James Hasik

The bills "move around the deck chairs, but don't get at the substantive problems."

Defense News reported the other day that “U.S. House and Senate negotiators have hammered out a final version of defense acquisition legislation that would shake up the Office of the Secretary of Defense”. Amongst other things, the bill would replace the Office of Program Analysis and Evaluation and the Cost Analysis Improvement Group with a single Office of Cost Assessment and Program Evaluation. Strong stuff.

The best part, though, is how the bill would modify the Nunn-McCurdy statute by requiring the Pentagon to "perform a root cause analysis" on each breaching program. Even more drastically, according to the language, “if the program is not terminated, but is restructured, it would rescind the most recent milestone approval and require the program to receive a new milestone approval prior to proceeding.” Now that’s just scary.

As the story quotes a jaundiced senatorial aide, the bills "move around the deck chairs, but don't get at the substantive problems." Any questions about the extent of the shuffling so far can be cleared up by watching this short instructional video on the history of the Pentagon’s procurement process regulations.

The fact is that the Pentagon’s procurement directorates have been choking on process and oversight for years. And despite Gates’ well-meaning desire to reverse staffing cuts from the 1990s, it’s doubtful that the Defense Department needs another 9,000 bureaucrats in procurement jobs approving paperwork. Putting a higher barrier in the Nunn-McCurdy process is like Dean Wormer putting the Deltas on double secret probation. "One more slip-up," and your program will be restructured! Again!

What they need is some better incentives—like firing people for approving the design of FCS vehicles with flat bottoms 18 inches off the ground. Who is the canard who let that one get past? Oh, wait, we know that: it's this guy. What’s the root cause analysis of that move? I'm encouraged that Bob Gates sacked General McKiernan for piling people onto FOBs and wearing a piece and a vest to a shura. Perhaps he'll start extending that enlightened personnel practice to people in the program offices.

I heard from a colleague once that, in many smaller countries, the military acquisition process is pretty much a matter of the defense minister one day announcing what the government will buy next. At least that approach economizes on transaction costs.

Could someone bring Norm Augustine up to speed?

In last week’s Aviation Week & Space Technology (“As Augustine Sees It”), Norman Augustine was asked whether his so-called law about increasing platform costs was still the trend. He replied
I hate to say it, but we’re still on that path. We’re headed toward the one-airplane scenario.
Huh? Has Norm been living on the same planet with the rest of us for the past few years? In a string of announcements and commentaries on the fiscal year 2010 budget, Pentagon officials made clear that

1. MQ-9s would be replacing early-model F-16s and A-10s.
2. The F-22 program would be ended in favor of the F-35 program.
3. The F-18E/F program might be wound down early, depending on the results of the pending QDR.

Let’s look at the numbers in each case:

1. According to the USAF’s fact sheet and the price index in the US GPO’s budget guide, those early-model F-16As cost over $18 million in today’s terms. New MQ-9s cost about $10 million. This comparison, however, assumes that someone would replace an F-16A with another F-16A. The price of the UAE’s newest Block 60 F-16Es is a bit unclear, but Flight Global reported in 2007 that the Emirates’ federal government paid Lockheed Martin $3 billion in development costs alone for a fleet of just eight aircraft. Oh, and the MQ-9s have quantumly longer range and endurance.
2. Again according to the USAF, the unit cost of an F-22 is $143 million. The USAF’s 2009 budget had asserted that the long-term present-year unit cost of the F-35A would be about $83 million. That would have to increase wildly to meet what the USAF was paying for F-22s. And note how I write was paying.
3. One the one hand, the Navy will be paying more per airplane in phasing out purchases of F-18E/Fs in favor of more F-35Cs sooner. That said, the Navy won’t be winding up the Super Hornet program to buy a more costly airplane; the F-18C/Ds that they were to replace will probably instead by replaced by drones, whose costs are yet to be determined. For more on what drones cost, see item (1).

I don’t know what numbers Norm has been studying, but he’s sounding a little cranky these days. The last few years have brought a totally different approach to military procurement, and if you’re missing that, you’re missing out on good business.

Update on the future of the US Army's structure

Last week I wrote a long column about the possible evolution of the US Army’s force structure in this summer’s Quadrennial Defense Review (QDR). To review, the current structure of the Army and the National Guard—at least in their line brigades—looks roughly like this:

type	composition	Army	NG
Heavy	Abrams tanks, Bradley fighting vehicles with dismounting infantry and cavalry troops, and Paladin armored howitzers	17	8
Medium	LAV-III Stryker vehicles with dismounting infantry and cavalry troops, and 155 mm towed howitzers	6	1
Light	dismounted infantry, cavalry troops in armored Humvees, towed 105 mm howitzers, and MRAPs when they need them	20	19

The Army is planning to add two more brigades, and it is widely assumed that those will be light formations. I also noted that the QDR would probably call for more Stryker brigades, but wasn’t sure (as I put it) “whether those possible new Stryker brigades will be converted from light or heavy formations.”

The answer now seems fairly clear. Greg Grant reports at DoD Buzz that Chief of Staff General George Casey, while testifying to the conggress last week, was talking up those Stryker brigades on two counts: their LAV-III armored vehicles were performing very well in Iraq, and headquarters loved the large number of dismounted infantry and cavalry troops that they could bring to battle. The general left the question to the QDR as well, but signaled hard that the Army leadership (1) expected more Stryker brigades, and (2) preferred that their number would come from a reduction in the number of heavy brigades.

The general wasn’t specific about how many brigades he expected would be converted, but the plurality of his speech suggests at least two. That would leave the Army in 2013 or so with 15 heavy brigades, 8 Stryker brigades, and 22 light brigades. The loss of two more heavy brigades—if matched in the training and prepositioning equipment sets as well—will cut the reset and upgrade expectations of BAE Systems (with the M2/M3 Bradley and the M109 Paladin) and General Dynamics (with the M1 Abrams) by about 12 percent. That hurts, though not overwhelmingly.

Casey also made clear that those “light” formations would only go in light if they had to. Otherwise, they’d expect to drive into battle in MRAPs. That was to be expected, but it’s an important articulation from the head of the service. At this point, no one should doubt a reasonable future for the MRAPs in US service. For whosever vehicles will be retained in the inventory, that’s good news.

One of the relative advantages of the Stryker brigades is that their vehicles can carry rather heavier weaponry than MRAPs currently do. Since the Stryker brigade can be stiffened by the addition of an independent Abrams tank battalion, and brings its own 105 mm assault guns and anti-tank missile launcher vehicles, it can be expected to perform well against even well-armored opponents. In a sense, the LAV-IIIs nicely bridge the capabilities of vehicles like the Bradley and vehicles of the MRAP type.

That is, they would if they were rather more mine resistant. This gets to the question of just what that freed-up Future Combat System money might buy. Casey also mentioned six factors (even if he didn’t delineate them that way) that add up to a rather altered dynamic of competition amongst prospective contractors:

• New vehicles would be sought in five to seven years.
• The question of wheels versus tracks would be revisited.
• The Army would probably not try to put all vehicles on a common chassis.
• The engine systems would most likely be diesel-electric hybrids.
• Protection from anti-armor weapons (specifically mines) would be much more important this time.
• Several vehicles would need to fit in a C-17 Globemaster III transport plane.

There may be multiple ways to interpret this set of constraints, but to me, it suggests four logical, supporting paths forward:

1. Adaptation of a existing eight-wheeled armored vehicle for the high capacity roles of troop carrier, command vehicle, and ambulance.
2. Use of the MRAP-ATV or JLTV for some reconnaissance and liaison roles.
3. Development of a lighter-weight tank more suited to Third World infrastructure.
4. Dropping the requirement for a tracked howitzer replacement (sorry, Senator Inhofe).

It’s entirely possible that none of this will come to pass, but looking around the world, it’s a familiar pattern.

Regarding artillery, a confluence of factors favors this last point. The last M109A6 was built in 1996, and those vehicles haven’t been driven much—rather at all—in combat in Iraq or Afghanistan. The M777 towed howitzer is performing very well, 120 mm mortars are very suitable for close-in fire support, and the Netfires rockets are showing great promise. After all, the US Marines dropped their self-propelled artillery fleet almost 20 years ago.

Item (3) is rather favored by both the USMC and the British Army. The heavy cannons of Canadian and Danish Leopard tanks have been greatly valued against fortified Taliban positions, but they’ve come with more weight than necessary to ward off most rocket grenades. No reasonable amount of armor, of course, will stop a top-attacking anti-tank missile, so the whole protection calculation might be rethought.

Items (1) and (2) are largely where the French Army is headed, in replacing its AMX-10Ps with eight-wheeled VBCIs, but retaining tracks for the tanks. For the high capacity roles, there’s a wide range of candidates—GD’s LAV series, ARTEC’s Boxer, Patria’s AMV, and Nexter’s VBCI might all be considered. Can’t imagine the US Army buying a vehicle designed in France? Why not? It’s already buying the helicopter.

Rockets-in-a-box become naval fire support, and put serious pressure on the big guns business.

At Aviation Week today, Bettina Chavanne reports that the US Marine Corps commandant, General James Conway, has convinced the head of the Navy, Admiral Gary Roughead, that those Netfires boxes destined for littoral combat ships (LCSs) aren’t just for killing small boats. They’re absolutely useful for fire support ashore. The commandant says that there may be issues with storage and elevator capacity aboard the two models of LCS—the Freedom and Independence classes—and that the box itself may not be quite right for the mission. Otherwise, what works for the Army and Marines ashore should work for the Navy afloat.

In this case, necessity has begat innovation. In the past two years, the Navy has suffered two serious setbacks to its plans to reinvigorate naval surface fire support (NSFS). The Zumwalt-class destroyers are still each intended to carry two of BAE Systems’ impressive 155 mm Advanced Gun Systems (AGSs) with 600 of BAE and Lockheed Martin’s Long-Range Land-Attack Projectiles (LRLAPs), but the program is being cut short at two or three ships. Most of the 127 mm guns on Arleigh Burke and Ticonderoga-class ships were supposed to get Raytheon’s Extended-Range Guided Munitions (ERGMs)—conceivably hundreds each for the NSFS mission—but that program was cancelled last year after repeated failures in testing. That left the Navy with only unguided, unboosted rounds in existing 127 mm guns, and a handful of 155 mm AGSs with LRLAPs on the way.

I will gloat a bit about having predicted this development several years ago. With rocket propulsion and precision guidance in 127 mm form factor, it seemed clear that the Navy was asking Raytheon to stuff a proverbial ten pounds of kit into a five-pound bag. With the AGS destined for only the fabulously expensive Zumwalts, the Navy was never going to get the number of guns it wanted. Netfires, as soon as it was announced for the LCSs, was the obvious solution.

Rockets-in-a-box is the colloquial name for this missile system from Netfires LLC, a joint venture of Raytheon and Lockheed Martin. The US Army prefers the term Non-Line of Sight Launch System (NLOS-LS), which says a lot about the Army’s sense of style. Specifically, if you haven’t been following the program, the Netfires is a box of fifteen missiles with integrated GPS, inertial, and infrared precision guidance. Each missile packs the effect of a 155 mm artillery shell, and flies at least as far: 40 kilometers or more, depending on conditions (and which source one is checking). Sixty such boxes are meant to supplement the howitzers in each of the US Army’s towed artillery battalions. In the longer run, missiles like this have been suggested as complete replacements for all tube artillery larger than heavy mortars.

The logistical footprint is a large part of the attraction. The ‘net’ part comes from the missiles’ concept of operations: after emplacement from a crane-equipped truck or a sling-equipped helicopter, each box requires no manning, and fires its rounds by radio signal. The boxes are effectively disposable, in that each costs only a few thousand dollars. The missiles themselves, of course, cost quite a bit more How much more is not clear at this point, at least not publicly. The development contract was for $1.1 billion, but almost all of that is already a sunk cost. A recurring figure of $100,000 per missile was suggested some time ago; while pricing data are hard to come by, this seems reasonable given the costs of comparably powerful but shorter-ranged missiles. It also seems reasonable pricing for the customers. The cost of a LRLAP round is difficult to discern, in that the Navy’s reported data on the AGS and the LRLAP have conflated all costs in a single line. Estimates of the ERGM costs are, of course, meaningless at this point. What’s clear, though, is that whatever the price, the Netfires missiles should be even more economically attractive to a navy than an army.

This is because guns ashore merely require trucks to tow them, while guns at sea require whole ships, which are rather more expensive. Missiles like the Netfires can be placed on vessels much smaller than those that can support 155 mm (or even 127 mm) guns; smaller vessels can be more easily obscured from enemy sensors, or alternatively, more cost-effectively hazarded closer to shore. Forty kilometers approaches the over-the-horizon standoff that a navy should want when approaching a coastline with anti-ship missile batteries, even if it isn’t quite ideal. Eventually, those assault troops will move further ashore, and the ships will have to close a bit to continue to support them.

This, though, is where the Netfires concept gets even more interesting. The missile boxes can be lifted from ships and placed ashore once a beachhead has been secured, simultaneously keeping the fleet from harm’s way and extending the range of missile batteries. The modularity of the system is simply brilliant, and has implications well beyond the system itself. Consider that there are basically three reasons for building bigger ships: to cost-effectively produce longer range, better seakeeping, or greater payload. The range and seakeeping requirements of most navies are met by ships the size of large corvettes or small frigates. Surface combatants not meant to carry area air defense systems—and not meant for hybrid roles like that of the Danish Absalon-class—need not be much larger than a large corvette to accomplish the wide range of missions for which they are intended. This is rather borne out in the patterns of naval procurement worldwide: many fleets are converging on this size as appropriate for most ships. The Netfires boxes, after all, won’t be specific to LCSs, but could be deployed on any ship with a helicopter flight deck, or just enough flat topside space for the installation. Assault ships, that is, could reasonably be expected to bring their own fire support.

If modular missile launchers can both destroy small boats at standoff range and support troops ashore, then larger surface combatants will only be required for area air defense, not fire support. At that point, it would not be clear why anyone would put a major-caliber gun on an air-defense ship: any target large and threatening enough to need a 127 mm round would call for an anti-aircraft missile fired in the anti-surface role. As we have seen from past incidents, one or two of these is enough to cripple a large combatant. More so, at that point, navies actually could begin removing large guns from their ships, rather as the US Navy removed the SM-1 launchers from its Oliver Hazard Perry-class ships after they became obsolete air defense weapons. They might be replaced with medium or even minor caliber weapons, or they might not be replaced at all. The cost savings would be considerable, in that not just the weapons, but all their depot infrastructure and associated staff could be let go as well.

The big gun business is thus about to come under severe pressure. In the long run, without counteraction by artillery manufacturers or suppliers of precision-guided cannon rounds, weapons like Netfires have the potential to kill much of the major-caliber gun market. While a client in the business once reminded me that the whole guns-versus-missiles debate has been underway for decades, the technological balance may finally be shifting sharply. This shift—to the considerable detriment of big-gun manufacturers—may not be inevitable, if they can innovate competitively to secure for their products a continuing role, whether afloat or ashore. Competition here will be on cost as much as capabilities: as accurate and flexible as the missiles are, producers of cannons and their ammunition will need to show how shells can be more cost-effective under the more plausible scenarios. If they’re up for the challenge, the dissimilar competition will be intriguing to watch, and could produce some excellent solutions for the troops.

Possible evolution of the US Army force structure this summer

While complaining about the unimpressive survivability of the Future Combat System vehicles he was ash-canning, and announcing a halt in the expansion of the US Army at 45 (vice 48) brigades, US Defense Secretary Robert Gates hasn’t indicated which three brigades he didn’t want. This is an issue of some interest for land forces suppliers.
Today, the US Army advertises that it has 43 brigades in the line (some mixture of armor, foot soldiers, and artillery), and another six purely of artillery (deemed “fires” brigades, for some reason). The National Guard has 28 in the line and another 7 of artillery. The composition and distribution of those line brigades breaks down as follows:

type	composition	Army	NG
Heavy	Abrams tanks, Bradley fighting vehicles with dismounting infantry and cavalry troops, and Paladin armored howitzers	17	8
Medium	LAV-III Stryker vehicles with dismounting infantry and cavalry troops, and 155 mm towed howitzers	6	1
Light	dismounted infantry, cavalry troops in armored Humvees, towed 105 mm howitzers, and MRAPs when they need them	20	19

The Army appeared set to get another two heavy and three light brigades to get from 43 to 48. Gates hasn’t indicated which two of those five he planned to stand-up, but I will bet—and I’ve heard this presumption generally—that they will be another two light brigades. Having enough having tanks is clearly not the shortcoming these days.
That said, this may not be the end of the story. As Christian Lowe of Defensetech pointed out the other day, there is an excellent chance that the now-starting Quadrennial Defense Review will wind up calling for more Stryker brigades. As I noted recently, Strykers have been the most heavily utilized vehicles in Iraq, and are well-suited to the terrain and long distances in Afghanistan.
Further, note that this count isn’t really the whole picture. The figures above don’t include the 75th Ranger Regiment, which has three infantry battalions, or any of the Special Forces groups. They also don’t include the ten engineering brigades of the Army and the National Guard (five each), and the three military police brigades of the National Guard. Both these types of units are rather important, but are especially so in counterinsurgency.
What does this all suggest for contractors? Quite a few things, but I’ll just highlight four:

• Whether those possible new Stryker brigades will be converted from light or heavy formations is anyone’s guess, but General Dynamics and its suppliers will appreciate the additional orders of LAV-IIIs either way. BAE Systems wouldn’t mind a request for a few more set of M777 howitzers either.
• If the number of heavy brigades is again cut, both General Dynamics and BAE Systems will have fewer M1s, M2/3s, and M109s to refit over time.
• Those 1,080 MRAP-ATVs that the Army will be ordering this year will probably be preferentially distributed to the cavalry battalions of the light brigades. At the moment, they’re trying to scout the wilds of Afghanistan with armored Humvees, and that’s a bit scary. If the congress approves more, they’ll refit those battalions faster.
• If the money that Gates is setting aside for Army recapitalization is really not needed for yet another armored vehicle program, funds may flow to other priorities—like additional ISR assets or new robotic concepts.

Generally then, this could be a serious QDR, and thus one worth watching. Now is probably the time to start preparing contingency plans for shifts in business, and launching at least the viewgraph campaigns to show how you can keep ahead of those rebalancing priorities.

Dyke Weatherington, David Chu, and Edmund Burke on Requirements Overreach

Dyke Weatherington, the deputy director of the Pentagon’s unmanned aircraft systems task force, had some curious comments for Aviation Week & Space Technology in the last issue. Before beating on him a bit, I should state that I appreciate all that he has done over the past several years to advance unmanned aviation in the US Armed Forces. Now, on to the beating. In Amy Butler’s article on how the “high number of MQ-9 mishaps prompts worries at the Pentagon,” Dyke says

We don’t have any system today that fulfills current requirements, let alone the future requirements... We have pretty significant limitations. Predator was utilized by the Air Force because that was what was available. It was not what they wanted... it was what they got.

If I worked at General Atomics, I’d possibly take umbrage at that. Not what they wanted? As Edna Mode once said, “yet here we are.”

It is not that Predator, the Sky Warrior, or even the Reaper are without limitations. Rather, it’s the statement’s revisionism and presumptive reaching. The USAF effectively got dragged kicking and screaming into the reconnaissance drone business in the early 1990s. Today, the USAF and Army Aviation aren’t exactly settling because that product line is all that is available. There are plenty of options for buyers in drone aircraft; General Atomics is leading the market by consistently innovating and building aircraft ahead of its customers’ needs.

David Chu’s testimony before the House Armed Services Committee two weeks ago is rather telling here. DoD Buzz entitled its article "Fix Requirements, You Fix Costs"; Chu went as far as to say that the word requirement needs to be removed from the lexicon—objective would much better describe what military services are trying to attain. More pointedly, recasting system performance preferences as objectives would encourage officialdom to consider more seriously the reasonable tradeoffs that should be made in weapons acquisition. As that classic old school conservative Edmund Burke put it, “those things which are not practicable are not desirable.”

No more Next Generation Bomber after all

One of the significant departures in the Pentagon's 2010 budget was the cancellation of the Next Generation Bomber project, which seemingly had gotten underway last year with a $2 billion black contract award to Northrop Grumman. At the time, we had supposed that the non-competitive award suggested that the next bomber design would follow the rough outlines of the existikng B-2 Spirit bombers; a patent filing found by Aviation Week suggested that Northrop would also draw on the rough outlines of its X-47B drone for the Navy.

The new budget, of course, asserts that the existing bomber fleet is adequate for the time being. As we wrote on 12 August of last year, the few details known then about the putative Next Generation Bomber suggested that it would be equipped with a single but particularly large bomb bay. An oversized bomb bay is most useful for oversized, bunker-busting bombs, so this would make the bomber particularly aimed at the so-called deeply buried target set.

Cancellation of the program suggests that Bob Gates' thinking on this matter has rather evolved. There are several possibilities. He may be thinking that existing or developmental weapons in the USAF arsenal could hold this target set at risk from the B-2s. Alternatively, he could believe that the problem is intractable, or that deterrence--holding other targets at risk in return--is working just fine.

This strongly suggests that the USAF's next bomber, such as it may be, will be an unmanned platform. It may very well be nuclear-capable, in that nuclear-armed cruise missiles are similarly robotic but powerful weapons. Whatever the case, the decision definitely shows that Gates and his team are willing to change their minds, and to enforce their will after those decisions are made.

Changing Roles and Missions in 2009, and Military Suppliers' Needed Responses

To paraphrase Ted Logan, strange things are afoot in the E-Ring, at least for those who thought that roles and missions debates had been settled. As Marine General and Vice Chairman of the Joint Chiefs of Staff James Cartwright asked rhetorically at a media roundtable one month ago today,

If you have bombers in the Pacific, do you also have to have aircraft carriers? Do we always have to have every thing in every service? How much of this do we really need, especially given the situation we face, which is a much broader spectrum of conflict, over a much great geographic dispersal than we’ve had in the past?

That’s a rather bold statement, but Bob Gates and his people are making clear that they’re willing to make meaningful moves without waiting for a pile of analysis. My analysis here concerns aircraft specifically, but it covers all five military services in the United States, and should be applicable worldwide, and to other sectors of military supply.

To begin, both Aviation Week and Flight Global are observing today that the 2010 Pentagon budget indicates that the US Army and the USAF will be swapping turboprop aircraft fleets. Authority for purchasing 38 C-27J Spartans from Alenia (the first eight next year) is being transfered wholly to the Air Force, while control of 37 MC-12W Liberties from Hawker Beechcraft (including a final six purchased next year) may be swinging to the Army. This would consolidate the fixed wing transport mission in the Air Force, while confirming the Army’s primacy in low altitude battlefield surveillance.

Next, parsing Amy Butler’s numbers at Ares, wholesale revolution in the USAF’s priorities continues. I made light last year of how the USAF’s 2009 budget, for the first time, included more unmanned aircraft than manned ones. Overall purchasing in this request would be much lower, and not quite according to that pattern, but still radically different. The service is requesting 10 manned fighter aircraft (all F-35A Lightning IIs), 29 drones (MQ-9 Reapers and RQ-4 Global Hawks), and 29 assorted transport aircraft (CV-22s, C-27s, -37s, -40s, and -130s). That’s right: far more drones and transports than fighters—a seemingly unthinkable shift even a few years ago.

Attack helicopters are getting a hard look as well. The Army’s Armed Reconnaissance Helicopter (ARH) program is not being restarted just yet, but rather, the current OH-58D Kiowa Warriors will be upgraded and life-extended. An analysis of alternatives (AoA) has been launched to determine what to do thereafter. As Bettina Chavane reported on Aerospace Daily & Defense Report last month, depending on the results of that AoA, the ARH may not wind up being a manned helicopter at all. The Army could buy more rotary-wing drones in the form of MQ-8 Firescouts from Northrop Grumman, or even more fixed-wing drones in the form of MQ-1C Sky Warriors (Predators) from General Atomics. My helicopter pilot friends are quick to remind me that the capabilities of fixed-wing drones and manned helicopters are worlds apart, but the Army and the National Guard do already have over 700 AH-64 Apache attack helicopters. Regardless of “validated requirements,” that’s a lot.

Similarly, as Graham Warwick observes at Ares, the US Navy may or may not have a strike-fighter shortfall, but the upcoming Quadrennial Defense Review (QDR) will deal with that question squarely. Though the division of the money is seemingly even, the current budget requests 22 EA-18G Growler electronic attack aircraft, but just nine more FA-18E/F Super Hornet fighter-bombers. That’s more than enough to keep the unit costs at Boeing down, but it’s not nearly what the Navy wanted.

Over in the Homeland Security Department, the Coast Guard is asking for another two CN-235s (HC-144A Ocean Sentries) from EADS CASA for maritime patrol. If that seems modest, that’s because it doesn’t quite complete the program, which had been planned at 32 aircraft. No word yet on the significance of that restrained outlay.

New starts were particularly lacking in the Defense Department’s budget, and the QDR may result in further program cancellations. That doesn’t necessarily indicate a wholesale retreat for the US military, as many of the most cost-effective ideas today are line extensions of existing aircraft. Consider the USMC’s Harvest Hawk program, which converts new KC-130Js from tankers to tanker-surveillance-gunship aircraft. A few underwing pods, lightweight missiles, and a 30 mm door gun mean that the same airplane can watch for insurgents, refuel the incoming attack aircraft, and if that doesn’t work, use some direct fire to take them out personally. The idea itself is brilliant: as Stephen Trimble quotes a Marine at Flight Global, “if we can get more utility out of the tanker platform, then why not?”

That said, it is an open question who is the efficient operator of such an airplane. A colleague asked me the other day “why does the Marine Corps have fighter aircraft, anyway?” While I could muster a good justification, I couldn’t find as much to explain why the Corps—but not the Army—might need its own tanker-surveillance-gunship. Indeed, there is a reasonable argument that a land-based aircraft as this ought to be operated by the USAF, or at least in joint squadrons, with Army or Marine Corps involvement. This is rather how the USAF, the Air National Guard, and the Army operate the 17 E-8s of the 116th Air Control Wing, and to a broader degree, how the RAF, the Royal Navy, and the British Army together run the 250 aircraft of Joint Helicopter Command.

Something similar could be said about the future of the EA-18G, or even a future EF-35. The need for electronic attack aircraft is not disputed today, even with the huge pending purchases of stealthy F-35s. The USAF, however, hasn’t had an organic capability since the retirement of its last EF-111 Ravens in the mid-1990s, and cannot seem to decide what aircraft to use in that role in the future. Alternatively, the defense secretary could simply assign that mission to the Navy, utilizing a single aircraft type, which would naturally be carrier capable. The analysis awaits, but it seems reasonable to suggest that the costs of carrier operability for the additional squadrons could be outweighed by common fleeting with a single type and operator.

It is entirely possible that Gates is already thinking this with the shift in priorities from the FA-18E/F to the EA-18G. In this context, it is notable that Robert Work, a retired colonel of marines and former think-tanker, has been nominated to be the Navy’s next under secretary. Work is well-known for his advocacy of drones on carriers decks. His analysis of the issue at the Center for Strategic and Budgetary Assessments with Tom Ehrhard (himself a retired USAF colonel) argued that the range of the Navy’s carrier air wings could be tripled by replacing some of the current manned strike-fighters with reconnaissance-strike drones. If this idea gains currency with the small group undertaking the QDR, the Pentagon leadership will observe no supposed strike-fighter gap in the Navy. After all, Northrop Grumman is slated to begin underway carrier suitability demonstrations of its stealthy, jet-powered X-47B drone in just 2011.

What does this mean for military suppliers? Big changes, and in four ways:

Your customer today may not be your customer tomorrow. It is good that Alenia has an excellent relationship with the USAF, because whatever it had invested in getting to know the Army Department in the C-27J program is not likely to pay off in the future. At the end of the summer, the QDR could change things rather suddenly. If roles and missions will be changing meaningfully, suppliers may want to start knocking on new doors to smooth the shifts in relationships. Even if June or July is premature for starting, contractors with programs that could shift between services ought to at least get a marketing contingency plan in place. To know whether you’re in that lot, ask yourself not just who would be the likely, but rather the efficient, operators of the products you sell. In the long run—or possibly the very short run—that’s quite likely where your program is going.

Worse, your whole program really could disappear tomorrow. If you were building the Next Generation Bomber at Northrop Grumman, it just did. If you’re working on the KC-X replacement at Airbus/Northrop or Boeing, you’ll still have a good shot at building hundreds of tankers for the USAF, because no one can come up with a better idea than refueling aircraft in the air with other aircraft based on existing airliners. Beyond that, few things about future budgets are certain. The aforementioned FA-18E/F may be moderately priced, but it’s not remarkably long-ranged and not remotely stealthy. It’s no wonder that Bank of America’s equity analysts last month asserted that “Boeing's future in the fighter market is precarious.” Having a back-up plan for your redeployable (as economists say, non-specific) assets is getting increasingly important. Fortunately for Boeing, as I note below, the boys in Saint Louis are already on this.

Don’t try to invoke “the industrial base” in your defense. Time was, big contractors could scare the government into buying more airplanes out of fear that something called “the industrial base” would vanish from neglect. On calm consideration, it’s hard to imagine that happening with $670 billion in annual US military spending. Moreover, structural government intervention in the collection of industries that get called defense has not been very successful. Consider how, as I argued in a paper in 2007, the USAF has tried, “in the roughly thirty years in which Airbus has been rising as an aircraft manufacturer... to defend the business of any US-based manufacturer of large commercial aircraft that was threatening to exit the business by allocating
work, extending credit, and running interference with the Congress.”

Fortunately for the government, that came to a suitable and screeching halt in the Bush Administration. As then-Air Force Secretary Jim Roche told Andrea Shalal-Esa of Reuters in January 2005, “if you have no leverage, and you have a company who thinks they're a monopoly supplier, then you're stuck and you flail and fight as we did.” That behavior has now largely lapsed, because technologically dynamic, entrepreneurial firms have shown governments (particularly in the US and the UK) that market entry is possible. This has been particularly demonstrated in the armored vehicles and unmanned aircraft sectors. If today the MQ-9 Reaper is part of the USAF’s force structure and employment calculations, then General Atomics’ industrial capabilities are assuredly part of its view of the industry.

Better yet, consider how a line-extension could ingress on someone else’s turf. After years of public speculation about the future of that aforementioned fighter aircraft business in Saint Louis, Boeing revealed this week that it has gotten the message. More pointedly, it revealed its Phantom Ray jet drone demonstrator, an internally-funded outgrowth of its work on the X-45 in the Joint Unmanned Combat Air System (J-UCAS) program. Graham Warwick lauded this “new focus on prototyping”; Amy Butler asserted that “this type of company-funded research is likely to become more critical to the survival of Boeing and its rivals in light of the expected leveling-off in U.S. defense spending.” I couldn’t agree more. Separately, Boeing has also landed a contract from Special Operations Command for 20 MQ-18 Hummingbird rotary-wing drones, and another for something called a “Mid Endurance Unmanned Aircraft System,” which is quite possibly an Insitu Integrator. With all this activity, the company is going after the drone business on multiple fronts.

Boeing has indeed been busy, but is of course not the only firm thinking this way. Consider the gunship question: Air Force Special Operations Command wants a AC-27J Stinger II; the Marine Corps is working on that KC-130J Harvest Hawk. Both could be multi-mission ships, as the Stinger IIs could be equipped for more than just carrying cannons and lightweight missiles. At least, that’s the marketing fight that Lockheed Martin, Alenia, L3, and all their subsystem suppliers ought to be having: to demonstrate that their off-the-shelf solution has the broadest or most cost-effective multi-mission applicability.

Starting wholly new programs without some wholly new capability has become appropriately unpopular these days. Now is the time to be thinking of what else you can pull out of the hangar or the garage for a second look, what else can get a new pod or fairing or remote mount, and what else could be done with that venerable system that hasn’t been rethought in years. If you’re inclined towards a woe-is-we argument, sharpen your pencil on the short-term issues. As future military needs are less knowable today than they were a decade ago, emphasize to customers the money that they could save in the next two to three years by extending or accelerating your program. That could at least buy some time for your next round of innovation.

"We don't have a plan beyond 2010."

That was Pentagon Comptroller Robert Hale’s preemptive explanation as to why today’s detailed budget release didn’t extend past the pending fiscal year. At once, it’s a breathtaking but unsurprising remark. Any political party assuming power anywhere in the world ought to bring with it a multi-year military procurement plan, but few do. However, as we’ve seen from a long series of Pentagon budgets, only the first two years or so of any spending plan is worth its ink anyway. Thus, no one has cause for alarm.

Indeed, we have today at least the outlines of a plan. The defense secretary still wants 55 littoral combat ships, and a constant (if slightly lagged) supercarrier build rate. The USAF and USMC will get a whole lot of F-35 Lightning II Joint Strike Fighters, and eventually the Navy will as well. Space satellite purchasing is being bridged with existing products because the stretch of the last set of development efforts proved too far. Many more decisions are being put off until the conclusion late this summer of the Quadrennial Defense Review.

The outlines are least clear in the United States for the land forces, the dimensional segment of military power that is most heavily engaged against the Salafists. This is arguably true around the world, because spending plans—when governments actually care about political objectives and the welfare of their troops—must eventually come in line with real battlefield needs. Working from this principle, I had been telling clients since at least 2005 that the US Army’s Future Combat System program—at least the vehicles portion of it—would never cut much metal. Today, the plan for armored vehicles in the US Army and Marine Corps pretty much consists of the MRAP-ATV, the developmental JLTV, and yet another try at the EFV. After that, little is being said, at least by the services. After all, Robert Gates’ scorn for how the FCS manned ground vehicles were to have flat bottoms just eighteen inches off the ground should apply to the EFV and the Army’s huge fleet of Bradley fighting vehicles as well.

Given the evolving threat, it’s no wonder that MRAP vehicles in Iraq get twice the monthly mileage of Bradleys, and that Strykers get twice that again. That’s right: according to the US Congressional Budget Office, Bradleys are driven less than 300 miles, MRAPs about 600 miles, and Strykers about 1200 miles each month in country. The Army’s aging M113s are rarely allowed outside the wire, clocking just 60 miles. Commanders will use the assets that protect their troops best, and as much as they can. That’s why the budget calls for 1,080 MRAP-ATVs just this year, and why some in the congress are calling for yet more.

With numbers like these, smart military suppliers don’t actually need paper plans from governments for planning business. Rather than skating where bureaucrats tell them the puck is going, they can skate where it’s going to be, one way or the other. Shortly, someone will build a prototype of a robustly blast-resistant eight-wheeled armored vehicle, and make a pile of money at it. In the air, General Atomics is already ahead of the game with its jet-powered, stealthy Avenger drone. MQ-9 Reapers are now slated to replace the oldest F-16s and A-10s, and with those folding wings and tailhook, the Avenger could replace something more. Clever producers of sensors and data fusion systems needn’t wait for new platforms to be conceived; urgent requests from the field will ensure that their latest kit gets on helicopters and turboprops that can be ordered, like the MC-12W Liberties, in a single year.

Simply put, new infusions of information technologies and greater uncertainties in military-political planning are shortening the clock cycles of new product development for military suppliers. Political officials can talk airily about how many aircraft carriers a navy will possess in 2040, but the chatter is of no value. What matters for the troops, and for suppliers who care about discounted cash flows, is what will be needed in the next several years. Within that window, there’s reason to plan; after that, it’s anyone’s guess.

The End of Force Structure

We are dispatching to a distribution list throughout the business a further viewpoint on what lies ahead for the industry in the rest of 2009, and beyond. This paper goes by the title

THE END OF FORCE STRUCTURE
Relevance, responsiveness, rapid learning, and the renewal of entrepreneurship in military contracting

As we see it, recent announcements in the US and the UK regarding the rebalancing of military spending priorities reflect broad and ongoing evolutionary change in the demand for military forces. The familiar scenarios for which force structures had long been planned are giving way to actual preparation for the messy, distant, persistent, small wars of the 21st century. Indeed, the very construct of force structure is giving way to force generation as the dominant paradigm of planning.

This new focus on supporting forces in the field, rather than force structures in garrison, is leading to three broad changes in military-industrial planning. In investment strategy, capital expenditure is giving way to the relevance of operating expenditure; in industrial strategy, capacity is increasingly less valued than responsiveness; and in technology strategy, long cycle innovation is yielding to the rapid learning of short cycle innovation.

In this new, more dynamic environment, entrepreneurial suppliers can succeed by tapping into the information streams of logistics and training markets, by tackling aftermarkets with the same gusto as serial production, and by embracing engineering and product development as their best bet for finding an inimitable capability. The result will be customer needs that are met before they are stated, and defensible profit margins for the forward thinking. Fortis fortuna adiuvat.

The full, 11-page paper is attached as a PDF file for download.

This effort is, if you have been following, the second in a series of papers developed in a research project that I started with some colleagues in early 2008 on the qualities arms makers will need to succeed as their customers in defense ministries undertake messy small wars around the sketchier parts of the globe. One of our colleagues had this to commentary to offer (I have slightly edited the text):

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I really like this. Very insightful.

I accept what you demonstrate and appreciate your arguments. I have now moved on to try and figure out what the “hybrid” approach looks like. After all, some (though not all) of the emergent technologies, systems, etc. will find themselves based on existing platforms, and some of those platforms will in fact require capital investment, some years in development, etc. For instance, we are installing BMD systems on Burkes, but that was likely not thought of at the outset in the late 1970s. However, in order to do this, accomplish this mission, retrofit the system, you have to have the system in the first place, and the Burke is arguable a very, very good system. The P-8A will be a good system, but it required a 737 platform that itself took capital, some years in development, etc. to make this a possibility today.

So the simple answer is you need modular, scalable systems. OK, that’s buzz-word compliant, but it will be important to really understand what this means, and perhaps to understand and plan for not the force structure, but the loose platform requirements that may be necessary to support the innovation in systems that will then populate that platform for years to come? And there will be some platforms that just come along and innovate themselves (ie, Predator / Warrior / Reaper / Avenger).

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I agree. We are moving on to help enterprises discover the mechanics of those hybrid approaches.