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Amazon Cracks Code on How to Attract Innovators to Federal Market
By Sandra I. Erwin

Thousands of pages of legislation have been passed by Congress over the years in efforts to overhaul the government’s procurement system. So it might come as a surprise to policy makers that one of the most transformative forces in the federal market of late is not a piece of legislation but insurgent industry player Amazon Web Services.

The AWS cloud computing approach to managing government data and software is slowly changing how federal buyers acquire tech services and cybersecurity products — and in the process is luring new vendors to the federal sector, industry executives said.

National security agencies like the Defense Department, the Department of Homeland Security and the intelligence community have launched massive outreach campaigns to attract tech startups and innovators to do business with the government. These efforts often have fallen short for being tone deaf to the economic forces that drive the tech industry, 
analysts said.

The cloud computing revolution that AWS has accelerated — and its increasing influence on the government’s thinking on cybersecurity — has drawn the attention of many firms in the tech sector. As a result, more companies are now contemplating government work, executives told National Defense.

The adoption of Amazon’s secure cloud services in the intelligence community and other agencies — timed with the rise in federal cybersecurity spending — has opened up opportunities for vendors much like the Apple app store did for software developers when it launched eight years ago. AWS has only been in the government market a few years. It made a big splash in the federal sector in 2013 when it beat incumbent contractor IBM to win a $600 million CIA award to build and maintain a secure cloud for 17 intelligence agencies.

The Amazon cloud model has made it easier for government buyers to procure software, and has created new channels for vendors to sell products, said Kirk Spring, president of SafeNet Assured Technologies, a cybersecurity company in Abingdon, Maryland.

As cyber attacks against military and civilian government networks become more frequent and more sophisticated, one of the hottest markets right now is for data encryption apps, Spring said. Vendors that become AWS certified partners can tap into the growing demand. The intelligence agencies are avid consumers of cybersecurity products and the planned movement to the Amazon cloud is good news for the tech industry, Spring said.

The secure government cloud, which Amazon calls C2S for commercial cloud services, only allows U.S.-based suppliers. The intelligence community plans to be fully operating in the AWS cloud by 2019 or 2020. Amazon executives have projected further growth across the federal market as more agencies invest in modern infrastructure and transition old-school data centers to cloud-based models.

Registered C2S providers are “putting technology in the cloud,” Spring said. “It does allow us a greater reach into the customer base. For the customer, this is a new way of thinking. They are trusting AWS to house data and apps.” Vendors post the apps, and AWS does the monitoring and billing.

Amazon started offering web services commercially in 2006. Last month, the company reported its cloud computing sales reached nearly $9 billion over the past four quarters, up 70 percent from 2014.

Brian Wilson, senior vice president of Zenoss Inc., a cybersecurity and information technology company in Austin, Texas, predicts sales in the defense and security market will grow as agencies embrace the cloud. The federal government today makes up less than 25 percent of the company’s business.

The government's move to the cloud and AWS in particular have shaken up the procurement ecosystem, Wilson said in an interview. “AWS introduced the intelligence cloud. That led Zenoss to launch services inside the AWS marketplace."

“That has been the most significant procurement change that I have seen in the last 12 to 18 months,” he said. Since Zenoss' products and services started being hosted in AWS, other agencies like DHS and NASA have become potential new buyers, Wilson said. “AWS is opening the government’s eyes to the fact that the cloud can be very secure and provide the benefits that have been promised.”

Just two years ago, it was rare to have cloud computing as a central topic of meetings with government buyers, Wilson said. “Today it comes up in every discussion. To have the senior leadership of the CIA encouraging folks to buy from AWS is new.”

For buyers, the economics on the cloud are staggering, Wilson said. The government can buy IT services for one-tenth of the cost of traditional approaches, he said. And the intelligence cloud meets stringent security requirements. “The promise has been there for 10 years,” Wilson said. “The government is betting big on cloud.”

The Pentagon has been moving to cloud-based information technology services, officials said. “In five years, I am hopeful that we will be in an almost complete virtual cloud environment,” the Defense Department’s Chief Information Officer Terry Halvorsen told lawmakers. “We'll have private clouds, which are completely private within segments of DoD. We'll have private clouds that are just DoD. And we'll have private clouds that are DoD and other parts of the federal government. And then we'll have hybrid public clouds.”

The Defense Department, Halvorsen noted, is “slightly ahead of most of the Fortune 50 in the use of cloud.” The next step is to create a marketplace for the private sector, he said. “To start being competitive the next thing is to look at how we bring industry into on-premise cloud offerings.”

Photo credit: iStock
Pentagon’s European Defense Effort Comes Under Increased Oversight
By Sandra I. Erwin

The Defense Department’s inspector general will be closely monitoring how the Pentagon spends funds to shore up NATO allies under the European Reassurance Initiative.

With a high political profile and substantial funding, the ERI is a “new and important oversight area for the DoD IG,” Defense Department Inspector General spokeswoman Bridget Serchak told National Defense in a statement.

The ERI budget is poised to quadruple to $3.4 billion in fiscal year 2017, up from $789 million in 2016. The IG office plans to begin a formal assessment of the program immediately, according to an April 27 memorandum by Kenneth Moorefield, deputy inspector general for special plans and operations.

The IG review will span ERI efforts in six “Operation Atlantic Resolve” countries: Poland, Bulgaria, Romania, Estonia, Latvia and Lithuania. It will examine U.S. military participation in training exercises and whether projects deliver promised outcomes such as improved combat readiness of European forces and greater interoperability. Investigators also will propose metrics to gauge progress.

President Obama first announced the launch of the ERI in June 2014. It was funded in fiscal year 2015 as a one-year $1 billion emergency response to Russian aggression. Top U.S. military leaders, Defense Secretary Ashton Carter and other senior administration officials hailed the president’s decision to boost the program in the 2017 Pentagon’s budget request and expand U.S. military presence in Europe after decades of steady withdrawal and a growing threat posed by Russia to NATO countries.

“We're strengthening our deterrence posture in Europe by investing $3.4 billion for the European Reassurance Initiative,” Carter said April 27 during a Senate Appropriations defense subcommittee hearing.  “We're challenging our NATO partners and working with them to develop what I call a new playbook for NATO.”

“Yes, we have quadrupled our request for the ERI,” Carter added. “We hope we get favorable consideration of that. We think it's necessary. What is it going to pay for? It pays for more presence on a rotational basis of U.S. forces, ground forces, air forces and naval forces in theater — with a particular attention to the Baltic states that are very much exposed on that flank of NATO.” ERI also funds weapons such as heavy armaments, tanks, armored personnel carriers and artillery.

Senate Armed Services Committee Chairman Sen. John McCain, R-Ariz., has praised the ERI as a “positive first step to re-establishing deterrence in Europe.” But he warned that the program may not succeed without greater financial and troop commitments from European allies.

U.S. Army Europe announced last month it will begin receiving continuous troop rotations of U.S.-based armored brigade combat teams to the European theater in February 2017, expanding the total Army presence in Europe to three fully staffed brigades. The Army is storing "static" equipment, known as Army prepositioned stocks in Europe.

The armored brigades will be on nine-month rotations from the United States and will bring their own equipment to conduct exercises across Atlantic Resolve countries.

By the end of 2017, the plan is to have a continuous presence of three fully equipped Army brigade combat teams — one armored, one airborne, one Stryker — and one prepositioned set of combat-ready equipment to support another armored brigade. In addition the Army will deploy division-level logistics support units in Europe.

PHOTO: U.S. Army 3rd Infantry Division troops observe soldiers with the Ukrainian army during a live-fire exercise at the International Peacekeeping and Security Center near Yavoriv, Ukraine. (ARMY)
Air Force Official: F-35 Still Facing Maintenance Challenges
By Allyson Versprille

The Air Force is continuing to work through several maintenance issues in its F-35 joint strike fighter program, including getting the next increment of the autonomic logistics information system ready for initial operational capability, a senior service leader said April 28.

The service's F-35A needs to have the latest version of ALIS, version 2.0.2, ready ahead of declaring IOC sometime between Aug. 1 and Dec. 31. Gen. Ellen Pawlikowski, commander of Air Force Materiel Command, said the concept behind ALIS is brilliant. The system would give the service greater agility because it would inform support crew of maintenance needs — enabling them to have the right parts available upon landing — and would notify suppliers of shortages.

But "as you start to see just how challenging that is and all of the interfaces that are involved in that, and then now introduce the cybersecurity requirements that go into it … it's almost as challenging as building a fifth-gen aircraft," Pawlikowski told reporters during a Defense Writers Group breakfast in Washington, D.C.

Officials have already said the system is approximately 60 days behind schedule. "This version of ALIS combines the management of F135 engine maintenance within ALIS and tracks all the life-limited parts on each and every F-35 aircraft," said Lt. Gen. Christopher Bogdan, program executive officer for F-35. "The development of these capabilities is proving to be difficult because they require integration with Lockheed Martin’s and Pratt & Whitney’s enterprise resource planning systems, or the 'back end' of ALIS," he said in his written testimony at a recent hearing before the Senate Armed Services Committee.

The Air Force is working through the challenges with ALIS including the cybersecurity and integration problems, 
Pawlikowski said. "The question is … how much is enough now that we see how challenging this is, and how much do I really need to do to have that agility?" she said. The Air Force is focused on getting the system to a form where the operator can reliably count on it and use it for IOC, she said.

Additionally, the service is looking at adjusting expectations for what it wants ALIS to do at IOC, Pawlikowski said. That does not mean changing the system requirement, but reevaluating how the Air Force interprets some of the specific details within that requirement, she said. "I think it's a little 'r' adjustment not a big 'R' adjustment."

Another F-35 support challenge centers around contracted maintainers working on the aircraft at Luke Air Force Base in Arizona, she said.

Due to a shortage of Air Force maintainers as a result of keeping the A-10 Thunderbolt II in its fleet, the Air Force has asked Lockheed Martin to provide contractors to Luke to work on the F-35. Currently, the company has taken over maintenance of an entire wing.

"We're not looking to try to do that in the long term," Pawlikowski said. "What we're trying to do is … to give ourselves the time to build the organic workforce, the airmen, to be able to do that maintenance."

However, putting together a cadre of maintainers experienced enough to work on the F-35 program could taken seven to nine years, she said. "It's going to take us probably until the beginning of the next decade to get caught back up."

At the same time, paying for those contractors — which is tens of millions of dollars more expensive per year — was not included in the funds allocated in the 2017 budget request for operations and maintenance costs to keep the A-10 in the fleet, she said. "We are having to carve that out as we balance all of the other O&M costs we have."

Another constant worry with hiring contractor maintainers is the potential to pull active-duty and reserve airmen away from the service. "So far we are not seeing a serious strain, but … that is a continual challenge for the Air Force. We are facing that right now with the commercial airlines," she said.

The Air Force has had discussions with Lockheed regarding this problem and hasn't seen any major issues so far, she said. But "we want to make sure we're not essentially just creating a bigger hole for ourselves."

Meanwhile, Pawlikowski said the Air Force is continuing efforts to field directed energy weapons.

In the past, there have been two main challenges with directed energy: achieving technological maturity and having realistic expectations, she said.

However, with advances in solid-state lasers, "I think we're on the cusp of actually being able to field a true laser weapon within the next five to six years."

Pawlikowski noted Air Force Special Operations Command's efforts to place a directed energy weapon on its AC-130J Ghostrider gunship by 2020. There is also potential for using such weapons on fifth-generation fighters, she said.

"We've got an activity that's going forward … to put a laser on a fighter aircraft, not to blow up scud missiles or to win in a dogfight, but as an air defense," she said.

Photo Credit: Air Force

Marine Corps Soon to Complete Probe of V-22 Fleet Readiness (UPDATED)
By Sandra I. Erwin

The Marine Corps plans to wrap up later this year a sweeping review of the state of the V-22 fleet. This probe comes amid a widening awareness on Capitol Hill of substandard aviation readiness across the Marine Corps.

An “independent readiness review” of the V-22 Osprey got under way in October and should be complete by late summer or early fall, said Marine Corps spokeswoman Capt. Sarah Burns.

Overseen by the consulting firm LMI, the review is expected to “identify issues and causes for aircraft and maintenance-personnel readiness, and to recommend the best courses of action for the MV-22B community to achieve and maintain a T-2.0 readiness rate,” Burns told National Defense. T-2.0 is the optimal readiness rating for Marine Corps aircraft.

The V-22 Osprey tiltrotor entered service in 2007 after a 
turbulent decade of development, safety problems and being on the brink of termination. In recent years, it has become a workhorse in the Marine Corps and hailed as a game changer in combat operations. 

“In the years ahead, the Osprey will remain the nation’s crisis response platform of choice in support of the ‘new normal,’” said the Marine Corps’ 2016 aviation plan.

Rising demand and wear and tear, meanwhile, have stressed the fleet and prompted the Marine Corps’ top leadership to take action. Officials have testified on Capitol Hill about eroding aviation readiness, and lawmakers have expressed alarm at news reports of Marine crews cannibalizing aircraft to keep squadrons running. The Marine Corps Times last year obtained a Defense Department inspector general report that found V-22 readiness rates fluctuated from 45 percent to 58 percent from fiscal years 2009 to 2011, much lower than the desired 82 percent. Marine officials have briefed lawmakers in hearings this year about efforts to increase those rates.

In recent months, most of the spotlight has been on the deteriorating state of Marine Corps and Navy Hornet tactical fighters, but the readiness of the V-22 fleet of about 280 aircraft also is troublesome, officials said.

“It’s a bathtub we’re in,” said Russell Howard, assistant deputy commandant for aviation sustainment.

The downward spiral is the result of several issues dating back a decade, Howard said last week at a logistics industry conference. “In some cases it’s money, in some cases engineering investment, reliability, supply chain management,” he said. "We’ve dug ourselves a hole. You don’t have enough airplanes so you overfly the ones that are up, so it becomes a death spiral. … We’re in a dire situation with Hornets … and the V-22 is very stressed,” Howard said.

The independent readiness review is the first step toward turning this around, he added. “It will be our roadmap to bring back the V-22.” The issues are similar for all Marine Corps fleets, Howard explained. “Maintainers are struggling to do their jobs. Depot capacity is a serious problem. Funding is always a problem.”

There are today 14 operational squadrons in the active fleet. The goal is to expand to 18 when the fleet reaches 360 aircraft. The Osprey is assembled at Bell Helicopter in Amarillo, Texas. The fuselage is made by Boeing in Ridley Park, Pennsylvania. 

To help cope with aircraft availability problems, the Naval Air Systems Command and Boeing more than a year ago built a V-22 “readiness operations center” in Ridley Park to monitor performance anomalies and predict maintenance and logistical issues across the fleet.

An LMI fact sheet says the V-22 readiness review is a “data driven” analysis that will suggest a path to future improvements. For this project, the company developed modeling and simulation software tools to “calculate fleet readiness and associated costs, allowing users to perform what-if analyses to see potential impacts of proposed program changes.” According to LMI, the review will provide “recommended courses of action to enable the military to make targeted program investments” and consider staffing options.

Similar reviews were conducted in the past for the Harrier attack jet and the Super Stallion helicopter fleets, said Marine Corps spokeswoman Burns. “So we anticipate the findings from the Osprey independent readiness review to echo the same results.”

Marine officials have championed expanding the role of the Osprey from simply a mobility platform for troops and cargo to serve as a “command and control” mobile network link over the battlefield. These emerging missions and a slew of technology upgrades and advanced electronics planned for the Osprey will challenge the Corps to not only maintain the fleet but also protect aircraft from cyberattacks, experts said.

“The cyber stuff is what I worry about. How do we work that into the readiness equation?” asked Todd Probert, vice president of mission support and modernization at Raytheon. The company does the integration and testing of the Osprey avionics systems and software at a facility in Annapolis, Maryland, under a contract with the Naval Air Systems Command.

“We certify mission configuration for any new capability that’s deployed,” Probert said in an interview. The Osprey is an apt illustration of how the “sustainment” business is changing in military aviation. “The metal, the rotors, the engines, are important. But now more and more of these things are a flying avionics infrastructure,” he said. “Mission is becoming more about the avionics.”

The Marine Corps now has to consider the readiness of the software to ward off cyberattacks, he said. “As these systems become flying networks, what we have seen in the last couple of years is the cyber threat creeping into it,” said Probert. “The whole discipline of sustainment is really changing before our eyes.”

The V-22 was designed three decades ago, he noted, “when the broad philosophy was to trust. We’re coming into an environment of ‘trust no one.’” Consumer products like the iPhone have “more cyber resilience than military systems that were designed 30 years ago.”

Correction posted 4/27: An earlier version of this story incorrectly stated the location of the Osprey's assembly line.

PHOTO: Japan Maritime Self Defense Force personnel refuel a U.S. Marine Corps MV-22B Osprey tiltrotor aircraft at Marine Corps Air Station Iwakuni (MARINE CORPS)
Pentagon Fears Foreign Intrusions Into Supplier Networks
By Sandra I. Erwin

The United States military’s No. 2 officer Gen. Paul J. Selva was reticent when asked what he really worries about.

“It’s in the classified realm,” the vice chairman of the Joint Chiefs of Staff told an audience of defense logistics contractors last week. Implicit in the context of the discussion were well-known Pentagon concerns about the prospect of U.S. supplier networks being penetrated by foreign spies.

The cybersecurity of the supply chain is becoming a worrisome issue for the Defense Department. Not only are there fears of attacks against Pentagon suppliers that have access to secret data, but there is also uneasiness about more sophisticated types of espionage, such as the acquisition of American firms that do business with the military. This shines a light on how little control the Pentagon has over non-U.S. ownership of hundreds of corporations that may not be prime contractors or weapons manufacturers but still provide somewhat sensitive products and services to the military.

The issue hits home with Selva, who before his promotion to vice chairman was commander of U.S. Transportation Command, one of the military’s most frequent targets of cyber attacks, and a command that is heavily reliant on the private sector. According to officials, about 90 percent of Transcom’s activity takes place on commercial networks. Several intrusions in 2013 and 2014 against Transcom contractors were traced to China. The worry is that adversaries could penetrate networks that hold information about the movement of U.S. troops and equipment.

The command has taken preemptive measures such as requiring its contractors to certify the security of their networks and to report intrusions. The Defense Department across the board has stepped up cybersecurity and counterespionage efforts, but Selva cautioned that the Pentagon is becoming apprehensive about contractor mergers and acquisitions by foreign parent companies from countries that the United States doesn’t trust.

“One thing that worries me is the consolidation of most of our supply chain industries,” Selva said April 20 at the National Defense Industrial Association’s annual logistics forum in Washington, D.C.

This is now a reality of the global economy, Selva added. “We are going to consolidate. Consolidation is what stockholders want. It brings more efficiency and a net return on investment for stockholders.”

There is a problem, however, “in the way we depend on industry to support the military,” he said. “Consolidation also means there might be fewer options. It also means there is opportunity for foreign investments — either masked through companies that appear to be American or direct foreign investment,” Selva said. “There is a point where that foreign investment makes those commercial entities less likely to be ready to operate with us when we go to war. That worries me.”

Selva also commended the private sector for moving to respond to the military’s needs for reliable suppliers. “Companies have improved resiliency and supply chain management,” he said. “There was a time when we believed making supply chains as lean as we could possibly make them was actually a good thing. Companies are learning that resiliency matters. That’s a healthy trend in industry.”

He complimented the IT industry for swift efforts to combat cyber threats. Selva cited rapid advances in artificial intelligence software that have dramatically improved security in the banking sector and the development of new tools that allow companies to map networks and detect unusual activity like intellectual property theft.

“Encouraging things are happening,” he said.

Industry experts insist that the defense sector has heard the government’s call to action with regard to cybersecurity. “There are a number of initiatives at the Department of Defense to have the industrial base up their game,” said Deloitte’s global defense and aerospace consultant Tom Captain. Prime contractors, for instance, are keeping tighter watch over lower tier suppliers, he said in an interview. “DoD contractors realize they can’t continue to use the same methods.”

Both the Pentagon and the intelligence agencies have levied a host of new “supply chain risk management” demands on contractors, Captain said. This was the “inevitable consequence” of growing threats and a recognition that much of the defense community’s intellectual propriety resides in the supplier network. “People are not asleep at the wheel,” Captain said. “There has been a wakeup call.”

Among the tech sector’s pioneers in supply chain security is network equipment manufacturer Cisco. The company is one of 18 organizations that the National Institute of Standards and Technology listed as having the best practices for cyber supply chain risk management.

Whereas commercial companies focus on the financial impact of threats like cyber espionage and counterfeit manufacturing, for defense suppliers, the risks carry more consequential ramifications, said Edna Conway, Cisco chief security officer for global value chain.

The defense sector has to worry that leaks could result in loss of lives, she told National Defense in an interview. “I do think they have the same challenges as any other enterprise. But they just manifest in a different way. The nature of the impact and the severity of the impact that a security breach could have are unique.”

PHOTO: iStock

Senior Pentagon Official Warns About Complacency in Combat Logistics
By Sandra I. Erwin

One way to define an "enabler" is someone who encourages negative or self-destructive behavior. But on the military battlefield, enablers is the name given to support units like logistics, transportation and medical personnel.

As troop numbers come down and the Pentagon shifts its focus from massive ground wars to leaner operations, it is not paying enough attention to the enablers, warns Vice Chairman of the Joint Chiefs of Staff Air Force Gen. Paul J. Selva.

“In lean years we cut things that we think don’t contribute to combat power,” Selva said April 20 at the National Defense Industrial Association’s annual logistics forum in Washington, D.C.

When money is tight, the military services concentrate resources on combat forces, often at the expense of support units, and this could be a dangerous trend, said Selva. “I worry about the logistics workforce.”

The logistics infrastructure becomes an easy target when the services are looking to buy more “combat power,” Selva said. As a consequence, “We’re getting leaner on logistics enablers and heavier in relative terms on combat power.” As vice chairman of the joint chiefs, he noted, “I like combat power. But I also ask the questions: Have we addressed the tail that comes with combat power? Have we addressed the depots, the logistics, training and sustainment infrastructure? If the answer is no, the combat power is going to be irrelevant.”

A former commander of U.S. Transportation Command and a career pilot of military cargo planes and refueling tankers, Selva has an unusual appreciation for the work that goes into managing logistics support of forces in the field. He cited the complex operation the Pentagon orchestrated in late March to evacuate U.S. military family members from Turkey’s Incirlik Air Base due to security concerns. It looked easier than it actually was, said Selva. “In the blink of an eye,” the military and support contractors airlifted more than 700 family members and 60 pets. Just hours later, 250 children were enrolled in schools in Germany so they wouldn’t miss class.

A robust logistics organization is what makes any operation successful, he said. “Combat power is a one-shot capability. Once I expend it, if I don’t have the support infrastructure to sustain and reconstitute it, it’s gone,” he said. “That’s something we have to address. … Operators are increasingly thinking that way, but we are not there yet.”

Selva worries that the military services are shortchanging the enablers. “Look at their budgets, and see what’s happening.”

The Pentagon just launched an $18 billion innovation initiative — dubbed “third offset” — to modernize the military. This can’t be a discussion of just “shiny objects,” Selva said. “We can debate what third offset is or isn’t, but right behind the technology is a very serious conversation about organizational structures to sustain that fight.”

The topic of logistics is likely to be part of the debate on how the Pentagon should reorganize to better respond to new global challenges. This falls under the umbrella of “Goldwater-Nichols” reforms that soon will be unveiled by the Senate Armed Services Committee. The thrust of these reforms is the idea that the organizations created by the 1986 Goldwater-Nichols Act over time grew into bloated and inefficient military and civilian structures.

Logistics is not immune to bloat, Selva said. “There are places where we can make some serious changes. We can de-layer a lot of our processes, and we should.” But Selva insisted that would oppose draconian cuts, and would support changes to the law that elevate the importance of joint-service logistics.

“I would like to see language that codifies the necessity for our J-4 structures, both in the joint staff and the combatant command staffs. They’re incredibly important to sustaining the force.” In the context of Goldwater-Nichols reforms, Selva said, “if the change is too drastic, the institution will rebel against it. … If we can reform around the edges of the goodness that Goldwater-Nichols brought us, count me in.”

Drastic reorganizations can cause more problems than they solve, he argued. Selva more than a decade ago was in the thick of a heated bureaucratic turf battle over a proposal to merge the U.S. Transportation Command with the Defense Logistics Agency. At the time Selva was for it, but his thinking evolved, he said, as he saw that each organization had unique value. He would no longer back such a move.

PHOTO: Air Force Gen. Paul J. Selva, vice chairman of the Joint Chiefs of Staff, visits Joint Base Elmendorf-Richardson, Alaska (DOD photo)
Pentagon Hard Pressed to Absorb Next Round of Acquisition Reforms
By Sandra I. Erwin

The Defense Department’s contracting bureaucracy has struggled to stay ahead of an avalanche of new dictums that have come down from Congress and the White House over the course of the Obama presidency.

Yet another round of sweeping reforms looms later this year as the House Armed Services Committee’s “Acquisition Agility Act” makes its way through the legislative process. HASC Chairman Rep. Mac Thornberry, R-Texas, says he fully understands the burdens of compliance and implementation of new measures, but he is convinced that these are necessary changes that will help the Pentagon move technology faster to troops in the battlefield.

Thornberry unveiled a draft bill last month and is expected to release an updated version next week in the chairman's mark of the 2017 National Defense Authorization Act before the full committee takes it up.

The Pentagon will be given a 2019 deadline to carry out the new reforms, although Thornberry recognizes that some rules could take longer to flow into the procurement system.

“We asked DoD to tell us how they plan to implement the changes,” Thornberry told reporters April 21. “I tried to be sensitive to the fact that some changes do take time.”

Thornberry said he has made some revisions to the language in the initial draft — in response to objections raised by Pentagon officials and industry groups. But the centerpieces of the bill will remain in place. He wants the Pentagon to start acquiring cutting-edge components to update existing weapon systems. He is directing the Defense Department to buy “open systems architectures” as much as possible so they can be updated frequently, and to get into the habit of “prototyping” and “experimenting” with technologies before the government commits to long-term contracts. He also wants the Pentagon to create a more inviting business environment for small businesses, startups and other innovators that typically shy away from government work.

“We need to get top technology to the war fighter faster,” said Thornberry.

Defense officials and contractors agree with the spirit of the new legislation, but worry that the procurement system is still playing catch-up and will be hard pressed to absorb a fresh load of directives.

The Pentagon is still putting into action measures from the Weapon Systems Acquisition Reform Act of 2009, past NDAAs, the defense secretary’s “Better Buying Power” initiative and other executive branch actions and regulations that are issued to implement legislation.

The Thornberry bill has thrown into sharp relief the difficulties of mandating changes across a huge procurement bureaucracy like the Pentagon’s. Rules have to be drafted, sent out for comment and revised. “This takes a lot of time,” said Roger Jordan, vice president of government relations for the Professional Services Council. There is also a cultural change associated with procurement reforms, he said during a conference call hosted by Bloomberg Government. The workforce needs to be trained on changes and incentive structures. This being an election year, implementation will be delayed further than it normally would.

Bloomberg analyst Cameron Leuthy said the basic tenets of defense procurement — how to buy faster, smarter, cheaper — won’t change, but he predicts DoD will “struggle with competing goals.” It has to keep prices low but still foster competition. It must increase procurement of commercial goods and services while ensuring prices are fair. And it must simplify the acquisition process while reducing risk to the government.

The Pentagon is now up against the “snowball effect” of years of reforms, said David Berteau, president and CEO of the Professional Services Council. There is widespread confusion among contracting officers who “can only deal with the guidance they have” but also are aware of the expectations that they have to comply with new laws.
In the case of the Thornberry bill, “it will be years before you see the results in place” as rules trickle down into solicitations and the contracting process. Last year’s NDAA had more than 50 provisions on defense procurement. “At some point we're going to have to stop and catch our breath,” said Berteau. For now, “they're moving ahead.”

Jordan credited Thornberry for being “willing to take criticism to get to a better product.” But he cautioned that regulatory burdens and “compliance stuff” are significant and “cut both ways” because they could drive some businesses out of the market. Contractors also have had to cope with a litany of White House executive orders in recent years that have increased the cost of doing business with the federal government, Jordan said. “Without taking significant steps to look back and not add new things, it's only going to get worse.”

Berteau said the Acquisition Agility Act would pose new requirements both on the Pentagon and on contractors. “We've seen little to reduce the burden on industry.”

Thornberry anticipates more pushback on his bill and will consider making further revisions over time. “We are going to have to keep working on acquisition reform constantly,” he said. “I do not pretend that we are solving [everything] with this bill.” The procurement of contractor services is one area that has yet to be dug into. “There’s a whole list of things I want to get into,” he said. “I realize some of the changes are going to take time because they [contracting officers] have to do their job every day while these changes are taking place.” Extending the implementation deadline until 2019, he added, “gives us a chance to make adjustments.”

Former HASC general counsel and deputy staff director Roger Zakheim, now a government affairs attorney at Covington & Burling, said Thornberry is prepared to fight this battle for the long haul, as he is poised to stay at the helm of the armed services committee for six years. “Thornberry knows that when it comes to defense acquisition, he can’t legislate out of the problem. Legislation is just one tool he has,” Zakheim said April 20 at a National Defense Industrial Association forum. “He knows he has to keep pressing the DoD leadership.”

PHOTO: Rep. Mac Thornberry
Experts See Pitfalls in Congress' Acquisition Reform Efforts
By Jon Harper

Ongoing congressional efforts to improve the Pentagon’s acquisition system could backfire or fall far short of expectations, defense experts cautioned at a panel discussion on April 20.

Concerned about long acquisition timelines and the need to maintain the U.S. military’s technological edge, leaders of the House and Senate Armed Services Committees are drafting a new round of legislation aimed at making the Defense Department more effective and nimble in the way it develops and procures new equipment.

However, additional reporting requirements aimed at beefing up congressional oversight of Pentagon acquisition efforts could cause problems, according to Camron Gorguinpour, director of transformational innovation in the office of the assistant secretary of the Air Force for acquisition.

“Intense reporting requirements and additional reporting requirements slow things down,” he said at an Executive National Security Forum in Washington, D.C., hosted by the National Defense Industrial Association.

About 20 such requirements were part of acquisition reform legislation drafted last year, he noted.

“If there are more [in this year’s National Defense Authorization Act], well at some point, that’s just antithetical to agility,” he said.

Analysts on the panel noted that past problems with major acquisition programs were sometimes caused by a failure of defense officials to set the right operational and technical requirements and make necessary tradeoffs. Legislative changes won’t necessarily prevent that from happening again, they said.

Looking at acquisition problems or challenges in the last 10 to 15 years, “I don’t think most of them were caused by the acquisition system per se in the sense of rules and … the lack of authorities or the specifics of the technical legislation,” said Michael O’Hanlon, co-director of the Center for 21st Century Security and Intelligence at the Brookings Institution. “They were caused, I think, by bigger picture mistakes … in the way we weigh the priority of different goals.”

Plans to make changes to Pentagon organizational constructs laid out in the 1986 Goldwater-Nichols Act, including the way acquisitions are managed, could result in overreach by reform-minded lawmakers, O’Hanlon warned. Some aspects of the procurement system are working well, he noted.

“Part of what I’m concerned about with that debate is that people are going to try to do too much,” O’Hanlon said. In previous national security reform efforts, “people wanted to measure progress by the enormity of the change, and that can be a danger.”

Roger Zakheim, counsel at the law firm Covington and Burling, LLP, and a former House Armed Services Committee staffer, said it would be shortsighted of lawmakers to zero in on reforming major acquisition program. Growth in operating and sustainment costs, as well as spending on the acquisition of services by the Defense Department, eats into procurement, he noted.

“If we just focus on major defense acquisition we’re basically focusing on a smaller and smaller slice of the budget,” he said.

Rep. Mac Thornberry, R-Texas, chairman of the House Armed Services Committee, has encouraged the Defense Department to be more accepting of failure early in the technology development process as long as the overall process moves quickly. The concept is similar to what has been embraced by commercial firms in Silicon Valley and elsewhere.

The Defense Department is trying to learn from Silicon Valley business practices, Gorguinpour noted. But there are limits to how much the “fail fast” model could apply to the Pentagon, he said.

“When a Silicon Valley startup fails fast, they typically don’t get hauled before
Congress,” he said. “They don’t end up on the front page of the newspapers.”

There needs to be “a little bit of realism here that there are definitely strong political forces” that affect the way the Pentagon does business, he said.

Giving the Defense Department more authorities won’t streamline acquisition efforts if officials don’t use them. The Air Force has “other transaction” authority that many procurement officers aren’t aware of, Gorguinpour said.

“We have a lot of authorities that we just don’t use. We have a lot of flexibility that we don’t actually take advantage of,” he said.

His office is trying to utilize those authorities as it reaches out to commercial firms around the country. Later this week, Gorguinpour plans to travel to Boston, Massachusetts, with Secretary of the Air Force Deborah Lee James to speak with executives about ways that the Air Force can improve its business practices. While this is the first such visit, the service intends to do more, he noted.

But concerns about intellectual property are hindering the Pentagon’s outreach efforts, the panelists said. There are only 16 intellectual property lawyers in the entire Air Force, and only eight are dedicated to acquisition. Changing acquisition rules and statutes won’t fix that problem, Gorguinpour said.

“At the end of the day, if we don’t have the resources, the manpower resources within our agency that will be able to understand the nuisances … you’re not going to see much improvement,” he said.

Concerns about intellectual property rights, limits on profit margins and other headaches associated with dealing with the Defense Department are a turnoff to tech firms, Zakheim said.

“I don’t think with Silicon Valley [and] with small business you’re going to be able to legislate your way out of this” situation, he said.

Photo Credit: NDIA

DoD Acquisition Chief Worried That Technology Development Will Stall
By Jon Harper

Budget shortfalls could prevent the Pentagon from taking critical technology development to the next level, the Defense Department’s top acquisition official warned April 19.

The Pentagon is pursuing a “third offset” strategy intended to provide the U.S. military with cutting-edge tools to maintain technological superiority over potential adversaries.

“The idea there is to use our creativity across the board to try to do business better, more efficiently, more effectively [and] to be more creative about the technologies we buy ...  and how we use them,” Under Secretary of Defense for Acquisition, Technology and Logistics Frank Kendall said at the 32nd annual National Logistics Forum in Washington, D.C., hosted by the National Defense Industrial Association.

Pentagon budget plans call for $2 billion to $3 billion worth of investment in third-offset related activities in fiscal year 2017, including wargaming, modeling and simulation, and technology demonstrations, he said.

The demonstrations tend to emphasize autonomous systems, artificial intelligence, man-machine integration, and the ability to operate farther away from missile systems that are being built by potential adversaries, he noted.

The Defense Department hopes to spend about $18 billion over the next five years on these initiatives.

“A lot of it [is] going towards demonstrations of future capabilities that we might have,” Kendall said. “What we did get into the budget was some near-term demos to demonstrate concepts, give the operators a chance to experiment with some things, as well as to move technology forward. That’s step one of what would be a lot longer journey.”

But budget constraints and the looming return of sequestration in fiscal year 2018 could derail the Pentagon’s plans.

“What we don’t have and what we can’t afford right now is the money that follows those demonstrators to build … the full-scale development and the production and the fielding, and have the force structure associated with those things,” the acquisition chief said.

The problem will only get worse in the early 2020s when the Defense Department is faced with a high nuclear modernization bill, he noted. Efforts are underway to develop a new long-range strike bomber and Ohio-class replacement ballistic missile submarine. The Pentagon also plans to update its Minuteman III and cruise missiles.

Those initiatives are expected to cost $12 billion to $15 billion per year beginning in fiscal year 2021, according to Kendall. The Pentagon will be paying for other expensive programs at that time, such as the joint strike fighter.

“We have a big affordability gap, and one of the things the next administration is really going to have to sort out is how it works its way through all of that,” Kendall said. “It would be enormously helpful if we could get rid of the sequestration thing and have an intelligent debate about what we really need for national security.”

The U.S. military’s technological edge is eroding, he said, noting China’s development of sophisticated missiles and sensors.

“They know that we’re dependent on a relatively small number of assets, and that if you can attack those assets you have basically defeated the United States,” he said.

Space platforms, forward air bases and aircraft carriers are at risk. Logistics systems — including ships, transport aircraft and logistics nodes that the U.S. military relies on — are also vulnerable, he noted.

“We’re fighting an away game most of the time, which is a great position to be in except it makes your job a lot harder,” Kendall said. “Our ability to logistically sustain the force is a big part of what we need to be able to do, hence the idea of a third offset strategy.”

An inability to get programs into development by the end of the future years defense plan will mean the Pentagon will be without critical capabilities five or 10 years from now, he warned.

“We are already in trouble,” he said. “This is not a future problem, it is a now problem.”

Photo: Frank Kendall (Jon Harper)

Defense CEOs to Examine the Future of the Industry
By Sandra I. Erwin

A group of defense CEOs will be working with a top Washington, D.C., think tank in the coming months to analyze the state of the industry and its relationship with the Defense Department as a new administration comes into office.

The project, called “Future Foundry: Forging New Industries for Defense,” is led by the Center for a New American Security. The plan is to “develop and articulate a positive vision for healthy collaboration between the Department of Defense and its partners from multiple industries,” said a CNAS news release.

William J. Lynn, CEO of DRS Technologies and former deputy secretary of defense in the Obama administration, is one of the co-chairs of the project, along with Sean O’Keefe, former CEO of Airbus Group Inc., and former administrator of NASA in the George W. Bush administration.

“Our goal is to study the defense industrial base, and where it is going in the next five to 10 years,” Lynn said in an interview.

The study is being launched at a time of growing concern in the Defense Department about its access to technological innovation and the implications of corporate realignments in the defense sector.

“There will be shifts in the industrial base,” Lynn said. Disruption already is happening as companies consolidate into fewer players and become more globalized, he said. Another force of change is the increased demand for technology in the defense market that is being developed outside the defense sector.

“The future structure of the defense industrial base will have to have a larger commercial element,” Lynn said. “That could mean commercial companies entering the defense industrial base or existing companies expanding into the commercial space, or some hybrid of that,” he added. “We still don't know. We need to examine that.”

The study is scheduled to be completed by fall, said Lynn. One of the likely conclusions is that, as the industry changes, the Pentagon is “going to have to take a different approach to competition,” he said. “There will be only one or two vendors that will be qualified to build major categories of weapon systems, but in other areas — like information technology, communications and robotics — there is “robust competition,” said Lynn. “On the platform side, they'll have to be more creative to have competition.” Some efforts already are under way at the Defense Department to address this problem, but the CNAS study will look further into the future. “How do we set ourselves up for the trends that seem to be accelerating?” With increasing worries about the United States maintaining its military edge, this will be an important discussion, said Lynn. “We're at an inflection point. The structure of the defense industrial base is under pressure to change.”

CNAS said the project will “take advantage of the momentum currently surrounding acquisition reform” and lay out issues for the next administration.

During a congressional hearing last week, Pentagon officials predicted that the technology and innovation dilemmas that bedevil the Defense Department are going to be long lasting.

“I'm sure that any transition team for any administration to come is going to face the same set of challenges that we face today,” Stephen Welby, assistant secretary of defense for research and engineering, told the Senate Armed Services’ emerging threats and capabilities subcommittee. “This is not driven by personalities. It's driven by the nation's need to refresh our technology,” Welby said.

The Pentagon’s focus in the near term is to reform its acquisition process so it can attract fresh talent and new suppliers, Welby said.

“We've been challenging ourselves to be able to move faster especially at that cutting edge of new technologies,” he said. “We've been looking for ways to be able to engage new partners in time lines that might be measured in weeks rather than months and often a year to contract.”

Many of the companies the Pentagon would like to work with see little incentive to bid on government contracts, he added. “If there's no return on that, they would rather focus on commercial sector engagements.” Defense officials intend to turn that around by using more streamlined acquisitions and proposing “new ways to bring technology into platforms and systems.” In the future, said Welby, “we won't see 30-year development programs in anything. And adversaries will have counter measures prepared a decade before we field something if that's the case. And so, we need to up our game in terms of speed.”

The testimony of William Roper, director of the Pentagon’s strategic capabilities office, suggests that the government is acutely aware and concerned about the changing industrial landscape worldwide.

“The impact of commercially available technologies is going to be large,” Roper said. “It's also going to be available to everyone. And so this is going to force the department as well as our adversaries and competitors, it's going to force us to become fast adapters.”

Roper cautioned that the Pentagon is not just seeking innovation at any price. The “third offset” strategy — focused on the development of next-generation weapon systems to counter future enemies like Russia or China — is about trying to avoid the “exquisite requirements” problem that has made many weapons unaffordable, Roper said.

“Cost is going to be a very important metric in the offset,” he said, both the cost to the U.S. military and the cost to the enemy. “What are we spending, what are they spending and, then, what do we think the refresh rate of that technology will be? … If we're wise, we will try to find capabilities in the commercial world where we're getting good bang for the buck. Is it something we can share with allies and partners? If we can, then our coalitions that we build play for us and not against us.”

PHOTO: William Lynn (CNAS)

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