DoD: No Mergers of Top Firms

The Pentagon will not support the merger of large defense companies, which would further consolidate the number of prime contractors at a time when the Defense Department is looking to increase the number of competitive contracts.

Pentagon acquisition chief Ashton Carter called for transparency between the industry and DoD during an expected increase in mergers in the near future. 

DoD acquisition executive Ashton Carter warned against further consolidation in the defense industry during a speech at an investor conference in New York this morning. Carter stressed the Pentagon's desire for competition, a major focus of the "Better Buying Power" initiative first announced by Defense Secretary Robert Gates last September.

"A number of our specific Better Buying Power initiatives are aimed at increasing competition among all our suppliers and throughout our procurement of goods and services," Carter said in his speech, according to a transcript released by the Pentagon. "Sometimes competition is provided by having two or more providers of the same thing go head-to-head, but where this is not possible, we can still harness this power through a wide variety of other competitive strategies that provide real incentives for increased productivity."
That said, Pentagon officials expect market forces to lead to an "uptick" in mergers and acquisitions "and other industry adjustments in the coming period," he said.
DoD "welcomes needed adjustments that lead to greater overall efficiency, but will require transparency with respect to all contemplated transactions," Carter said. "We will examine these transactions to ensure that the Department's long-term interests in a robust and competitive industrial base dominate any near-term or one-time proposed savings, that potential organizational conflicts of interest are avoided or carefully mitigated, and that we have full visibility into restructuring costs and the potential for continuing capital investment and R&D."
Still, DoD will keep the interests of taxpayers and troops in the "forefront in our minds as we review proposals that may result in the creation of weaker stand-alone firms less likely to thrive without the necessary capital structure that their larger parent company is able to provide," Carter said.
Throughout this period, he called for transparency between the industry and DoD.
"The Defense Department would not want to see its industrial base experience what has happened in some other sectors of the economy: poor risk management, unnecessary leverage and excessively short-term behavior at the expense of long-term health," Carter said. "Transparency allows all these things to be addressed early in the process, which is in the interest of all involved."
Carter also stressed the importance of healthy lower-tier suppliers, which "are centrally important to a healthy industrial base."

Inter-Korean Talks Collapse After North's Walkout

SEOUL - Military talks aimed at easing high tensions between North and South Korea broke down Feb. 9 when the North's delegation walked out, Seoul's defense ministry said.
The two sides had been meeting for the first time since the North's deadly shelling of a South Korean island on Nov. 23, which briefly sparked fears of war.

A ministry spokesman said that the delegates even failed to discuss when to meet again. "Under the current situation, we can say the talks have collapsed."
After two days of working-level discussions aimed at setting the agenda for a high-level military meeting, North and South remained far apart.
The South demanded an apology at the proposed senior-level meeting for two bloody border incidents last year.
Four people, including civilians, died in the shelling of Yeonpyeong Island near the disputed Yellow Sea border.
The South also accuses the North of torpedoing a warship last March near the border with the loss of 46 lives, a charge it denies.
Earlier on Feb. 9, the South agreed in principle to hold separate Red Cross talks on reunions for families separated since the 1950-53 war. But the unification ministry said these could not now go ahead.
The island bombardment, the first attack on a civilian area in the South since the war, sparked outrage in South Korea.
Seoul said Pyongyang must apologize at high level talks both for the shelling and the warship sinking and punish those responsible.
The North, however, said the talks should focus on halting all military actions that can be considered provocative by the other side.
Pyongyang flatly denies involvement in the sinking of the South's warship.
It says its attack on Yeonpyeong was in response to a South Korean live-fire drill there, which dropped shells into waters claimed by the North.
The South's chief delegate Col. Moon Sang-Gyun told reporters the North had described the warship allegations as a plot instigated by the United States to justify a policy of confrontation on the peninsula.
It repeated its earlier claim that the Yeonpyeong bombardment was caused by provocations from the South.
Moon said he rejected the assertions as "nonsense."
North and South had agreed to talk soon after their respective superpower patrons, China and the United States, called jointly for inter-Korean dialogue.
"Both sides are now under international pressure to continue dialogue," Dongguk University Professor Kim Yong-Hyun said.
"I don't think the collapse of talks will escalate tensions again. After a cooling-off period, I believe the North will make a fresh proposal for a new round of military talks."
After dire predictions late last year of nuclear war, the North abruptly changed tack in January and launched a spate of appeals for dialogue.
Some analysts say the events fit a pattern in which the North manufactures a crisis, and then suggests negotiations in hopes of aid concessions.
South Korea's JoongAng Ilbo newspaper said Feb. 9 that a North Korean diplomat, at a meeting in New York last month, had asked the United States to resume the food aid it suspended in 2009.
China for its part is striving to revive six-party talks that offer the North economic and diplomatic benefits in return for nuclear disarmament.
But the United States says the North must mend ties with the South before the nuclear dialogue can resume.
North and South were briefly "in the same bed but dreaming different dreams," said Hong Hyun-Ik of Seoul's Sejong Institute think-tank.
"The South believes the North's dire economic situation will force it to accept responsibility for the incidents, but the North cannot swallow its pride for the sake of opening talks with the South," Hong said.
"The North will now say to the U.S. and China that it did all it could to resume dialogue with the South."

SOCOM Moved Quickly To Create Daytime Gunship

Direct acquisition authority has allowed U.S. Special Operations Command to quickly and quietly deploy a heavily modified C-130 cargo hauler that can strike ground targets with precision-guided weapons.
The MC-130W Dragon Spear went from concept to flying with a minimum capability in less than 90 days and deployed in 18 months, according to SOCOM chief Adm. Eric Olson.

"This is light speed in the acquisition world, but we were able to do it because we do have the authorities and, frankly, the talent to make that kind of thing happen," Olson said.
The MC-130W has already deployed to Iraq and is now flying in Afghanistan, Olson said.
Unlike traditional acquisition programs, which are run by the individual services and overseen by the weapons buying division of the Office of the Secretary of Defense, SOCOM ran the development and fielding of the Dragon Spear.
"It was in some ways a pilot project for us," Olson said Feb. 8 during a presentation at a National Defense Industrial Association-sponsored conference in Washington, D.C. "We formed a joint acquisition task force within Special Operations Command, grabbed control of this project and have delivered."
The Dragon Spear program installs a gun, sensor and standoff precision weapons on the MC-130, an aircraft typically used for inserting special operations forces and aerial refueling helicopters. Unlike Air Force Special Operations Command-operated AC-130 gunships, the precision weapons allow the Dragon Spear to fly daytime missions - and at a greater standoff distance.
The four-star admiral also touted a system used in Afghanistan that involves an "airborne-mounted overt laser that projects a beam that illuminates a spot on the ground."
Commanders "are finding more and more uses for an illuminated spot on the ground," he said. "It can prevent fratricide, it can cause people to muster against a target, it can have a powerful psychological effect if you are standing in the beam." SOCOM officials are currently building tactics, techniques and procedures for the system.
In addition to these rapid-acquisition initiatives, SOCOM is preparing for some new weapons, including undersea and surface mobility, as well as air, land and sea remotely piloted systems.
For years, SOCOM tried to field the Advanced SEAL Delivery System (ASDS), a mini-submarine designed to carry special operations forces during covert missions. Although contractor Northrop Grumman delivered the first ASDS in 2003, the craft suffered from reliability issues and design flaws. The Pentagon scrapped plans to buy more mini-subs in 2006. The program came to a halt in 2009 after a fire burned out the vessel's interior.
"We're working on revamping our undersea mobility," Olson said. "We didn't focus on that for a while, but we're revamping that program."
As for maritime surface mobility platforms, the Navy's Mark V special operations boat "is reaching the end of its service life," Olson said.
SOCOM is also using a deployable solar-fueled system that can power a forward operating base. A prototype system is already deployed.

Unanswered Challenges

The admiral noted that he has not "received satisfactory answers" to a number of challenges he posed to the defense industry back when he was SOCOM vice commander. Olson wants to know how the Pentagon's investment in simulation technology has reduced operational and training costs and how the investment in reach-back technologies has reduced the number of forward-deployed troops.
He also asked that programs designed to save people and money follow through with promises and younger people present these programs to him.
"I won't say they're completely unanswered," Olson said. "We've made starts in each of those areas, but largely we are still a community that's found ourselves unable to take full advantage of the potential of technological development, and I think we do it better than most of the rest of the [Defense] Department does. Even within the special operations forces, we've struggled to do that."
To accomplish this, cultural change is required, he said.

Shakeup Atop Russia's No. 1 Arms Exporter

MOSCOW - Almaz-Antei, Russia's leading arms exporter, replaced the head of its design bureau, according to a Feb. 4 statement on the company website.
Igor Ashurbeili, was replaced by his first deputy, Vitaly Neskorodov, after a unanimous vote by the design bureau's board of directors, the statement said.

Industry insiders quoted in the Russian press described by the conflict between Ashurbeili and the concern's leadership. Ashurbeili, who had run the design bureau since 2000, was said to be defending commercial independence of his design bureau that directly dealt with the Defense Ministry and the state arms export monopoly, Rosoboronexport.
Almaz-Antei, which develops and produces anti-aircraft missiles, had 2009 defense revenues of $3.3 billion.
The design bureau, formerly NPO Almaz, which was merged with rival NPO Antei in 2002 to make Russia's biggest defense company, has developed and produces powerful S-300 and S-400 anti-aircraft missile defense systems popular on the international market. The bureau develops prospective S-500 anti-aircraft, anti-missile system for the Russian military.

S. Korea To Boost Marine Force, Islands' Defenses

SEOUL - South Korea is considering increasing the number of its Marines by up to 2,000 as part of broader efforts to enhance defense capability for five islands near the disputed sea border with North Korea, the Ministry of National Defense said Feb. 8.
An extra 2,000, if approved, would take the size of the South Korean Marine Corps to 29,000.

The new troops would be assigned to a coastal defense command for the islands near the Northern Limit Line (NLL), a major flashpoint for inter-Korean conflict. The division-level command, with a combined strength of some 12,000 from all wings of the military, will be inaugurated as early as April.
Following a torpedo attack on a South Korean patrol ship that killed 46 sailors in March last year, the North fired hundreds of shells from its coastal artillery guns toward one of the five islands in November, Yeonpyeong, killing four people.
"In the aftermath of the Yeonpyeong Island attack, consensus has been built among government and military officials to augment troops, in particular Marines, on the West Sea islands to help facilitate amphibious operations against North Korean forces in the case of an emergency," a Ministry of National Defense spokesman said. "The final size and assignment of troops are to be fixed after further discussions."
The augmentation of Marines near North Korean waters implicate a major shift in Seoul's operational concepts on the border islands from a deterrence against a North Korean landing assault to an offensive one that could allow a preemptive strike on the North should it launch an attack, defense experts said.
Since the Yeonpyeong Island attack, South Korea has bolstered its forces and military arsenal off the west coast.
The South Korean military boosted the numbers of the K-9 self-propelled howitzer, the 130mm multiple rocket launchers on Yeonpyeong, located just 12 kilometers from the North Korean mainland. It also deployed newer artillery-finding radars built by Swedish company Saab, as well as domestically developed, self-propelled surface-to-air missiles.
Other weapons to be deployed on the border islands include Israeli-built Spike missiles, Low-Cost Guided Imaging Rockets being developed by South Korea and the United States, and 500-kilometer-range ship-to-surface cruise missiles, according to military officials.

Boeing Unveils New Hornet Options at Aero India

BANGALORE, India - Boeing provided a preview of new options available for international customers under the Super Hornet International Roadmap program at the 2011 Aero India defense and aerospace show at Yelahanka Air Station here on Feb. 8.

The Sarang Indian helicopter aerobatics team flies in formation above a Boeing F/A-18 Super Hornet aircraft as it prepares to take off on the eve of Aero India 2011 on Feb. 8. (Dibyangshu Sarkar / AFP)

The program allows international customers to tailor the F/A-18 Super Hornet fighter to meet their requirements, said Mark Gammon, Boeing's program manager for the Super Hornet International Roadmap. At present, the Roadmap is for the international market, but the U.S. Navy is looking closely at the program.

In the past two years, Boeing has been investing in the Roadmap in areas that improve situational awareness, stealth, range and precision strike capabilities.
Improvements include the Next Generation Cockpit outfitted with a new 11-by-19 inch large area display with integrated intuitive graphics and increased situational awareness.
"Basically, it's one big iPad, which provides the pilot with a large increase in display surface area," Boeing test pilot Ricardo Traven said.
Other unique features include improvements in the Hornet's stealth and range a stealthy conformal fuel tank and a conformal enclosed weapons pod, for example. The weapons pod can carry a combination of AIM-120 air-to-air missiles and air-to-ground bombs, with each Super Hornet capable of carrying three pods. The conformal fuel tank also reduces drag.
Range and speed are also increased with the GE-414 Enhanced Performance Engine (EPE).
"When you reduce the drag with the stealthy weapons pod and with an engine with 20 percent more thrust, you greatly increase range," Traven said.
Configuration flexibility improvements include an internal Infra-Red Search and Track (IRST) system and a new missile and laser warning system.
Many of the new features - including AESA radar, EPE and the missile warning system - were included in India's 2008 request for proposals for the Medium Multi-Role Combat Aircraft (MMRCA). New Delhi plans to buy 126 MMRCAs.
Not included in Boeing's MMRCA bid were conformal pods, IRST and the Next Generation Cockpit, due largely to requirement limitations at the time of the submission of proposals, but the systems could be included at a future date, a Boeing representative said.
The unveiling of the Super Hornet International Roadmap at Aero India is part of Boeing's effort to win a wide range of Indian military aircraft competitions, estimated to be worth up to $30 billion in the next ten years.

S. Korea Sets Fighter Jet Timetable

SEOUL - The South Korean government has set the timeline for a third phase of the F-X fighter procurement.
The program's prospects became unclear last year after the National Assembly rejected the spending plan amid budget constraints, and coastal artillery barrages by North Korean forces upended procurement priorities.

"Consensus has been built up among government and military officials to speed up Air Force modernization not only to respond to North Korea's provocations more effectively, but also not to fall behind regional powers in air superiority," said a Defense Acquisition Program Administration (DAPA) spokesman. He was apparently referring to China's recent showcase of the J-20 stealth fighter and Japan's efforts to acquire the Lockheed Martin F-35 Joint Strike Fighter. After the North shelled a South Korean island in November, calls have grown to improve precision-guided airstrike capability to neutralize the North's coastal artillery pieces and other key targets.
Under the new timetable, the spokesman said, the Seoul government is scheduled in December to release the request for proposals for its 10 trillion-won ($9 billion) F-X III contest to acquire as many as 60 stealthy aircraft. The F-X aims to buy 120 foreign fighters by 2020 in stages to replace aging F-4 and F-5 aircraft. In the previous two phases, Seoul bought 60 F-15K aircraft developed by Boeing. The DAPA plans to fix the details of the program, including the required operational capability and the linkage between the F-X III and the KF-X effort to develop an F-16-class indigenous fighter aircraft by April, said the spokesman. Bidder selection is expected by August 2012, he said.
To that end, DAPA may request an addition­al 15.7 billion won to launch F-X III, he said.
Boeing, the reigning champion of the F-X competition, is offering to sell more F-15Ks fitted with limited stealth capability. The Chicago-based defense giant offers to sell at least 20 more F-15Ks equipped with advanced electronically scanned array radar along with radar­absorbent coatings and external treatments that are applied to the stealthy version of the F-15 Silent Eagle, one industry source said.
The company plans to invite Korean journalists to its facilities in St. Louis from Feb. 20-25, according to the Boeing Korea office.
"We're confident in our ability to deliver aircraft to the Republic of Korea Air Force beginning as early as 2016," said Steve O'Bryan, vice president of Lockheed's F-35 business development.
Still, there is a concern among Korean officials about the multinational F-35 program's cost overruns and the operational risks of adopting an early version of the plane.
Eurofighter officials said South Korea could receive lenient technology transfers for the KF­X program if it joins the Typhoon program.