photo Credit: Thinkstock
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