Category Archives: Military Industrial Complex

A Pentagon Procurement Program That Seems Doomed to Fail

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Image: “Greycampus.com

REAL CLEAR DEFENSE

The Pentagon spends more money on federal contracts and relies more on private contractors to provide necessary support than all other U.S. government agencies combined.

With a potential ceiling of almost $8 billion dollars, the NGEN-R is one of the largest non-hardware contracts ever awarded. The problem with massive, long-duration IT contracts is that the pace of technological change often makes them out-of-date almost from the start.

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“The primary objective of the contract is to manage, modernize and eventually merge several massive Navy and Marine Corps networks that collectively encompass some 400,000 computers and 800,000 users at 2,500 locations. NGEN-R will provide secure data and information technology services such as data storage, email, cloud services, and video teleconferencing for Navy and Marine Corps ships and locations around the world.

As if this were not in itself a major undertaking, the Navy acquisition bureaucracy decided to make the effort even more challenging. First, it decided to split what had been for twenty years a single contract into two: a smaller hardware-centric section, and a larger one focused on services and support. Second, the Navy chose to assume the responsibility for overall management of the two contracts. Third, it awarded the services contract to Leidos, a company with no prior experience in providing support to major Navy/Marine Corps networks. Fourth, the new contract sets an extremely aggressive schedule for transferring responsibility for multiple networks from the existing contractors, who have some 30 years of experience in this field.

The NGEN-R award repeats an often-seen pattern in defense acquisitions, particularly those involving IT services and support contracts. The acquisition bureaucracy isn’t satisfied with incremental advancements; it wants to preside over “transformational change.” As a consequence, it dispenses with experienced contractors and tried-and-true approaches in favor of modernizing complex networks. This same bureaucracy buys into the new contractor’s promises that it can effortlessly take over for its predecessors, and then simultaneously integrate and modernize the Navy’s networks—all while lowering costs. We’ve seen this movie many times before and it never ends well.

When an IT network procurement goes wrong, a lot of bad things can happen. The most immediate impacts will be slow responses to individual needs and major events alike. In the former case, this results in increased dissatisfaction and frustration; in the latter case, missions are endangered when Sailors and Marines can’t get data or effectively communicate. Furthermore, it’s less than helpful when the “green” service desk team—the place where one goes for IT support—is struggling to understand how things work. Compounding this demand for IT help is the age of the technology, as refresh cycles for replacement laptops and PCs were likely put on hold until the new team was firmly in place. In the longer term, the Navy risks backsliding on everything it has accomplished over the last 20 years to consolidate its networks, standardize its technology and rein in IT spending. 

Were these normal times, the Navy and its new contractor might have the time and resources to weather the inevitable delays, service interruptions, and cost increases that will result from the acquisition bureaucracy’s desire to have the new contractors do it faster, better and cheaper. However, these are extraordinary times. We are in a crisis in which clear communications and a reliable network are much more important than they were when the contract was awarded. Like everyone else in the world, the Department of the Navy faced a massive challenge in getting several hundred thousand Sailors, Marines and civilians set up to telework and unlike a business, the important mission—protecting the United States—did not stop to wait for the IT to catch up with this radical change. The Navy’s networks have had to be reconfigured in real time while adding new nodes (such as two hospital ships deployed to support New York and Los Angeles’ health systems) and ensuring that both the Navy’s networks and connections to medical networks across the country are viable and secure.

There are already signs that the NGEN-R contract is heading for difficult times. The most notable was the early talk by the winning bidder about changing the solution that they proposed. In a recent interview, Gerry Fasano, head of Leidos’s Defense Group, acknowledged that the network “has continued to evolve, and so we’ll update ourselves from what we proposed and then worked through our transition plans.” Read this to mean: get ready for lots of change orders as the company attempts to make good on all its commitments.

In late April, the Department of the Navy’s Chief Information Officer, Aaron Weis, said in an interview that the Navy has been looking to “jumpstart” modernization—which is the right thinking—but expressed concern that the recently-awarded NGEN contract was the best path forward: “One of the first things we really talked about was do we stop NGEN-R and reset it given what we thought we needed to do. The reality is, given the acquisition timeframes, it probably would’ve set us back another year.” In hindsight, that would not have been a high price to pay.

The Navy’s plan to modernize its IT networks is likely to be dead in the water for an extended period while the NGEN contract transitions and networks struggle to deal with the new reality of communications in the era of COVID-19. While the acquisitions folks won’t feel a bit of pain, the Sailors and Marines and the state and local communities they are trying to help certainly will.

The NGEN-R award is currently in protest. But whatever the outcome, the Navy should take the opportunity to reconsider its rush towards an unpredictable future. The Navy needs a different approach, one that doesn’t put its networks and thus its pandemic response at risk, much less the security of the Nation and tens of thousands of Sailors and Marines. It would be wise for the Navy to suspend the NGEN-R contract and pursue a new competition.”

https://www.realcleardefense.com/articles/2020/05/16/a_pentagon_procurement_program_that_seems_doomed_to_fail_115296.html

Is Short Term Economic Focus On Earnings Killing U.S. Innovation?

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Image: “Saracanaday.com

DEFENSE SYSTEMS

The U.S. risks losing its competitive edge over China in terms of technology because companies care more about quarterly earnings than research and development.

Solutions involve incentivizing U.S. companies to focus on long-term investments and research.

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“That’s the message Michael Brown, director of the Defense Innovation Unit, the Defense Department’s innovation arm, shared at a Brookings Institution virtual event May 8 on China’s technological impact worldwide.

“You’re never going to win in a technology race with defense,” Brown said. Instead, the U.S. needs to focus on being more productive and “invest in itself” with more basic research.

“What do we do to reform our business thinking and our capital markets to move away from short-term thinking to be more long-term oriented,” Brown said. Ways to focus U.S. companies on building and maintaining a competitive edge include stricter export controls and more scrutiny of foreign investments in U.S. companies, particularly technology startups.

Brown, formerly CEO of Symantec, said the corporate focus on quarterly earnings and stock prices is counterproductive to competing with China.

“They all feed into this short-term thinking in our business community,” said Brown, “we have to reform this or we’re not going to be successful in competing with China.”

Incentives could include tax advantages for focusing on long-term growth and research and development, Brown said. And on the punitive side, there is the possibility of establishing penalties for U.S. companies that off-shore manufacturing or spinning off hardware businesses whose domestic presence can support U.S. jobs and military production.

“The irony is that U.S. companies focus on profits often driven by market dominance ends up aiding China’s cause,” Tom Wheeler, former Federal Communications Commission chairman, said during the event. “The market control, market dominance that we’ve seen from the principal big tech companies thwarts competition driven innovation.”

“It is doubtful that we will be able to out implement China,” said Wheeler, referencing that country’s tightly controlled, one-party system of government. “But we can out-innovate China if we have policies that will encourage this competition driven innovation.”

The big question for DIU is whether it can take advantage of U.S. tech talent, startups and research dollars to maintain a long term advantage over China, which is able to dictate its priorities to industry.

“The Defense Innovation Unit spends all day every day trying to encourage innovative companies to work with the Defense Department,” Brown said. “And General Secretary Xi [Jinping] accomplishes this by fiat. So we have to recognize that there are some advantages to their system.”

Brown said he maintained some doubts about the ultimate success of the “civil-military fusion” practiced in China.

“I don’t know how well that’s going to work for them, but that certainly keeps me up at night,” he said.”

Other Transaction Agreements (OTA) Best Practices For Success

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NATIONAL DEFENSE MAGAZINE

The intent of OTAs is to leverage commercial technologies for military purposes, improve the nation’s industrial base and allow for more cost effective and affordable solutions without extreme bureaucracy.

Opportunities are available to traditional defense industry partners and nontraditional defense contractors, such as academia, non-profits and other small businesses.

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“Imagine this. The Defense Department had an urgent need for armored vehicles to protect warfighters from new threats during a time of war. By applying a unique and tailored acquisition approach with specific attention to time and similar solutions already available in the commercial marketplace, it successfully started fielding new vehicles only 18 months after identifying the warfighter need.

The program referenced here was the mine-resistant ambush protected vehicle program, which began in 2006. Was the program a success? Absolutely. Was it a risk-free or perfect solution? No. Although the MRAP program was timely in helping mitigate the threat and associated warfighter casualties, there were challenges related to operating field conditions, training, sustainment, transportation and costs. The program, however, ultimately enabled the creation of other military vehicles that are still widely used today and supports how tailored acquisition approaches can produce successful outcomes.

A popular and continuously growing phenomenon within the department is the other transaction authority, or OTA. It permits Defense Department entities to award OTA agreements for research, prototyping and production efforts critical to national security. They are not an acquisition approach or strategy; however, they are flexible options that can support an acquisition approach or strategy.

Given leadership’s priorities for the increased application of adaptive acquisition methods, it is highly likely OTAs will be a key ingredient for success.

OTAs are binding agreements between Defense Department organizations and industry partners that are different than Federal Acquisition Regulation contracts, grants and cooperative agreements. While they are an innovative and flexible option that are not subject to all acquisition laws and regulations, they require vigorous program management.

Here are some points to remember:

OTAs are not new to the department. Although it received limited authority in 1989, the authority has significantly expanded since 2015. As a result, more agencies and industry partners are working together on the agreements. OTAs vastly differ from contracts because negotiations are not limited by FAR-based restrictions and allow for more robust terms between parties. This includes, but is not limited to, intellectual property rights, title to property, payment terms, project schedule or duration, cost or price analysis, financial and project status reporting, disputes, remedies and termination.

Congress specifically provided the authority to foster business flexibility for certain circumstances. Unfortunately, there is not a universal process or checklist for all parties to follow when planning or executing the agreements. This is intentional because universal processes across the department could hinder innovation and expanded industry participation.

Since OTAs will differ between agencies, these entities should individually create and maintain some form of standard business processes to support how to execute them from initial planning through completion. Examples of standard business processes include organizational policies, instructions, directives, guidebooks and standard operating procedures. These resources are foundational for success as they can provide tremendous assistance and value to not only the parties seeking to do business with the defense organization, but also the personnel leading or supporting the process.

There can also be immense benefits for industry partners who have not previously done business with the department. It currently has an “OT Guide” published in November 2018 available to the public; however, it is very broad and not unique to individual DoD organizations. Creating and maintaining standard processes can enable consistent and efficient operations, prevent miscommunication, minimize noncompliance with laws and assist organizations during evaluations or audits.

Since there is not a one-size-fits-all option to execute OTAs, defense authorities and industry partners should be aware of the various options available. Specific to prototype OTs, the most widely used type of OT, there are primarily four options for execution. Figure 1 provides helpful information associated with each option.

Agencies should carefully evaluate all options prior to option selection, depending on the specific need or the entity’s experience with OTAs. Evaluation can be done by market research and other means to effectively support the strategy and objectives. For example, if an organization is seeking a prototype that could be created by start-up companies or existing commercial firms, it may be in the best interest to award an OTA on its own, through the Defense Innovation Unit, or to a consortium.

Alternatively, if an agency is seeking a prototype similar to one another government agency is concurrently seeking through its own prototype OTA, it may be in the best interest — and the most economical option — for it to leverage the other government agency’s agreement. The Government Accountability Office reported in 2019 that the majority of funding for prototype OTAs between fiscal year 2016 and fiscal year 2018 was awarded to consortiums.

Further, the GAO reported that the department — in response to congressional direction — is improving its reports on OTA usage to provide more data and transparency. Given the options available for executing OTAs, it is critical that both defense organizations and interested industry partners are cognizant of the options and their individual characteristics.

Another factor for success is sound planning and identification of technical performance parameters.

Failing to plan is planning to fail. Since parties can negotiate and tailor many OTA elements, it is critical for all parties involved to complete sound planning efforts prior to execution. Also, because they promote “outside the box” business practices, risk management is not a choice, but the backbone of the effort from cradle to grave. Agencies should start planning with a clear needs statement or defined problem supporting a capability gap.

Next, the entity must perform adequate market research and requirements analysis to determine if solutions already exist or whether the capability is possible among industry partners. Adequate market research efforts must consider existing commercial products and practices, technological stability and current similar Defense Department or federal government efforts.

Entities must ensure OTAs will comply with codes, depending on the effort’s characteristics. The agency must collectively and clearly articulate what success looks like and how success or performance will be measured. Is the end game a report as a result of extensive research? Or is the end game follow-on production if the prototype OTA successfully meets the capability gap?

The government shall give full consideration to key areas related to cost, schedule and performance throughout the project’s life since OTAs do not eliminate the need for effective program management. Thus, consideration shall be given to vital technical characteristics or performance parameters, such as cybersecurity, intellectual property, technology transfer, testing, integration, interoperability and life cycle sustainment/supportability. Parties involved should continually ascertain when to continue or terminate the effort based on cost-benefit analysis.

Planning efforts should also encompass the means by which the government will publicize and solicit OTAs. Publicizing activities should target relevant and capable industry partners identified from market research. Solicitation activities must be creative, through fair and reasonable methods, to foster maximum competition. Methods include white papers, commercial solutions openings, requests for proposals, panel pitches, industry days, LinkedIn and Twitter.

OTAs require critical thinking and can be incredibly complex. Besides the many aspects of cost, schedule and performance to be considered and evaluated, they have minimum predefined requirements and are accompanied with unique negotiations requiring advanced levels of business acumen from various perspectives. OTAs are a team sport and should have diverse participation by technical and non-technical personnel.

Standardized OTA training or credential programs are not widely available to Defense Department or industry personnel. Personnel should seek to complete some form of OTA training. Nontraditional contractors should also complete training on the electronic invoicing system that will be used to submit invoices for work performed on OTAs. Invoicing the department can be cumbersome, especially for smaller firms with operations largely dependent on timely cash flows.

OTAs also require sufficient documentation since they have more flexibility and fewer internal controls when compared to other business options. Documentation is also vital to support OTA-related actions were fair, reasonable, transparent and legal. The need for sufficient documentation applies to both government and industry partners.

Appropriate documentation assists organizations in establishing beneficial continuous feedback loop mechanisms to replicate best practices and learn from shortcomings. Documentation also allows independent or unbiased individuals to follow OTA-related business decisions and funding. Documentation is even more meaningful as defense organizations spend greater amounts of taxpayer funds on OTAs and Congress seeks additional details on their usage.

Also, the law requires that all prototype OTs above $5 million include a clause that provides the GAO full access to records. As a result, all parties involved need to make documentation efforts a priority throughout the life of every OTA. Lack of existent or appropriate documentation could cause all the parties to receive undesired scrutiny from

Congress and defense leadership. Congress could also reduce or eliminate the authority if parties do not create or maintain sufficient OTA documentation.

The ability for the nation to maintain a sustainable competitive advantage and efficiently leverage adaptive acquisition methods depends on OTAs. It is all but certain they will continue to grow in popularity.

Although they are a bright and shiny object drawing significant attention from expanded usage, the department, its agencies and industry partners must carefully plan and execute OTAs from cradle to grave.

While they are flexible alternatives, they are accompanied by risks, not appropriate for every situation, and do not have a universal pathway for guaranteed success. OTAs must be treated as a privilege rather than an authority that will remain indefinitely.

Appropriate use in accordance with Congress’ intent could produce tremendous value for the Defense Department and industry partners. Alternatively, inappropriate use could result in inefficient use of taxpayer resources and Congress limiting or eliminating the modernized authority.”

https://www.nationaldefensemagazine.org/articles/2020/4/15/other-transactions-best-practices-to-enable-success

F-35 Full Rate Production Challenges Include Failing Engine Tests And Replacing 1,005 Turkish Parts

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 Image: Senior Airman Quay Drawdy/U.S. Air Force

DEFENSE NEWS

According to the GAO, the number of F-35 parts delivered late skyrocketed from less than 2,000 in August 2017 to upward of 10,000 in July 2019. At one point in 2019, Pratt & Whitney stopped deliveries of the F135 for an unspecified period due to test failures, which also contributed to the reduction of on-time deliveries.

And those supply chain problems could get even worse as Turkish defense manufacturers are pushed out of the program, the Government Accountability Office said in a May 12 report.

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 “Lockheed Martin’s F-35 Joint Strike Fighter is on the verge of full-rate production, with a decision slated for early 2021. But a congressional watchdog group is concerned that as the company ramps up F-35 production, its suppliers are falling behind.

The number of parts shortages per month also climbed from 875 in July 2018 to more than 8,000 in July 2019. More than 60 percent of that sum was concentrated among 20 suppliers, it said.

“To mitigate late deliveries and parts shortages — and deliver more aircraft on time — the airframe contractor has utilized methods such as reconfiguring the assembly line and moving planned work between different stations along the assembly line,” the GAO said.

“According to the program office, such steps can cause production to be less efficient, which, in turn, can increase the number of labor hours necessary to build each aircraft,” which then drives up cost, the GAO added.

Those problems could be compounded by Turkey’s expulsion from the F-35 program, which was announced last year after the country moved forward with buying the Russian S-400 air defense system. Although Turkey financially contributed to the development of the F-35 as a partner in the program, the U.S. Defense Department has maintained that Turkey cannot buy or operate the F-35 until it gives up the S-400.

The Pentagon has also taken action to begin stripping Turkish industry from the aircraft’s supply chain, a process that involves finding new companies to make 1,005 parts, some of which are sole-sourced by Turkish companies.

Ellen Lord, the Pentagon’s undersecretary for acquisition and sustainment, had hoped to stop contracting with Turkish suppliers by March 2020, but in January she said that some contracts would extend through the year, according to Defense One.

While the Defense Department has found new suppliers to manufacture the parts currently made in Turkey, it is uncertain whether the price of those components will be more expensive. Furthermore, as of December 2019, the new production rates for 15 components were lagging behind that of the legacy Turkish producers.

“According to program officials, some of these new parts suppliers will not be producing at the rate required until next year, as roughly 10 percent are new to the F-35 program,” the GAO said.

“Airframe contractor representatives stated it would take over a year to stand up these new suppliers, with lead times dependent on several factors, such as part complexity, quantity, and the supplier’s production maturity. In addition, these new suppliers are required to go through qualification and testing to ensure the design integrity for their parts.”

The F-35 Joint Program Office disagreed with the GAO’s recommendation to provide certain information to Congress ahead of the full-rate production decision, including an evaluation of production risks and a readiness assessment of the suppliers that are replacing Turkish companies.

In its statement, the JPO said it is already providing an acceptable number of updates on the program’s readiness for full-rate production.

Hard times for the F-35’s engine supplier

Not all F-35 production trends reported by the GAO were bad for the aircraft. Since 2016, Lockheed has made progress in delivering a greater proportion of F-35s on schedule, with 117 of 134 F-35s delivered on time in 2019.

However, one of the biggest subsystems of the F-35 — the F135 engine produced by Pratt & Whitney — drifted in the opposite direction, with a whopping 91 percent of engines delivered behind schedule.

At one point in 2019, Pratt & Whitney stopped deliveries of the F135 for an unspecified period due to test failures, which also contributed to the reduction of on-time deliveries.

According to the Defense Contracts Management Agency, “there have been 18 engine test failures in 2019, which is eight more than in 2018, each requiring disassembly and rework,” the GAO wrote. “To address this issue, the engine contractor has developed new tooling for the assembly line and has established a team to identify characteristics leading to the test failures. Plans are also in place for additional training for employees.”

https://www.defensenews.com/air/2020/05/12/some-f-35-suppliers-are-having-trouble-delivering-parts-on-schedule-and-turkeys-departure-could-make-that-worse/

New Cybersecurity Regulations ‘On Track’ Despite Virus

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“NATIONAL DEFENSE MAGAZINE”

Katie Arrington, chief information security officer at the office of the undersecretary of defense acquisition, said CMMC is still on track despite hurdles created by the ongoing COVID-19 pandemic that has roiled the world.

“We are on track, but we’re having to retool some of the training because the actual inspections … [do] have to happen,” she said. “The actual audit has to be done on site.”

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“Work on the Defense Department’s highly anticipated set of new cybersecurity standards — known as the Cybersecurity Maturity Model Certification version 1.0 — is still on track despite the ongoing COVID-19 pandemic, said an official in charge of the effort April 22.

The new rules, which the Defense Department rolled out earlier this year, are meant to force the defense industrial base to better protect its networks and controlled unclassified information against cyberattacks and theft by competitors such as China. The rules will eventually be baked into contracts, and the Pentagon had targeted including them in requests for information as early as this summer on pathfinder programs.

Under the plan, CMMC third-party assessment organizations, known as C3PAOs, will be trained and approved by a new accreditation body. They will have to certify that a company has met the CMMC standards before it can win contracts. CMMC features different levels, with the level 1 standards being the least demanding and level 5 the most burdensome.

“We are on track, but we’re having to retool some of the training because the actual inspections … [do] have to happen,” she said. “The actual audit has to be done on site.”

The Pentagon is working on ways around that, she said during a webinar called “Protecting Small Business in a COVID-19 Environment” hosted by Project Spectrum, which is part of the Cyber Integrity Initiative and is supported by the Pentagon’s Office of Small Business Programs.

“We’re still on track,” she said. “We’re still doing the pathfinders. We’re working through those. We’re still on target to release some initial RFIs in June with the CMMC in it so we can all kind of get a feel for it.”

Additionally, the Pentagon still plans to get the first class of C3PAOs rolling out in late May or early June, she said.

The biggest sticking point will be conducting in person audits, as is required, Arrington said.

“Until we get the directive from the president and from Secretary [of Defense Mark] Esper with the DoD we have our stay-at-home orders,” she said. However, “the work hasn’t stopped and we’re still doing our absolute best to stay on track.”


Last week, speaking during a Bloomberg Government webinar, Arrington said potential delays of a couple of weeks would be insignificant to the overall program. 
“A two-week push on something is not going to … have a massive impact to our rollout of this,” she said. “I don’t think it’s going to be impactful to the schedule. I think maybe we’ll have a two, three week slip on actually doing the first audits, the pathfinders, but nothing of significance.” Auditors may have to wear masks or social distance while conducting their work, she said.


Meanwhile, Arrington noted that businesses should consider implementing the first level of the CMMC requirements now to protect themselves as more employees in the defense industrial base work from home.

“CMMC level one are 17 controls, no cost, that you can implement today that can help you be secure,” she said. “Waiting isn’t an option for any of us right now.”
 She also stressed the importance of good cyber hygiene, and recommended that employees frequently change their passwords and be mindful of spearphising attempts. 
“Do your best to be diligent and remember that … the weakest link is where the adversary will come in,” she said. “Don’t be the weakest link.”


Nathan Magniex, a senior cybersecurity expert at Project Spectrum, also noted during the webinar that contractors should be wary of conducting meetings on the popular video platform Zoom.

“I would not use it as a business owner,” Magniex said. “There are certain red flags. There are connections with China that are concerning especially for the defense industrial base.”

Project Spectrum recently released a white paper on potential security risks with Zoom which said, “Zoom’s numerous vulnerabilities are not unique to them because every software company and application has them. Zoom’s links to China, however, are particularly concerning because those links expose the DIB and its supply chain, thus jeopardizing American innovation, IP and proprietary information.”

Project Spectrum recommended Cisco Webex, Facebook Workplace, Google Hangouts, GoToMeeting and Microsoft Teams as potential alternatives.”

https://www.nationaldefensemagazine.org/articles/2020/4/22/new-cybersecurity-regulations-on-track-despite-virus

Amid COVID-19 DOD Weighing Security And Other Transaction Agreement (OTA) Controls

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Image: https://twitter.com/hashtag/othertransactionagreements?src=hash

DEFENSE SYSTEMS

OTAs are meant to speed the government buying process and allow DOD to buy new capabilities faster by allowing officials to sidestep competitive bidding in certain cases.

Rapid acquisitions for prototypes and experimental technology will be subject to the Defense Department’s unified cybersecurity standard.

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“In an OTA, in the technical specs, they can actually call it [Cybersecurity Maturity Model Certification (CMMC)] out and say what they want,” said Katie Arrington, DOD’s chief information security officer for acquisition during an April 29 NextGov webinar on CMMC.

OTAs are meant to speed the government buying process and allow DOD to buy new capabilities faster by allowing officials to sidestep competitive bidding in certain cases. But there’s ample worry of potential overuse, which could invite congressional scrutiny.

Arrington’s comments come as DOD has begun pushing for the use of OTAs to find and execute on solutions that can help treat or prevent the spread of coronavirus. Ellen Lord, DOD’s acquisition chief, issued a memo in early April to ease the OTA process by delegating contracting authorities to heads of agencies and combatant commanders during the pandemic.

For example, the Army issued $100,000 contracts for innovative ventilator solutions that could be deployed in rural settings as part of its xTech COVID-19 Ventilator Challenge. The ongoing contest aims to produce 10,000 ventilators suitable for field operation in eight weeks and uses OTAs.

As for cyber concerns, Arrington said because OTAs operate “outside” the Federal Acquisition Regulation and largely benefit small businesses, which can be the most vulnerable when it comes to cybersecurity, CMMC is even more important.

“That’s where we need to ensure that we’re putting those levels of CMMC in,” she said. “If you’re doing some grant work, we do need to make sure the institution or the department or the network that you’re doing this work on understands the risk…Everybody’s vulnerable.”

https://defensesystems.com/articles/2020/05/06/cmmc-ota-cyber-williams.aspx

COVID – 19 Adversarial Capital Threat to Defense Industry Small Business

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Image: Investors Business Daily

FCW

“Adversarial capital” is the latest buzz phrase used to describe the security problem that can occur when foreign rivals, especially China, take advantage of the relatively open U.S. investment marketplace.

“We simply cannot afford this period of economic uncertainty to lead to loss of American know-how on critical technologies,” – Jennifer Santos, DOD’s deputy assistant secretary of defense for industrial policy.”

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“The Defense Department is hoping steadily engaging small businesses will help shield them from shady foreign investments during the global COVID-19 crisis.

[At risk are] nascent technology firms whose work may have security applications but don’t yet fall under the aegis of the cross-agency Committee on Foreign Investment in the United States (CFIUS).

“We simply cannot afford this period of economic uncertainty to lead to loss of American know-how on critical technologies,” Santos said during an April 28 webinar on coronavirus supply chain challenges hosted by the Intelligence and National Security Alliance.

Additionally, DOD has been hosting teleconferences multiple times per week with industry trade associations and continued to host virtual Trusted Capital Marketplace events to help ensure companies have access to “clean capital” and avoid foreign investment conflicts.

Ellen Lord, DOD’s acquisition chief, warned in March that the defense industry base, their technology, and intellectual property were vulnerable to “nefarious” foreign investors.

As the coronavirus pandemic worsened, DOD has struggled with multiple plant closures — 93 out of 10,509 prime companies with 141 that closed and reopened and 427 out of 11,413 vendors, with 237 that have closed and reopened. Those closures have significantly affected aviation, shipbuilding and small space launch supply chains.

Santos said several companies in Mexico have “impacted our major primes” and DOD is working to identify those companies and work with the Mexican government supporting various technologies, including airframe production.

But foreign investment remains one of the more pressing priorities in defense acquisition, Santos said, adding that suspicious transactions in vulnerable areas are mitigated or blocked if a risk is found regardless of the pandemic.

That is an acute problem for small manufacturers, Lord said.

“Typically the most problematic areas we have now are some of the smaller manufacturers who, maybe from a dollar value, don’t do huge numbers but they are providing critical components across aircraft and naval applications. That’s where my biggest concern is; sort of the weakest link in the system,” Lord told reporters April 30.

The acquisition chief also worried some smaller companies “might end up with some significant financial fragility” and is looking across interagency and in the Trusted Capital Marketplace, a partnership that links private investors with defense companies, to keep those with “critical technology, talent, and facilities together with those investors.”

Lord’s concern extends overseas, as well, particularly in Europe, regarding what Lord called “nefarious” mergers and acquisition, where shell companies have known U.S. adversaries as beneficial owners. To protect against that, the Pentagon wants stronger foreign legislation from Congress to make the CFIUS process more stringent, Lord said.

In addition to pursuing stronger legislation, DOD has bolstered and expanded national security investment reviews, which can take 45 days and are reviewed by the Director of National Intelligence, and increased engagement with businesses using the newly stood up industrial base council.

Santos said the council helps address the industry base’s existing gaps and risks by aligning their priorities with DOD’s, identifying authorities that can be used to solve any issues, and drawing up policy as needed.

“We need to protect our industrial base from what could be adversarial capital and during COVID, we maintain the same due diligence,” Santos said, “It’s what keeps me up at night most nights.”

https://fcw.com/articles/2020/05/04/dod-adversarial-capital-williams.aspx?oly_enc_id=

Citizen-Soldiers Vs. Soldier-Citizens

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Image Courtesy “Spike.com”

“THE PROJECT ON GOVERNMENT OVERSIGHT (POGO)”

The divide between America’s soldier-citizens and the society they serve has a significant impact on policy decisions and military budgets.

Exploring the differences between the citizen-soldier and the soldier-citizen in “Killing for the Republic” with  Dr. Steele Brand.”

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“The veneration of service members in the United States today manifests benignly in the refrain, “Thank you for your service,” and the much appreciated discounts at the local home improvement center, but this reverence can also have less benign effects. The number of retired flag officers serving in high government positions, sitting on the boards of defense contractors, and appearing as talking heads on television shapes policy, which in turn drives Pentagon budgets.

Dr. Steele Brand, a professor of history at The King’s College in New York City, explored the differences between the citizen-soldier and the soldier-citizen in his recent book, “Killing for the Republic.Republican Rome produced highly adaptive armies with farmers who would moonlight as effective soldiers during the campaigning season and then return to their families and plows—a practice that helped to remove the barriers between the military and the society it served, according to Brand. He says Rome’s part-time soldiers faced an uphill battle against enemy professionals, but that their ability to adapt meant they usually prevailed in the end. In this interview, Dr. Brand explains the differences between the Roman and American models of training soldiers and how those differences contribute to the civilian-military divide.”

https://www.pogo.org/podcast/citizen-soldiers-versus-soldier-citizens-with-dr-steele-brand/

Defense Industry Needs New Small Business Entrants During Crisis

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Image: “Fundinggates.com

DEFENSE NEWSBy: Venture capital community leaders

How can the Pentagon best preserve its innovation base and develop the most competitive and advanced technologies? The answer is simple: Buy commercial. New and emerging defense startups — and our men and women in uniform — don’t need symbolic gestures.

What they need is concerted action to bring the latest and most advanced technologies — many of which are routinely used in industry — to dangerously antiquated defense weapons systems and internal IT infrastructure. This was true before COVID-19, it is true now and it will be true when the next crisis strikes.

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“The COVID-19 health crisis is quickly leading to an economic meltdown, throwing millions of Americans out of work and forcing strategic reevaluations across industries. The defense industry is no exception. We are praying for a swift end to the crisis, but its effects will linger, shaping the Pentagon’s priorities, organizational structure, military operations, logistics, supply chains and interactions with the defense-industrial base for years to come.

In the past few weeks, we have had numerous conversations with government officials about our venture and growth equity investments in the defense sector. These discussions have centered on the eligibility rules of the CARES Act’s Paycheck Protection Program and the risk of foreign capital seeking entry into defense technology startups desperate for investment in these trying times.

All too often the government has responded to crises by circling wagons around incumbent firms — the large prime contractors, whose political connections afford them bailouts in the name of “ensuring ongoing competition.” This process is already underway. After announcing its hope for a $60 billion relief package for the aerospace manufacturing industry, Boeing successfully lobbied for $17 billion worth of loans for firms “critical to maintaining national security.”

The CARES Act also announced provisions to streamline the Defense Department’s contracting process, which sounds promising, except for the fact that these provisions apply only to contracts worth over $100 million. This discriminates against smaller, more nimble innovators and providers of cutting-edge technology.

This isn’t how things have always been. After complaints about large horse dealers monopolizing military contracts during the Civil War, the government allowed quartermasters to purchase horses and mules from any dealer on the open market. In World War II, Congress created the Smaller War Plants Corporation, which awarded tens of thousands of contracts to small, competitive firms. Today, through innovative use of Small Business Innovation Research money, other transactional authorities, rapid work programs and the like, the Pentagon is certainly signaling interest in emerging technologies.

But let us be clear: We are not advocating continuing to invest larger dollar amounts into never-ending, short-term pilots and prototypes. The key to sustaining the innovation base through this crisis and any future crises is transitioning the best of these companies and products into real production contracts serving the day-to-day needs of the mission. Host tough, but fair competitions for new innovations, and then rapidly scale the winners.

America’s technological supremacy has afforded our country nearly a century of military hegemony, but it is not a law of nature. Sovereign states and peer competitors like Russia and China will quickly outpace us if we take our prowess for granted. We need new entrants into the defense industry more than ever, but without government support through crises like this one, the talent and capital simply won’t be there.

As the Department of Defense readily acknowledges, its mission is fundamentally changing. Breakthroughs in technological fields like artificial intelligence, autonomous systems, robotics, resilient networks and cyberwarfare mean that future conflicts will look nothing like those we have seen before. The DoD of tomorrow needs a fresh wave of technical expertise to understand and respond to these new kinds of threats.

That is not to say that legacy defense contractors are not needed; their expertise in large air and sea vehicles is currently unparalleled. But the expertise to build these new technologies resides in pockets of talent that the big and bureaucratic incumbents, who made their names with 20th century technology, lost access to decades ago.

The DoD has publicly exalted the importance of innovative defense startups for years. That is partly why we are so excited to invest capital into the defense sector at this moment in history. Silicon Valley has a chance to live up to its oft-ridiculed but sincere ambition to make the world a better place by investing in American national security.

However, we as venture capitalists and growth equity investors also have a duty to our limited partners who have entrusted us to invest and grow their capital. If we see the same old story of the government claiming to support small businesses but prioritizing its old incumbents, those investment dollars will disappear.

Times of rapid and unprecedented change, as COVID-19 has precipitated, also provide opportunities. The DoD and Congress can reshape budget priorities to put their money where their mouths have been and support innovative defense technologies. Each dollar awarded to a successful venture capital and growth equity-backed defense startup through a competitively awarded contract attracts several more dollars in private investment, providing the DoD significantly more leverage that if that same dollar was spent on a subsidy or loan to a large legacy contractor. This leverage of private capital means that every contract a startup receives accelerates by up to 10 times their ability to build technology and hire talent to support the DoD’s mission.

The bottom line is this: There’s no reason to let a health crisis today become a national security crisis tomorrow. The DoD has an opportunity to not only sustain but grow its innovation base, and give contracts, not lip service, to innovators. We, the undersigned, hope they do.”

The contributors to this commentary are: Steve Blank of Stanford University; Katherine Boyle of General Catalyst; James Cham of Bloomberg Beta; Ross Fubini of XYZ Capital; Antonio Gracias of Valor Equity Partners, who sits on the boards of Tesla and SpaceX; Joe Lonsdale of 8VC, who also co-founded Palantir; Raj Shah of Shield Capital, who is a former director of the U.S. Defense Innovation Unit; Trae Stephens of, Founders Fund; JD Vance of Narya Capital; Albert Wenger of Union Square Ventures; Josh Wolfe of Lux Capital; Hamlet Yousef of IronGate Capital; and Dan Gwak of Point72.

https://www.defensenews.com/opinion/commentary/2020/05/04/the-defense-industry-needs-new-entrants-and-a-supportive-government-during-crises/

The Pentagon’s Artificial Intelligence “Black Box”

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Image: “FCW”

FCW

In February, DOD formally adopted its first set of principles to guide ethical decision-making around the use of AI.

By the guidance they seek to push back on criticism from Silicon Valley and other researchers who have been reluctant to lend their expertise to the military.

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“The Department of Defense is racing to test and adopt artificial intelligence and machine learning solutions to help sift and synthesize massive amounts of data that can be leveraged by their human analysts and commanders in the field. Along the way, it’s identifying many of the friction points between man and machine that will govern how decisions are made in modern war.

The Machine Assisted Rapid Repository System (MARS) was developed to replace and enhance the foundational military intelligence that underpins most of the department’s operations. Like U.S. intelligence agencies, officials at the Pentagon have realized that data — and the ability to speedily process, analyze and share it among components – was the future. Fulfilling that vision would take a refresh.

“The technology had gotten long in the tooth,” Terry Busch, a division chief at the Defense Intelligence Agency, said during an Apr. 27 virtual event hosted by Government Executive Media. “[It was] somewhat brittle and had been around for several decades, and we saw this coming AI mission, so we knew we needed to rephrase the technology.”

The broader shift from manual and human-based decision-making to automated, machine-led analysis presents new challenges. For example, analysts are used to discussing their conclusions in terms of confidence-levels, something that can be more difficult for algorithms to communicate. The more complex the algorithm and data sources it draws from, the trickier it can be to unlock the black box behind its decisions.

“When data is fused from multiple or dozens of sources and completely automated, how does the user experience change? How do they experience confidence and how do they learn to trust machine-based confidence?” Busch said, detailing some of the questions DOD has been grappling with.

The Pentagon has experimented with new visualization capabilities to track and present the different sources and algorithms that were used to arrive at a particular conclusion. DOD officials have also pitted man against machine, asking dueling groups of human and AI analysts to identify an object’s location – like a ship – and then steadily peeling away the sources of information those groups were relying on to see how it impacts their findings and the confidence in those assertions. Such experiments can help determine the risk versus reward of deploying automated analysis in different mission areas.

Like other organizations that leverage such algorithms, the military has learned that many of its AI programs perform better when they’re narrowly scoped to a specific function and worse when those capabilities are scaled up to serve more general purposes.

Nand Mulchandani, chief technology officer for the Joint Artificial Intelligence Center at DOD, said the paradox of most AI solutions in government is that they require very specific goals and capabilities in order to receive funding and approval, but that hyper-specificity usually ends up being the main obstacle to more general applications later on. It’s one of the reasons DOD created the center in the first place, and Mulchandani likens his role to that of a venture capitalist on the hunt for the next killer app.

“Any of the actions or things we build at the JAIC we try to build them with leverage in mind,” Mulchandani said at the same event. “How do we actually take a pattern we’re finding out there, build a product to satisfy that and package it in a way that can be adopted very quickly and widely?”

Scalability is an enduring problem for many AI products that are designed for one purpose and then later expanded to others. Despite a growing number of promising use cases, the U.S. government still is far from achieving desired end state for the technology. The Trump administration’s latest budget calls for increasing JAIC’s funding from $242 million to $290 million and requests a similar $50 million bump for the Defense Advanced Research Projects Agency’s research and development efforts around AI.

Ramping up the technology while finding the appropriate balance in human/machine decision-making will require additional advances in ethics, testing and evaluation, training, education, products and user interface, Mulchandani said.

“Dealing with AI is a completely different beast in terms of even decision support, let alone automation and other things that come later,” he said. “Even in those situations if you give somebody a 59% probability of something happening …instead of a green or red light, that alone is a huge, huge issue in terms of adoption and being able to understand it.”

https://fcw.com/articles/2020/04/28/dod-ai-black-box-johnson.aspx?oly_enc_id=