Tag Archives: Government Spending

U.S. Government Writing Over $33 Billion in Blank Checks to Pentagon and Lockheed

Standard

Blank Checks

“BREAKING DEFENSE”

“In a sign of how strange the budget process has become, the House Appropriations Committee has approved a defense spending bill that basically gives Secretary Jim Mattis a $28.6 billion blank check.

Scattered across seven different accounts in the base and Overseas Contingency Operationsbudgets, it’s called the National Defense Restoration Fund, and it makes up 4.3 percent of the bill’s $658.1 billion Pentagon budget.

That percentage may seem small, but it’s more than any previous SecDef has had at his discretion. The only requirement? To “notify” Congress 15 days before dedicating the funds to a specific purpose. In theory, that gives legislators time to stop a transfer they dislike, but it would require new legislation, and the Hill just isn’t set up to pass bills on a two-week turnaround. That is, of course, why, historically, almost everything has to go through the annual budget process.”

http://breakingdefense.com/2017/07/house-appropriators-give-secdef-blank-check-for-28-6b/

“DOD BUZZ”

“The Defense Department has awarded Lockheed Martin Corp. a $4.49 billion undefinitized contract action to continue production on the latest batch of F-35 Joint Strike Fighters even as it continues to negotiate a firm price for the fifth-generation jets.

The UCA — a type of contract in which bottom-line terms or prices have not been agreed upon before performance is begun — stipulates a max price of $5.6 billion for Lockheed to continue working on the Low Rate Initial Production, or LRIP, lot 11 jets, according to the F-35 Joint Program Office.”

https://www.dodbuzz.com/2017/07/07/pentagon-gives-lockheed-billions-to-keep-working-on-f-35s/

 

 

 

 

The Federal Government Annual Spending Spree

Standard
Spending Spree -Static Politico dot com

Image: “Static Politico.com”

“FEDERAL TIMES” By Michael P. Fischetti, Executive Director of the National Contract Management Association.  

“Rapid actions at the end of the fiscal year, with contract managers working feverishly as the clock winds down, is never a recipe for prudent acquisition, not to mention management.

In recent years, the rush starts almost immediately once the budget is finally passed, with less than half of the year remaining before funds expire.

Near the end of each and every fiscal year, government agencies, for one reason or another, that were unable to fully obligate their budgeted funding completely and according to plan, find themselves going on “spending sprees” to ensure they completely exhaust those ever-more-scarce dollars available.

Every contract manager is well aware of the implications of the end of a fiscal year. Taking time off for annual leave is often prohibited during August and September while this heavy deluge of procurement requests from the many project managers rolls into the contracting offices — up to 80 percent of annual contracting obligations are often made in the last two months of each fiscal year. While “poor planning” on the part of requirements officials is no excuse for a crisis on the part of the contracting officer, the fact remains that contracting professionals are the final step in a process that starts with agency requirements and project managers determining their mission resource needs, including those to be fulfilled by contract.

This activity has become more pronounced in recent years, given the result of congressional appropriations dysfunction, whereby appropriations are generally not authorized in a timely manner, such as reasonably close to the start of a fiscal year in which they must be contractually obligated. Thus, agencies have ever fewer months in a fiscal year in which to execute their budgets. Instead of managing a 12-month budget beginning at month one, they may not know what their budget is until month three, four, six, etc. Agency priorities are compressed into fewer and fewer months and weeks and “the end of the year fiscal rush” becomes even more “rushed.”

Government agencies have long learned to adapt priorities (or “wish lists”) to move forward when funding may soon expire. These have historically included personal computers, furniture, carpeting, and other forms of housekeeping items. However, as the unknown dates of full annual funding become pushed further and further back into the fiscal year, the end-of-year rush starts to incorporate many basic agency mission activities, dependent upon contractor support. As many agencies are heavily reliant on obtaining products and services by contract, the reality of how this can occur without the required funding up front, with adequate time to buy smartly, and using agile practices, becomes increasingly at issue. Funding not filtering down to program managers until as late as the third or fourth quarter is no longer unusual.

Stop-gap funding mitigates this issue somewhat, but obviously the best response is program execution that occurs on time — after proper planning and before the fiscal year begins. The costs of today’s late budget to the taxpayer (who pays for it), or the citizens and constituencies thereby underserved, leaving aside the frustration and dismay of acquisition officials, is readily measured.

While contract managers — as well as finance, program, and indeed contractors — have all learned to muddle through (such as contractors willing to work “at their own risk” without a contract or guarantee of payment), they shouldn’t have to. This situation often includes the uncertainty of funding to maintain even their own employment. However, through their ingenuity, perseverance, and especially creativity, along with other government career professionals, they keep the trains running, despite the obstacles created by our current political polarization.”
http://www.federaltimes.com/articles/the-annual-spending-spree-commentary


For More on this subject please see:  https://rosecoveredglasses.wordpress.com/2017/04/26/the-one-year-budget-cycle-must-go/

 

Pentagon Declares Lockheed F-35 “Too Big to Fail”

Standard
F-35 Too Big to Fail

(Photo Credit: Staff Sgt. Staci Miller/US Air Force)

“DEFENSE NEWS” By Michael P. Hughes

“Officially begun in 2001, with roots extending back to the late 1980s, the F-35 program is nearly a decade behind schedule, and has  failed to meet many of its original design requirements.

It’s also become the most expensive defense program in world history, at about $1.5 trillion before the fighter is  phased out in 2070.

The F-35 was billed as a fighter jet that could do almost everything the U.S. military desired, serving the Air Force, Marine Corps and Navy — and even Britain’s Royal Air Force and Royal Navy — all in one aircraft design. It’s supposed to replace and improve upon several current — and aging — aircraft types with widely different missions. It’s marketed as a cost-effective, powerful multi-role fighter airplane significantly better than anything potential adversaries could build in the next two decades. But it’s turned out to be none of those things.

The unit cost per airplane, above $100 million, is roughly twice what was promised early on. Even after U.S. President Donald Trump lambasted the cost of the program in February, the price per plane dropped just $7 million — less than 7 percent.

And yet, the U.S. is still throwing huge sums of money at the project. Essentially, the Pentagon has declared the F-35 “ too big to fail.” As a retired member of the U.S. Air Force and current university professor of finance who has been involved in and studied military aviation and acquisitions, I find the F-35 to be one of the greatest boondoggles in recent military purchasing history.

Forget what’s already spent

The Pentagon is trying to argue that just because taxpayers have flushed more than $100 billion down the proverbial toilet so far, we must continue to throw billions more down that same toilet. That violates the most elementary financial principles of capital budgeting, which is the method companies and governments use to decide on investments. So-called sunk costs, the money already paid on a project, should never be a factor in investment decisions. Rather, spending should be based on how it will add value in the future.

Keeping the F-35 program alive is not only a gross waste in itself: Its funding could be spent on defense programs that are really useful and needed for national defense, such as  anti-drone systems to defend U.S. troops.

Part of the enormous cost has come as a result of an effort to share aircraft design and replacement parts across different branches of the military. In 2013, a study by the think tank Rand found that it would have been cheaper if the Air Force, Marine Corps and Navy had simply  designed and developed separate and more specialized aircraft to meet their specific operational requirements.

Not living up to top billing

The company building the F-35 has made grand claims. Lockheed Martin said the plane would be far better than current aircraft — “four times more effective” in air-to-air combat, “eight times more effective” in air-to-ground combat and “three times more effective” in recognizing and suppressing an enemy’s air defenses. It would, in fact, be “ second only to the F-22 in air superiority.” In addition, the F-35 was to have better range and require less logistics support than current military aircraft. The Pentagon is still calling the F-35 “ the most affordable, lethal, supportable, and survivable aircraft ever to be used.”

But that’s not how the plane has turned out. In January 2015, mock combat testing pitted the F-35 against an F-16, one of the fighters it is slated to replace. The F-35A was flown “clean” with empty weapon bays and without any drag-inducing and heavy, externally mounted weapons or fuel tanks. The F-16D, a heavier and somewhat less capable training version of the mainstay F-16C, was further encumbered with two 370-gallon external wing-mounted fuel tanks.

In spite of its significant advantages, the F-35A’s test pilot noted that the F-35A was less maneuverable and markedly inferior to the F-16D in a visual-range dogfight.

Stealth over power

One key reason the F-35 doesn’t possess the world-beating air-to-air prowess promised, and is likely not even adequate when compared with its current potential adversaries, is that it was designed first and foremost to be a stealthy airplane. This requirement has taken precedence over maneuverability, and likely above its overall air-to-air lethality. The Pentagon and especially the Air Force seem to be relying almost exclusively on the F-35’s stealth capabilities to succeed at its missions.

Like the F-117 and F-22, the F-35’s stealth capability greatly reduces, but does not eliminate, its radar cross-section, the signal that radar receivers see bouncing back off an airplane. The plane looks smaller on radar — perhaps like a bird rather than a plane — but is not invisible. The F-35 is designed to be stealthy primarily in the X-band, the radar frequency range most commonly used for targeting in air-to-air combat.

In other radar frequencies, the F-35 is not so stealthy, making it vulnerable to being tracked and shot down using current — and even obsolete — weapons. As far back as 1999 the same type of stealth technology was not able to prevent a U.S. Air Force F-117 flying over Kosovo from being located, tracked and shot down using an outdated Soviet radar and surface-to-air missile system. In the nearly two decades since, that incident has been studied in depth not only by the U.S., but also by potential adversaries seeking weaknesses in passive radar stealth aircraft.

Of course, radar is not the only way to locate and target an aircraft. One can also use an aircraft’s infrared emissions, which are created by friction-generated heat as it flies through the air, along with its hot engines. Several nations, particularly the Russians, have excellent passive infrared search and tracking systems that can locate and target enemy aircraft with great precision — sometimes using lasers to measure exact distances, but without needing radar.

It’s also very common in air-to-air battles for opposing planes to come close enough that their pilots can see each other. The F-35 is as visible as any other aircraft its size.

Analysts weigh in

Lockheed Martin and the Pentagon say the F-35’s superiority over its rivals lies in its ability to remain undetected, giving it “ first look, first shot, first kill.” Hugh Harkins, a highly respected author on military combat aircraft, called that claim “a marketing and publicity gimmick” in his book on Russia’s Sukhoi Su-35S, a potential opponent of the F-35. “In real terms an aircraft in the class of the F-35 cannot compete with the Su-35S for out and out performance such as speed, climb, altitude, and maneuverability,” he wrote.

Other critics have been even harsher. Pierre Sprey, a co-founding member of the so-called fighter mafia at the Pentagon and a co-designer of the F-16, calls the F-35 “inherently a terrible airplane” that is the product of “an exceptionally dumb piece of Air Force PR spin.” He has said the F-35 would likely lose a close-in combat encounter to a well-flown MiG-21, a 1950s Soviet fighter design. Robert Dorr, an Air Force veteran, career diplomat and military air combat historian, wrote in his book “Air Power Abandoned”: “The F-35 demonstrates repeatedly that it can’t live up to promises made for it. … It’s that bad.”

How did we get here?

How did the F-35 go from its conception as the most technologically advanced, do-it-all military aircraft in the world to a virtual turkey? Over the decades-long effort to meet a real military need for better aircraft, the F-35 program is the result of the merging or combination of several other separate and diverse projects into a set of requirements for an airplane that is trying to be everything to everybody.

In combat, the difference between winning and losing is often not very great. With second place all too often meaning death, the Pentagon seeks to provide warriors with the best possible equipment. The best tools are those that are tailor-made to address specific missions and types of combat. Seeking to accomplish more tasks with less money, defense planners looked for ways to economize.

For a fighter airplane, funding decisions become a balancing act of procuring not just the best aircraft possible, but enough of them to make an effective force. This has lead to the creation of so-called multi-role fighter aircraft, capable both in air-to-air combat and against ground targets. Where trade-offs have to happen, designers of most multi-role fighters emphasize aerial combat strength, reducing air-to-ground capabilities. With the F-35, it appears designers created an airplane that doesn’t do either mission exceptionally well. They have made the plane an inelegant jack-of-all-trades, but master of none — at great expense, both in the past and, apparently,  well into the future.

I believe the F-35 program should be immediately canceled; the technologies and systems developed for it should be used in more up-to-date and cost-effective aircraft designs. Specifically, the F-35 should be replaced with a series of new designs targeted toward the specific mission requirements of the individual branches of the armed forces, in lieu of a single aircraft design trying to be everything to everyone.”

http://www.defensenews.com/articles/what-went-wrong-with-lockheeds-f-35-commentary

This article was originally published on The Conversation .

About the Author

Image result for Michael P. Hughes is a professor of finance at Francis Marion University.

Michael P. Hughes is a professor of finance at Francis Marion University. He served more than 21 years in the U.S. Air Force. During that time, he spent more than 14 years in nuclear treaty monitoring and related activities, while the initial 7 years were in the aircraft maintenance and engineering (propulsion) arena with F-4 and F-15 aircraft.

http://departments.fmarion.edu/business/hughes-michael-p.html

Frustrated by Industry Behavior, Defense Officials Put CEOs on Notice

Standard
Kickthemallout dot com

Image:  Kickthemallout.com

“NATIONAL DEFENSE MAGAZINE”

“Defense contractors can expect the Pentagon to take increasingly tough negotiating positions as future procurements move forward.

That was in a nutshell the message delivered by senior officials last week at an industry conference in Washington, D.C.

In extensive comments to an audience of executives and investors, Director of Defense Pricing Shay Assad and F-35 Program Executive Officer Lt. Gen. Christopher Bogdan made it clear that they intend to push contractors into a corner.

Defense companies are in the best financial shape in years, but little of that windfall is trickling down into military programs, they complained. The government will seek to regain leverage and press contractors to “bring down the cost of DoD weapon systems,” Assad said at the annual McAleese Credit Suisse defense programs conference.

Government buyers and contract negotiators are encouraged by the Trump administration’s hard-line business approach, Assad said. “When you get somebody who is president of the United States and who understands precisely what you do for a living … This is terrific from my point of view.”

Assad for years has been a thorn in the side of Pentagon contractors as his office oversees pricing negotiations. He suggested the Defense Department is unhappy with the attitude of many defense companies that put profit ahead of the customer’s interest. His priorities going forward: Getting better deals for the Defense Department and looking for ways to increase competition in the market.

The F-35 joint strike fighter, the Pentagon’s largest weapons acquisition, is poised to become a litmus test for the new approach to negotiating with industry. “I am excited about the opportunities,” Assad said.

There is no one specifically to blame for the F-35 being far more expensive than anticipated, said Assad, but he believes that from now on, the Pentagon will look to  manufacturers to deliver cost reductions.

Executives from prime contractor Lockheed Martin have insisted that as soon as production ramps up, the unit price of the aircraft will drop. Assad is skeptical, however. “It’s not as simple as, ‘We increase the rate and that reduces the price,’” he said. “It’s not what this is about. This is about reducing the cost of building the product. We’ll get the inherent benefits of rate as we go along.”

As the Pentagon and Lockheed prepare for the next round of low-rate production contract negotiations, there are concerns that suppliers are not doing everything they could be doing to reduce the cost. “There is a lot of room for improvement at Lockheed Martin and the supply chain,” said Assad. One central question the government will ask is, “What should we be paying for the JSF?” he said. “We need to look deep. … We know what we’re paying. But what does it cost and, more importantly, what should it cost? I think you’ll see a focus on that over the next year.”

The Pentagon will be asking contractors to squeeze savings from their lower-tier suppliers, Assad and Bogdan noted. That will require a complex probe into how each component of the F-35 is made, a process they describe as a “delayering” of the supply chain. Under this approach, a company could consolidate subcontractors that do duplicative work, for instance. For every supplier, there’s additional administrative costs that are passed on and adds to the price of equipment.

Assad said the industry has to step up. “This is no secret to the investor,” he said. “The defense industry writ large in the last five years bought back $85 billion of their own stocks. That’s a pretty big number.” The Pentagon expects the industry to pour some of those returns into innovative technology for the military, he added. “We’re looking to find ways to make companies make meaningful investments.”

In conversations with leaders from non-defense commercial firms, Assad has been impressed by the “huge investments they make in areas so they can improve their market share. We don’t get a lot of that in this industry. And so we’re looking to find ways to reward companies that are stepping up to the plate.”

Assad took a swipe at the F-35 industry team for having suggested that the government co-fund a new round of “affordability” initiatives. In the commercial sector, customers do not give companies money to reduce cost, he said. “We’re looking for a sense of urgency. And frankly we want to reward the companies that do [these investments], and distinguish between those that do and those that don’t.”

He cautioned that he is not proposing that the government “suppress profit margins.” The Pentagon wants companies to be financially successful, he said, but needs the industry to help reduce prices.

In the F-35 program, Lockheed and top subcontractors BAE Systems and Northrop Grumman in 2014 funded a $170 million project called “Blueprint for affordability” to squeeze savings from the manufacturing process. Assad said that effort “has been modestly effective” but more is needed. Of a program that is forecast to produce at nearly 3,000 airplanes, “we only bought 400,” so there are billions of dollars in savings still to be extracted.

“We know companies are all trying to protect the interests of shareholders. And we respect that. We expect them to. But we are trying to protect the interests of the United States taxpayers and war fighters. Sometimes those two interests collide. And I don’t want to give any impression that somehow the JSF negotiation process is different than what we’re doing every day with other companies.”

The Pentagon intends to drive a hard bargain in other upcoming programs like the B-21 long-range bomber, the T-X trainer aircraft and the next-generation intercontinental ballistic missile, said Assad. “We should expect companies to be willing to invest in cost reduction. I’m not talking about buying in. I’m talking strictly making investments to reduce cost.”

Assad said he does not buy the industry’s argument that they are hesitant to invest because defense funding is unstable. And he rebuffed industry assertions that defense systems are expensive because red tape adds cost. By some estimates, defense-unique procurement regulations account for 20 to 30 percent of the cost of a system. “We hear a lot about the cost of doing business with DoD, a lot of angst and arm waving,” but Assad said he has yet to see reliable data that proves that point.

“Every time we go through these exercises nobody shows us the money.” In one case, he heard from a contractor who claimed the “earned value management” accounting system that DoD requires adds too much cost. When he asked for data, he said, the company came back 18 months later and the answer was that two additional people were needed to run EVM. “It is the cost of doing business, there’s nothing there, it’s all hypothetical discussion and no real data.”

Bogdan said the F-35 program is progressing and he is satisfied for the most part, except for the price. He recently concluded that there is more room for savings and lowered the bar — from an $85 million per airplane price tag by 2019 to $80 million by 2020.

“We have over 200 operational airplanes in the field. But the elephant in the room is affordability.” The $80 million goal is for an F-35A model, including the engine and contractor fee. said Bogdan. “That’s the target.”

Bogdan’s office will be negotiating F-35 production lot 11 this summer with Lockheed Martin. “What I see is a lot more has to be done to get cost out of the airplane.” Bigger production runs and multiyear contracts will help, but he wants the industry to take more aggressive actions now.

With a supplier base of 1,300 vendors, “we have to figure out how to delayer the supply chain. There is a lot to be gained in delayering 1,300 suppliers. I don’t disagree with Mr. Assad that there are things that industry could be doing today to drive cost out of this airplane that they ought to be doing themselves. If not, the government is going to help them do it.”

The message from Assad and others is that “we have to roll up our sleeves,” said Bogdan. “Just because I know what it costs doesn’t mean I should be satisfied.”

Like Assad, he seemed unimpressed by the Blueprint for Affordability initiative. “It was OK, just OK,” said Bogdan. “We took the low-hanging fruit. Industry invested $170 million in cost reduction initiatives. In my mind they didn’t invest in anything. It was money they didn’t have in their pocket for one to two years. They get paid back and get a premium. Savings were OK, but not as much as we thought we could have.”

The industry team has proposed a second phase of the Blueprint for Affordability. Initially the companies asked DoD to pitch in $100 million but the JPO said no. “As we move forward, we are looking for deeper savings, getting below the lower-tier suppliers,” said Bogdan. “I have to figure out how to energize the supply chain from the ground up, not from the top down.”

Lockheed Martin’s F-35 manager Jeff Babione, told reporters last week at a news conference that the company was taking significant actions to bring down costs. “Since the first LRIP we have reduced the price by 62 percent,” he said. “We are on a trajectory to get to $85 million in 2019. Between lots 11 and 14 the production will accelerate, which is essential to cost reduction, he said. “This is the opportunity to use economies of scale, apply additional pressure to reduce cost. This is extremely important, so we can procure parts at more cost effective rates. If we don’t have that ramp up the cost flattens.”

Is the $80 million goal achievable? “It’s all within the art of the possible,” said Babione. But he stressed that it’s mostly predicated on the number of airplanes ordered. “This allows us to plan better. I can buy 300 airplanes worth of stuff upfront. It’s like going to Costco. You get economies of scale.”

The details of the second phase of the Blueprint for Affordability are still being hashed out, said Babione. “We have a lot of great ideas. It will be about the same level of investment, $170 million, and we’ll be able to get billions out of the program.”

http://www.nationaldefensemagazine.org/blog/Lists/Posts/Post.aspx?ID=2463

Doing the Most with the Least – The Coast Guard Dilemma

Standard

Lean Coast Guard

National Security Cutter Munro completed builder’s sea trials in August. HII Photo

“U.S. NAVAL INSTITUTE”

“No other service over the last decade has been hit harder by budget cuts and sequestration than the U.S. Coast Guard.

In a time when our maritime services have been asked to do more with less, the Coast Guard has been engaging increased maritime threats with its leanest force in decades.

While today’s focus is being steered towards the U.S. Navy’s 2016 Force Structure Assessment (FSA), which called for a 355-ship Navy, there has been relatively little discussion about increasing the size of the U.S. Coast Guard.

“We are depleted of resources.” Coast Guard commandant Adm. Paul Zukunft recently stated to a packed audience at the annual West 2017 conference in San Diego. “When you add both transnational criminal organizations, plus the Arctic…we need to move from being a bantam-weight fighter to being a welter-weight fighter.”

The mission requirements for the Coast Guard are mind-boggling.

Today, the Coast Guard protects and defends more than 100,000 miles of U.S. coastline and inland waterways. Additionally, it has the imposing requirement to safeguard an Exclusive Economic Zone (EEZ) encompassing 4.5 million square miles stretching from the far reaches of the Arctic Circle to the South Pacific and from the Caribbean/Atlantic to Guam in the Western Pacific. This U.S. EEZ is a vast area that includes nine time zones and is one of the largest EEZs in the world.

Map

In President Donald Trump’s recent address to Congress, he said, “We’ve defended the borders of other nations, while leaving our own borders wide open, for anyone to cross – and for drugs to pour in at a now unprecedented rate.” The salient point here is that a majority of illegal drugs, cocaine in particular, come into this country via the maritime routes – where the drugs are in their most concentrated and in their most vulnerable form. A critical asset in the campaign to combat this illicit trade is the Coast Guard’s Legend-class National Security Cutter.

During the Surface Navy Association symposium in January, Zukunft listed the accomplishment of the crew of latest NSC cutter USCGC Hamilton (WMSL-753) that included response to Hurricane Matthew and the interdiction of more than 52,000 tons in cocaine.

A significant shortfall in the force structure of the Coast Guard fleet is the current shortage of High-Endurance Cutters. During the height of the U.S. drug interdiction efforts, the Coast Guard had a fleet of 12 Secretary-class 378-foot High-Endurance Cutters. Today, only five remain in service and the cost to maintain these 50-year old ships has become an unsustainable burden on the Coast Guard’s budget.

In 2008, to start the replacement of the aging High-Endurance Cutters, the Coast Guard commissioned the USCGC Bertholf (WMSL-750), first of the Legend class. Shortly after commissioning in 2009, Bertholf completed an extended operational deployment and exceeded all operational expectations of a “first-of-a-class” vessel.

The major concern with the current planned Coast Guard force structure is that it calls for only eight (now nine) National Security Cutters to replace 12 High-Endurance Cutters. Since the commissioning of the Hamilton-Class High-Endurance Cutters in the 1960’s and 1970’s, the maritime security landscape for our nation has changed dramatically. With the Department of Defense heavily involved overseas, the Coast Guard has taken the lead, appropriately so, in protecting and securing America’s homeland and our own backyard, as illustrated in the Commandant’s Western Hemisphere Strategy (September 2014).

US agencies stop semi-submersible, seize 12,000 pounds of cocaine

“If you look at DoD’s statement of key priorities, they are not focused on the Western Hemisphere. We have the responsibility by default and design,” Zukunft stated. Stressing the Coast Guard’s force structure deficiency to combat illegal drugs and illegal migrants in the southern approaches to the U.S., Zukunft went on to say, “The Navy’s Perry-class frigates have gone away. On the best of days, you have three Coast Guard ships in the Caribbean. That is your entire force to deal with threats in that region.”

The Coast Guard’s focus on the Western Hemisphere also includes the Arctic, as illustrated in the Commandant’s Arctic Strategy. In fact, increasing activity from cruise ships, eco-tourism, oil exploration, fishing vessels, and commercial cargo vessels seeking a shorter route between Asia and Europe have necessitated the need for the National Security Cutters to go where they never planned to go before: the unforgiving, icy waters of the Arctic.

In addition, with China’s expansion in the South China Sea and the U.S. Navy’s shortage of assets in the region, there has been discussion of the Coast Guard providing a more persistent presence in the area. The Coast Guard would be the perfect service to work with our allies in the region. If assigned, the National Security Cutter – with its 12,000-nautical-mile range and its 60-day endurance – would be the ideal ship to perform this mission.

In summary, as the new administration strives to enhance our overall national security posture, there should be serious consideration given to building at least 12 National Security Cutters to replace the 12 retiring ships in the High-Endurance Cutter program. A “one-for-one” NSC for HEC replacement strategy would better secure our nation and help the U.S. Coast Guard combat a host of emerging national security threats on multiple flanks.”

https://news.usni.org/2017/03/09/opinion-doing-the-most-with-the-least-the-coast-guard-dilemma

 

  

 

Veterans Administration Patchwork System Eats Most Of $4B Tech Budget

Standard

va-systems

“DEFENSE ONE”

“VA, with its history of failed large-scale IT projects that cost taxpayers billions of dollars, is again grappling with IT issues.

The agency’s CIO says there’s no clear plan for replacing custom-built systems, two of which are more than 50 years old.

This time, it isn’t a single program bleeding taxpayer dollars that is troubling Congress. Rather, it’s the agency’s aging IT systems, two of which are more than 50 years old, according to testimony from Dave Powner, director of IT management issues for the Government Accountability Office.

The age of some of VA’s oldest systems and its disproportionate spending on legacy technology clearly bothered several members of the House Committee on Veterans Affairs.

“It appears 86 percent of the money in IT is used for maintaining systems,” said Chairman Phil Roe, R-Tenn., who pressed VA Chief Information Officer Rob Thomas about what industry best practices for legacy spending were. Earlier, Powner had revealed that only about $400 million of the over $4 billion VA spends annually on IT is used to research and develop new systems.

Our numbers are out of kilter from industry; we’d like to see 60 percent on maintenance and 40 percent on development,” Thomas said. “Right now, we’re turning at 85 to 90 percent sustainment, and we have to shrink that.”

Thomas told the committee VA stood up a modernization effort last year aiming to decommission old systems, close data centers and attempt to make a dent in the agency’s legacy spending. Thomas said that effort could help lead VA toward a buy-over-build approach to IT, which he himself supports.

Roe said the push for commercial-off-the-shelf solutions is encouraging, but tempered his enthusiasm. Congress has increased VA’s appropriations for IT an average of 7 percent over the past five years with little to show for it. While the Defense Department opted to go commercial for its electronic health records system two years ago, VA still grapples with whether to build its own system or follow DOD.

“My fear is that I’ve been sitting here eight years, listening to how it will get better, and I realize we have a lot of good, smart people working on this, and it’s obviously not easy,” Roe said. “But there are a lot of COTS products that can do scheduling and billing.”

Roe also voiced disgust at VA’s failed $5.3 million cloud migration contract.

“That money could have paid for so many other things,” Roe said. “Like 70 entry-level nurses in Johnson, Tennessee.”

VA’s consolidation of data centers is generally behind the rest of government. Despite being the fourth largest IT spender among all agencies, VA has closed only 20 of its 356 data centers, ranking 19th out of the 24 agencies GAO studied.

Powner said VA’s reported data center savings of $15 million since fiscal 2011 are pennies compared to the $2.8 billion other agencies saved collectively over the same period. VA also has yet to meet any metrics established by the Office of Management and Budget. To better keep tabs on progress at VA, Powner recommended the committee call VA personnel to Capitol Hill for quarterly updates. The committee agreed.

“We need to have clear transparency on what progress is being made, and when the goal posts change,” said Powner, referring to schedule slippages that are apt to occur in large software projects.

Thomas said VA has many large IT decisions to make in the near future, beginning as soon as President Donald Trump’s nominee for VA secretary, David Shulkin, is confirmed. Chief will be determining whether VA will transition to a commercial electronic health records system, though when pressed, Thomas said he had no idea how long it might take.

DOD is beginning pilots of its new EHR system, but its $9 billion contract was awarded almost two years ago. Acquisitions of that scale take time, and VA would be reluctant to cut corners given the scrutiny it is under.

Ranking member Tim Walz, D-Minn., said he wouldn’t suffer another decade of health records issues between VA and the  Defense Department, and was disappointed to learn—from Powner—there still isn’t a seamless transition of health data for troops who transition to veterans. He called on Congress to demand interoperability between VA and DOD.

“I have to tell you, I cannot talk to a veteran and justify why we’re going to spend countless dollars for two systems that do not communicate and do not improve veterans’ experience,” Walz said. “We need to demand interoperability for one system and be responsible. Ten more years of it, I can’t stand it.”

If VA were to transition to a commercial EHR system, Thomas said the department would not necessarily have to use the same Leidos- and Cerner-developed system the Pentagon uses. Other commercial platforms should be interoperable, he said”

http://www.defenseone.com/technology/2017/02/vas-patchwork-system-eats-most-its-4b-tech-budget-congress-wants-stop/135254/

 

 

 

 

Budget Control Act and the Pentagon – The Elephant in the Room

Standard
Elephant in the Room.png

Image:  Vestedway.com

“NATIONAL DEFENSE MAGAZINE”`

“The Elephant in the room is the Budget Control Act [BCA] that imposes strict limits to federal discretionary spending.

Mattis’ budget guidance goes out the window if the BCA is not repealed.

Defense pundits and industry watchers were surprised this week when the Pentagon released extensive new “budget guidance” from Secretary James Mattis that spells out the process for how the Pentagon will justify its upcoming funding request to Congress. The proposed budgets will seek to plug immediate funding holes but also set in motion the military buildup that President Trump promised.

Photo: Defense Secretary Jim Mattis meets with the Joint Chiefs of Staff at the Pentagon (DEFENSE DEPARTMENT)

“It’s our hope and intent that we can operate in a budget environment outside of sequestration,” said Defense Department spokesman Navy Capt. Jeff Davis. “We’ll continue to work these budget submissions very closely with the Office of Management and Budget.”

Mattis has held private discussions with members of Congress on the issue but Davis would not comment on whether the secretary is confident that the BCA caps will be lifted any time soon.

The restrictions in the Budget Control Act are in effect until fiscal year 2021. “We have not seen any plan to lift or strike the BCA and foresee difficulty getting a major hike through fiscal conservatives and Senate Democrats,” noted industry analyst Roman Schweizer, of Cowen Washington Research Group. “OMB’s budget blueprint is expected this month and the reaction to it will be the first indicators of likelihood.”

It is noteworthy that the Pentagon is putting out documents on its budget “sausage-making” when there are no top-line targets yet from OMB, Schweizer observed.

Davis said Mattis intends to build the budget request from the ground up, based on legitimate needs rather than artificial targets. “We don’t just pick a number and fill it in with capabilities,” he said. “We’ll come up with very real capabilities we need to restore readiness and balance programs. Then we’ll work to get the appropriate price tag for it.”

This will not be a free-for-all, Davis said. “Secretary Mattis has said he wants to be a faithful steward and get maximum value for the taxpayer dollar. That’s what this process is designed to do.”

According to the three-phase plan, the Pentagon will request by March 1 an emergency budget amendment for fiscal year 2017 to fund immediate needs like precision-guided munitions and pilot flying hours. The fiscal year 2018 budget proposal due May 1 would seek longer-term investments to increase the size and capability of U.S. forces. The foundation for the 2019-2023 five-year budget would be a new National Defense Strategy that the Pentagon is now drafting. The Trump administration also has ordered a nuclear posture review and a missile defense review, both of which could add significant new expenditures.

The Pentagon’s budget not only faces huge political and fiscal pressures but also practical constraints such as a narrow window of time on the congressional calendar.

“There is lots to do, and not much time,” said Bloomberg Government analyst Rob Levinson. A deadline to increase the national debt limit looms March 16. Federal funding for fiscal year 2017 runs out April 28, when the current continuing resolution expires and action will be needed to prevent a government shutdown.

There are larger variables at play, too, Levinson said during a Bloomberg webinar. “Trade-off decisions could be affected by changes in relations with Russia,” he said. The Pentagon’s ambitious “third offset” strategy is predicated on the need to counter rising powers like China and Russia. “Trump appears to feel differently about Russia than many in Washington, but is concerned about China, which could steer more money to the Navy and Air Force at the expense of the Army.”

Trump, like every president, will be forced to make tradeoffs between spending plans, tax cuts and deficits, said Levinson. “A most likely outcome is increases — not necessarily equal — for defense and domestic spending with resulting deficit growth. No faction will get everything they want: not the fiscal hawks, defense hawks, Democrats or the president.”

http://www.nationaldefensemagazine.org/blog/Lists/Posts/Post.aspx?ID=2411

What Small Business Should Know About “FEDBIZOPPS.GOV – The Federal Business Opportunities Web Site

Standard

fedbizopps-copyINTRODUCTION

This posting will provide strategic guidance on FEDBIZOPPS and factors for using it in small business marketing to government agencies and prime contractors.

A PUBLIC DOMAIN ACQUISITIONS BULLETIN BOARD

Established as the public announcement vehicle for all federal procurements over $25K, FEDBIZOPPS is a web-based, “Public Announcement Bulletin Board” to satisfy fairness in government contracting laws mandated by US law. It is a terrific market research tool and an absolute necessity once a solicitation has gone formal to stay abreast of modifications, changes in proposal due dates, questions and answers and other necessary information that contracting officers are required to make public. The site has recently been expanded to include a special section on federal government “Recovery and Re-Investment” Contracts.

WHAT ANNOUNCEMENTS MEAN

FEDBIZOPPS is the mandated posting point for contracting officers in all federal agencies. It is also the required notification point for GSA schedule solicitations, contract award announcements of all types and other information that is required by law for communication to the public in a fair and open manner regarding federal government procurement of supplies and services. The site contains “Sources Sought” and bidders conference notices, government requests for industry comment on draft RFP’s and formally published solicitations with proposal due dates. The current FEDBIZOPPS “Agency Tab” lists 126 agencies:

https://www.fbo.gov/index?s=agency&mode=list&tab=list

A solicitation posted at FEBIZOPPS generally means that a procurement has received funding and the contracting officer has been authorized to start the source selection process.

Often misunderstood, is that much has occurred in the way of marketing activities by companies in advance of notices formally published by the government on FEDBIZOPPS. By the time the formal, solicitation is published it is too late to market for setting a procurement aside for a small business designation if it has not already been established as such. In addition, formal solicitation publication closes the window on self-marketing by HUB Zone and 8(a) firms for set asides to them individually without competition. In short, businesses have been marketing for the requirement long before it became formally announced at FEDBIZOPPS.

Finding a solicitation that is ideal for your company for the first time on FEDBIZOPPS is excellent market research insight into what the agency publishing the requirement is buying. However, a careful bid/no bid analysis should be conducted as to whether it is prudent to go through the expense of a proposal if the opportunity has not been a new business target for your firm earlier in the game. Please see the following article on completing a bid/no bid analysis:

http://www.smalltofeds.com/2007/02/federal-government-contract-proposal.html

NAVIGATING THE SITE

Start by registering at FEDBIZOPPS. Many of the features available to users are not accessible without a registration. Begin some careful searches by key words into agency solicitations that could use your products and services. The FEDBIZOPPS user guide is available as a free download at the “Boxnet” cube of this web site to the immediate left of where you are now reading. Study it before you complete your registration. Be specific in your key word selections on the feature that allows direct emailing to you of announcements by agencies.

The data base is huge and it is best to move from specific key word selections to the more general with experience to avoid being inundated with meaningless solicitations. Some companies establish a separate email address for the FEDBIZOPPS mailings to keep the results out of the mainstream of other business. The mailings are totally automated so there are no marketing factors to consider in setting up such an arrangement.

As you examine the solicitations, see who has indicated an interest in bidding them among your competitors and the primes you are pursuing and then target such projects for participation by your firm either as a prime yourself or as a subcontractor. Pay particular attention to “Sources Sought”, Draft RFP “Request for Industry Comments” and similar announcements that indicate an early requirement taking shape.

For active solicitations that you wish to monitor, check the “Follow” Box on FEDBIZOPPS to receive updates and announcements by email. Once the solicitation reaches the formal RFP stage and a due data for a proposal has been established, if you have decided to bid the job the “Follow” feature is especially critical.

If there is a bidders conference and you intend to bid the job, make plans to attend. When questions are solicited you may ask them but remember that your question and its associated answer will be published by the government so be careful not to educate your competition to your win strategy in the process.

You do not have to indicate you are interested in bidding the job by registering as an “Interested Vendor” in order to bid a solicitation. Some companies prefer not to advertise their bid intentions, seeking to avoid competitors modeling their firm.

A MARKET RESEARCH SOURCE

If you are new to federal government contracting and wish to determine the best market for your supplies and services, observing what a given agency is buying on FEDBIZOPPS is a key factor.

Keep in mind that the decision makers in government contracting are the technical managers and process people behind the scenes in an organization (either government agency or large company). They have the budget authority, program responsibility and accountability. These people pass their decisions on to buyers and contracting officers via signed requisitions. Buyers and contracting officers are really no more than gate keeping staff members, knowledgeable in legalities, terms and conditions and who sign on behalf of the agency or company AFTER an internal review by the executives who have technical and management responsibility.

Thus your real marketing targets are behind the gatekeepers and little is achieved by marketing to a contracting officer or buyer. This rule of thumb applies with prime contractor contracting specialists and administrators as well as government personnel. For further details on the roles of these personnel please see the following link:

http://www.smalltofeds.com/2007/06/federal-government-contracting-customer.html

Once again, bidding an active solicitation after it has hit FEDBIZOPPS may be too late. The idea is to use them for market research so you can target similar projects earlier in the process. Research the technologies and services in which your targeted agencies and primes are involved through trade magazines, Internet articles, web sites, employment hiring fairs and industry conferences.

Focus your marketing campaign on finding evolving projects you can use as vehicles to approach teaming partners and agencies directly with a marketing campaign geared to your capability statement. Develop a solution to the specific needs of the project and present it to gain their attention.

Your principal challenge as a small product and services provider is finding evolving programs and projects into which your capabilities fit. Once you have found such targets it is then a matter of marketing brusquely to get into the game with eye catching solutions and capabilities.

SUMMARY

When a procurement becomes public on FEDBIZOPPS it stays public, but many invisible strings behind the scenes are likely already attached to it by aggressive and talented companies who may have sculpted the requirement with the agency, assisted in writing the statement of work or influenced the structure of the specifications to favor their products and services. All this is good, competitive marketing practice in the government contracting venue, just as it is in the commercial marketplace.

Use FEDBIZOPPS as discussed here in consonance with the following teaming and marketing articles:

http://www.smalltofeds.com/2009/05/small-business-teamiing-in-government.html

http://www.smalltofeds.com/2009/07/multiple-front-marketing-in-small.html

http://www.smalltofeds.com/2006/12/marketing-small-business-in-federal_17.html

FEDBIZOPPS is an absolute necessity once you make a bid decision. It is an extensive resource prior to such decisions and if utilized prudently it can enhance your small business government contract marketing plan dramatically.

Bringing Pentagon Efficiency and Effectiveness to the Forefront

Standard
audit_required_575

Image:  “The Project on Government Oversight”

 

“DEFENSE NEWS”

“It is time to explore what can be achieved by bringing business considerations up front to help us navigate the treacherous national security waters ahead.

Archaic and inefficient, the Defense Department’s processes used to acquire and manage resources have ultimately become counterproductive in supporting the military’s war fighting mission.

In James Mattis’ confirmation hearing before the Senate two weeks ago, most of the questions directed at him appropriately focused on threats to the United States. There were thoughtful exchanges on Russia and Iran. And discussions about sequestration. However, one of the greatest threats not receiving appropriate attention is the Pentagon’s current business processes. Archaic and inefficient, the Defense Department’s processes used to acquire and manage resources have ultimately become counterproductive in supporting the military’s warfighting mission.

National defense too often is only discussed in context of size and cost in relation to external threats. While those are unquestionably important considerations, more emphasis must be placed on internal efficiency and effectiveness. Processes that monitor and reward output as opposed to processes that focus exclusively on inputs illuminate opportunities for dramatic improvements in our military posture.

As a former business leader, Donald Trump is well suited to prioritize business processes. And as president, he can direct Defense Secretary James Mattis and his staff to explore what can be achieved by elevating the primacy of efficiencies and effectiveness within the Pentagon.

Reconsidering how the Pentagon collects and uses data to make decisions will be particularly important. Indeed, better and more proficient employment of existing business process technologies and associated data has the potential to enable new capabilities, drive efficiencies, and promote more informed management decisions. Advanced analytics can provide insight into effects of even micro-level changes on readiness, with hope that current reporting could forecast how today’s decisions impact future military readiness.

Defense acquisition – historically the symbol of the slow-to-decide-and-act defense bureaucracy – is another area worthy of review. Pentagon procurers must have the opportunity to embrace and expand on the principles of rapid innovation. Rapid innovation has been adopted by Silicon Valley start-ups through some of our largest corporations, and its model would better attract existing and future military suppliers while providing our military world-class capability at lower costs.

The president and secretary of defense should also pursue measures that shed uniformed military responsibility of non-core services. The Pentagon has already seen success of such measures when they privatized military housing decades ago. There have been several studies over the years identifying other non-core military services that can be done more efficiently.

To move the Pentagon toward best-in-class processes and practices, the president must begin by outlining his support for efficiency and cost-savings reform in his budget. Notably, the budget must advance progress on auditability.

Under the current  plan, all four services must be audit ready by the end of September, with independent auditors in 2018 determining whether they passed or failed. Few are optimistic that the services will return a clean opinion, but the process is vital for prudent fiscal oversight while shedding light on how senior Pentagon leaders can run their organization more effectively. What is more, it provides a step toward full cost accounting which would provide even greater insight by capturing direct and indirect costs, driving decision making accordingly.

Another key provision would be support for eliminating, consolidating or repurposing excess infrastructure and facilities; to include requesting a new round of Base Realignment and Closure (BRAC). While unpopular in Congress, divesting unneeded infrastructure is basic best business practice and another BRAC round is well overdue. The last round occurred over a decade ago.

Our military and defense leadership is trained to operate in ambiguous and uncertain conditions — and that is necessary and appropriate for the battlefield. But we can and must do better when it comes to process, management, and generally keeping our own house in order. Indeed, a key rationale of strengthening business processes is to reduce the frequency of decision-making-by-gut-feel.”

http://www.defensenews.com/articles/bringing-pentagon-efficiency-and-effectiveness-to-the-forefront

 

 

The $ Price for Transformational New Technologies

Standard

ford-cvn78_christening_crowd-1024x570-768x428

“BREAKING DEFENSE”

“This week, the Navy finally announced a delivery date for the long-delayed and $2.4 billion over-budget aircraft carrier, the Gerald Ford (CVN-78).

‘In hindsight,” said Adm. Thomas Moore, head of Naval Sea Systems Command, the Navy should have tested the Ford’s ambitious new systems more extensively on shore before installing them aboard ship.

But building a new class of ship with “leap-ahead” technology is always risky, Moore told theSurface Navy Association: “We don’t build toasters. These are complex pieces of machinery.’

Given the problems the Ford has faced, we asked retired Navy commander Bryan Clark for an outside perspective on those problems and how to mitigate them. A career submariner,Clark has served at every level from enlisted man to head of the Chief of Naval Operations‘ Commander’s Action Group. He’s now with the Center for Strategic & Budgetary Assessments.

The Navy is paying the price for attempting to incorporate too many new technologies at once into a new class of ship. The Ford is an example of how short-lived strategic themes such as “transformation” can create long-term problems. The Ford carrier, Zumwalt destroyer, and F-35 Joint Strike Fighter were all shaped in large part by services’ need to get them approved by the Bush administration, which was only interested in pursuing transformational new technologies at the time.

This is not history we want to repeat. In our quest to pursue “Third Offset Strategy” technologies today, we will need to be judicious in how we incorporate them into new programs. The current Defense Department leadership has done a good job of refining these technologies in R&D programs until they mature, but sometimes these lessons eventually get forgotten.

As for the carrier program specifically, the Navy now is building parts of the next two carriers (the Kennedy, CVN-79, and Enterprise, CVN-80) and is buying some equipment for CVN-81 (as yet unnamed). Shipbuilder Huntington Ingalls has done some good work to get costs down, and has more to do. Many of the techniques they use for building nuclear-powered submarines, for example, can be applied to nuclear carriers, although it will require more investment and time due to the greater scale of carrier construction.

The Navy may be able to get costs for future carriers down further through multiyear procurement, essentially contracting for two carriers at a time and paying for them over multiple years. There are many pumps, valves, and other pieces of equipment on a carrier, and buying them in bulk for two ships can enable making them or buying them at a lower price. The Navy should start thinking about whether CVN-82, which hasn’t been started yet, should incorporate all the features of the first three Ford-class carriers. Some systems may be downscaled or removed to lower costs. (The Navy has already decided to install a more modest radar on CVN-79). Other options some have raised, such as shifting to a smaller carrier, would add more expense to develop and test the new designs.

It will be about three years before Fordconducts a deployment, since after delivery it will enter the Fleet Response Plan training and preparation cycle. To address the continued shortfall in carriers and begin developing a more effective Amphibious Readiness Group, the Navy and Marine Corps should start deploying USS America(LHA-6) and other big-deck amphibious assault ships (LHAs and LHDs) as F-35Bcarriers. (This is something CSBA recommended in our fleet architecture and amphibious warfare studies; F-35Bs are “jump jets” capable of operating off the shorter flight decks of amphibs, rather than requiring a full-sized carrier). This would make the ARG able to provide fire support to Marines over the long ranges at which their MV-22 Osprey tilt-rotors can operate. It could also provide fighter support to support some of the small-scale operations, such as those in Syria, that are currently being supported part-time by aircraft carriers. The Navy has repeatedly tested such amphib-based air operations over Libya with its existing AV-8 Harrier jump jets, and the F-35B would be far more capable.”

http://breakingdefense.com/2017/01/fixing-the-ford-getting-creative-with-carriers/