Page 96 – Defense Daily

B-52 CERP Faces Concurrency Challenges, DOT&E Says

A recently released fiscal 2024 report by the Pentagon Director of Operational Test and Evaluation (DOT&E) noted concurrency challenges for the re-engining of the B-52 bomber fleet under the U.S. Air Force Commercial Engine Replacement Program (CERP), as Rolls-Royce said that its F130 engine for CERP is on track.

Under CERP, a rapid prototyping Middle Tier of Acquisition effort, the Air Force is moving to put the F130 engines on the bomber to replace the B-52H’s Pratt & Whitney [RTX] TF33-PW-103 engines, which the Air Force has said it wants to retire by 2030.

In September 2021, the Air Force awarded Rolls-Royce a CERP contract worth potentially $2.6 billion through fiscal 2038 to outfit the B-52 with the F130, based on Rolls-Royce’s commercial BR725 carried on Gulfstream [GD] G650 business jets (Defense Daily, Sept. 24, 2021).

CERP and the Radar Modernization Program (RMP) are the Air Force’s key modernization efforts for the Boeing [BA] B-52H bomber. The modernized bombers will carry the B-52J designation.

“Integration of new engines on a legacy aircraft is a major design change,” said last month’s DOT&E report, which provides updates on top DoD weapons programs. “B-52J CERP integration will require extensive flight tests to evaluate safety and performance in the areas of aircraft structures, wing flutter, propulsion system compatibility, aerodynamic performance, and aircraft flying
qualities in critical phases of flight.”

DOT&E said that F130 low-rate initial production (LRIP) contracts would come before CERP initial operational test and evaluation in fiscal 2032 and would cover 51 of 74 bombers–the remaining 23 covered under a full-rate production contract in fiscal 2033.

“Changes in aircraft performance and flight characteristics require recertification of air refueling compatibility with all supporting tanker aircraft and recertification of all employed weapons,” the DOT&E report said. “Based on results from previous flight test programs, the risk of deficiency discovery in one or more of these areas is high. The proposed Air Force acquisition strategy
implements a highly concurrent flight test and production program, with LRIP contracts awarded for 69 percent of fleet aircraft prior to IOT&E.”

“A contract for the first LRIP lot for five aircraft would be awarded prior to the start of the flight test program,” DOT&E said. “Three additional LRIP contracts, covering 46 more aircraft, would be awarded prior to completion of the developmental flight test program and IOT&E. Previous aircraft development programs with highly concurrent flight test and production schedules of this kind have frequently incurred significant cost increases and schedule delays driven by deficiency discoveries.”

For systems other than Navy ships and military satellites, Section 4231 of Title 10 provides that DoD limit LRIP of major systems to 10 percent of total production unless the defense secretary justifies an increase beyond that threshold and receives a congressional waiver. That 10 percent ceiling is to limit concurrency while providing the minimum number of systems needed for operational test and the creation of an initial system production base to ease the transition to increasing the build rate.

“Air Force rationale for establishing 69 percent of [B-52H] fleet aircraft as the minimum LRIP quantity necessary for these limited purposes is based on a 2017 business case analysis,” DOT&E said. “That analysis projected significant cost savings from procurement of a commercial engine replacement in fewer and larger lots with installation schedules aligned with existing B-52 periodic depot maintenance schedules.”

In December, Rolls-Royce said that the F130 passed an Air Force Critical Design Review (CDR)–a step “clearing the way for final development, test, and production efforts to proceed and taking another step toward delivering the upgraded B-52J” to the service (Defense Daily, Dec. 13, 2024).

Rolls-Royce said on March 1, 2023 that it had begun testing the F130 at the company’s outdoor testing site at NASA Stennis Space Center in Mississippi.

The testing at NASA Stennis “marked the first time F130 engines were tested in the dual-pod engine configuration of the B-52 aircraft,” the company has said, and the Rapid Twin Pod Tests, which finished over the summer, “played a key role in validating Rolls-Royce’s analytical predictions, further de-risking the integration of the F130 engine onto the B-52J and meeting test goals,” Rolls-Royce has said.

Last summer, the Air Force said that it was undertaking a cost reduction effort for RMP and CERP (Defense Daily, July 31, 2024). Total Air Force estimated costs for CERP have risen to $15 billion from $12.5 billion, the service said. The $15 billion includes $6 billion for development and $9 billion for procurement.

The Air Force plans a CERP Engineering and Manufacturing Development decision this fiscal year–a delay from the original schedule of fiscal 2024 “due to changes required in nacelle design and auxiliary engine systems,” DOT&E said.

“Throughout our rigorous testing program, the F130 engine has demonstrated incredible dispatch reliability, which will lead to lower lifecycle costs and improved fuel efficiency,” Scott Ames, Rolls-Royce’s B-52 program director, said in a Friday statement.

“Our digital modeling and testing program have informed and confirmed our predictions, allowing us to stay on track to deliver for the Air Force,” he said. “Working closely with our partners at Boeing, we have successfully met major program milestones – including holding the engine CDR, completing Rapid Twin Pod testing to support the B-52’s unique nacelle configuration, and finishing the first phase of sea-level testing in Indianapolis.”

Navy Awards Series of Contracts For Future Mine Countermeasures Capabilities

The Navy on Monday said it has recently awarded a series of contracts focused on future mine countermeasures (MCM) capabilities.

The service first said it awarded a $7.7 million first contract to MCM Unmanned Surface Vehicle (USV) builder Bollinger Shipyards for an Advanced Material Order (AMO), procuring items needed to improve the MCM USV resulting from operational testing findings.

The MCM USV is a craft launched from a Littoral Combat Ship (LCS), vessel of opportunity or the shore that can field multiple payload delivery systems to perform MCM missions.

The MCM USV is one of the major components of the LCS MCM Mission Package (MP) and is designed to conduct minesweeping, hunting and neutralization missions, replacing the crewed Avenger-class MCM ship. These will be fielded on the even-numbered Independence-variant LCSs, built by Austal USA.

The Navy said it also awarded RTX’s Raytheon Technologies [RTX] an $18.3 million contract to produce five Minehunt Payload Delivery System (MH PDS) units and Textron Systems [TXT] a $12.1 million production contract to produce four Minesweep Payload Delivery System (MS PDS) units, with deliveries expected in fiscal year 2026 and early FY 2027, respectively.

This follows a $22 million Nov. 25 award to RTX for MH PDS production, which noted it stows, deploys and retrieves the AN/AQS-20C towed mine hunting sonar body from the MCM USV. Work under that contract is set to last through FY 2025.

LCS Mission Modules Program Manager Capt. Matthew Lehmann noted first deliveries of the MCM MP are underway and deployments will follow, so they must put contracts in place now to provide the needed systems.

“It is critical to ensure we have the contracts in place to procure and deliver the quantity of mission packages to the Fleet required in today’s changing world. These contract awards ensure our Littoral Combat Ships will continue to receive the modernized MCM equipment needed to conduct their missions, allowing our Sailors to operate safely and stay outside of the minefield,” he said in a statement.

While the MS PDS provides acoustic and magnetic minesweeping capabilities to the MCM Mission Package, the MH PDS uses the AN/AQS-20 sonar for mine hunting missions.

“These contracts are pivotal to ensure that the Navy’s LCS are equipped with the most advanced and reliable mine countermeasures capabilities,” Rear Adm. Kevin Smith, Program Executive Office Unmanned and Small Combatants (PEO USC) program executive officer, added.

The other major part of the LCS’s MCM Mission Package is an MH-60S Seahawk helicopter equipped with the AN/AES-1 Airborne Laser Mine Detection System (ALMDS) and AN/ASQ-235 Airborne Mine Neutralization System (AMNS).

Pentagon Weapons Tester Says Next-Gen Jammer Issues Now Software Related; First Deployer Says So Far, So Good

The Next Generation Jammer Mid-Band (NGJ-MB) is still dealing with reliability problems, now focused on software issues, according to the latest report from the Pentagon’s chief weapons tester.

While the Navy made “substantial progress” in the system in fiscal year 2024, a report by Office of the Director of Operational Test and Evaluation (DOT&E) said they still could “not draw definitive conclusions about the systems’ operational effectiveness or suitability” based on the integrated testing results.

An EA-18G Growler, attached to Electronic Attack Squadron (VAQ) 133, launches from the flight deck of the Nimitz-class aircraft carrier USS Abraham Lincoln (CVN-72) on Nov. 14, 2024 in the Central Command Area of Responsibility. (Photo: U.S. Navy). — An EA-18G Growler, attached to Electronic Attack Squadron (VAQ) 133, launches from the flight deck of the *Nimitz*-class aircraft carrier USS *Abraham* *Lincoln* (CVN-72) on Nov. 14, 2024 in the Central Command Area of Responsibility. (Photo: U.S. Navy).

The annual DOT&E report on major Pentagon weapons programs was released last week.

“Technical challenges were significant during the course of all testing in FY24. Specifically, reliability has been a clear challenge during the course of the program development, to the point of affecting suitability and the ability to assess the performance of the system overall,” the weapons tester said.

Whereas previously the NGJ-MB reliability issues were focused on hardware issues, DOT&E said after further development and implementing a round of fixes, the current issues are now largely software-based.

However, the report noted while data is still insufficient to fully assess system reliability, trends in the data “have been markedly improving, suggesting the potential for a strong positive reversal in the future.”

The overall NGJ program seeks to replace the legacy ALQ-99 jammer on EA-18G Growler aircraft by dividing the mission into low, mid and high-band frequency contract increments. The Mid-Band segment is the first increment of this effort.

RTX initially won the first $1 billion NGJ-MB contract in 2016 to design, build and test these pods (Defense Daily, April 15, 2016).

The report also noted there is still insufficient rest data for the later version of the NGJ-MB and EA-18G Growler aircraft software to determine operational effectiveness, suitability, and survivability.

It said Initiation Operational Test and Evaluation (IOT&E) is set to be finished in the first quarter of FY 2025, with DOT&E planning to publish its IOT&E report by the third quarter of FY 2025.

The report recommended the Navy complete IOT&E, “performing the most rigorous testing possible on the open-air ranges, in accordance with the DOT&E-approved test plan;” continue to develop and support advanced test and training infrastructure for electromagnetic warfare; and continue to refine the software development plan, threat and technique libraries, and tactics, techniques, and procedures for the use of NGJ-MB.

Last month, the Navy declared initial operational capability (IOC) for the system, which at the time it said is a sign the design, testing and production of NGJ-MB “meet the logistical needs of the carrier air wings and EA-18G Growler squadrons” (Defense Daily, Jan. 6).

The Navy first showed off the NGJ-MB’s capabilities during the five-month deployment of the USS Abraham Lincoln (CVN-72)’s carrier strike group in 2024, including its first use in combat when deployed to hostilities in the Middle East against Houthi forces in Yemen.

Speaking to reporters aboard his ship ahead of the WEST 2025 conference in San Diego last month, CVN-72’s commanding officer said his assessment of it is “so far, so good.”

“I will tell you, the interesting thing about electronic attack is sometimes it’s hard to determine your effectiveness. You know, it’s like trying to prove a negative, but the capabilities of the next gen jammer are incredible, certainly more than the old ALQ-99 and the air crews that flew with it had nothing but good things to say about it,” Capt. Pete Riebe, Commanding Officer of the USS Abraham Lincoln said.

“There are a few constraints on the flight deck and where we can launch it from, but we were able to overcome those pretty easily,” he added.

Alaska Military Bases Should Have Counter-Drone Technology Used In Ukraine, Research Official Says

The threat to U.S. military bases in Alaska from drones points to the need for more testing of equipment, and for better technology, that can take-down potential threats posed by unmanned aircraft, the head of a federally-sponsored unmanned aircraft system (UAS) research center in the state told a congressional panel on Thursday.

Domestic limitations on the testing of counter-UAS (C-UAS) technologies is forcing U.S. companies to test their systems in Ukraine in real world operations against Russian aggressors but more of this testing should be happening in the U.S. and at a faster pace, Catherine Cahill, director of the Alask Center for UAS Integration (ACUASI) at the Univ. of Alaska Fairbanks, said.

Alaska is challenged by people launching drones from Eielson AFB, home to two F-35 fighter squadrons, and flying them over the Army’s Fort Greely, where Ground Based Interceptors are based to protect the U.S. from ballistic missile attacks, Cahill told the House Transportation and Infrastructure Committee’s aviation panel.

“We need to have this technology deployed at our military bases, and many of them do have some of the counter-drone technologies, but it needs to be improved, it needs to be strengthened,” Cahill said. “We need to be doing the research to make sure our military has the best systems possible.”

In her written statement, Cahill argued that the U.S. should do more to facilitate testing of technology to not only detect, track, and identify (DTI) UAS, but also to mitigate threats from these drones, which usually is either by kinetic or non-kinetic means.

The Army oversees a joint office that evaluates counter-drone technologies at a military range. The Department of Homeland Security, in particular the Science and Technology Directorate, and the Transportation Security Administration, have tested DTI capabilities in different environments. And the Federal Aviation Administration also manages seven test sites around the U.S., including Alaska, for integrating UAS into the national airspace and for countering the aircraft.

Cahill said ACUASI is allowed to test DTI systems for drones but not technologies to mitigate them. Her center is partnering with authorized agencies to allow testing to determine the effectiveness of mitigation systems, she said.

The U.S. needs to lead in C-UAS technology and, at some point, there will be a “serious UAS attack on U.S. soil,” Cahill warned in her statement.

“We need to test these technologies in Alaska due to our extremely harsh environment, large number of general aviation and commercial aircraft that could adversely be affected by a C-UAS system, our proximity to Russia, the operation of Chinese vessels and aircraft near our shores, and the number of unauthorized UAS operations over our critical military infrastructure,” she said in her statement.

Army Could Begin Fielding Upgraded IVAS 1.2 In Early FY ‘26, DOT&E Says

The Army could look to begin fielding the upgraded “1.2” version of its Integrated Visual Augmentation System (IVAS) headset in early fiscal year 2026, according to a report from the Pentagon’s weapons tester office.

An operational assessment with the IVAS 1.2 mixed-reality headset is likely slated for the third quarter of this fiscal year and will inform the Army’s plan to make a production decision before the end of FY ‘25, the Office of the Director of Operational Test and Evaluation (DOT&E) notes in its annual report on the program.

IVAS 1.2 will be the IVAS variant fielded to the close combat force. Photo: Frederick Shear, PEO Soldier

The insight into the potential upcoming road ahead for the IVAS program arrives as Army Secretary nominee Dan Driscoll has described the program as a “shining beacon of effective development” (Defense Daily, Jan. 30).

In March 2021, the Army awarded Microsoft [MSFT] a deal worth up to $21.9 billion over the next 10 years to move the IVAS augmented reality headset program from rapid prototyping into production (Defense Daily, March 31, 2021).

Following an operational test with the initial 1.0 version of IVAS in June 2022, Army officials detailed a plan to adjust the program’s timeline to address reliability, low-light sensor performance and form factor issues identified during the evaluation, and in early January 2023 awarded Microsoft a $125 million deal to work on developing an upgraded IVAS 1.2.

The DOT&E notes there are no further operational tests planned with the earlier IVAS 1.0 and 1.1 variants, while it adds the Army does intend to issue some IVAS 1.1 headsets “using a limited safety release to select units to support its campaign of learning.”

Doug Bush, who was the Army’s most recent acquisition chief, told reporters in September that a series of ongoing evaluations with Microsoft’s IVAS 1.2 headset were intended “to gain knowledge about whether it is good enough to go to production,” with the decision likely to be made in FY ‘25.

The program report cites the specific user assessment with IVAS 1.2 from last July at Joint Base Lewis-McChord in Washington where the upgraded headset was provided to two squads of infantry soldiers.

“The purpose of the [user assessment] was to determine if the IVAS 1.2 form factor improves compatibility with current weapons systems, measure the effectiveness of low light and thermal sensors to determine if threshold and objective requirements have been met and demonstrate the ability for the network architecture to support select robotic autonomous systems,” the DOT&E writes in the report. “The [program manager] used the data collected to support its recommendations on program progression.”

The IVAS 1.2 system is next set to go through a “cooperative vulnerability and penetration assessment,” according to the DOT&E report.

The Army has also said the performance of IVAS 1.2 is also informing plans for a competitive IVAS Next initiative, with the service recently releasing a Request for Information as it explores a possible recompete of the potential $22 billion program (Defense Daily, Jan. 22).

Bush said in September the Army would “probably” decide in 2025 whether to pursue IVAS Next, noting no call had been made yet on whether it will definitely be a re-compete and that service is “setting conditions” to make it a competitive effort if it chooses to do so (Defense Daily, Sept. 12 2024).

“The potential for a future competition is there because there are so many companies in this space and there’s so much dynamic tech here that we certainly need to preserve the option of having a competition in the future if other people come with good solutions. But the decision hasn’t been made to for sure go that route,” Bush told reporters at the time.

Honeywell Earnings Rise While Aerospace Operating Income Dips

Earnings rose at Honeywell [HON] in the fourth quarter, even while the company reported a dip in Aerospace, the segment involved with management of several defense-nuclear sites.

Net earnings for the entire company for the fourth quarter were $1.29 billion, or $1.96 a share, up from $1.24, or $1.91 a share, in the year-ago quarter, the company reported Thursday. Quarterly revenue was $10.1 billion, up year-over-year from $9.4 billion.

Quarterly segment operating income for the fourth quarter, ended Dec. 31, for the Aerospace Technologies segment, which includes the Federal Solutions operations responsible for Department of Energy contracting, was $811 million, down from $1.03 billion a year ago. Segment revenue was $3.98 billion, up from $3.67 billion in the year-ago period.

Vimal Kapur, CEO of Honeywell, said on a conference call with investors Thursday that “while we may have gone in” to the year with “too much optimism, we have adapted.”

Honeywell is the sole or lead partner on the management and operations contractors for the Department of Energy National Nuclear Security Administration’s Kansas City National Security Complex, Nevada National Security Site and Sandia National Laboratories.

Honeywell Splitting Up, Aerospace To Become Independent Business In 2026

Following activist shareholder pressure and a portfolio review, Honeywell [HON] on Thursday said it would separate into three separate companies, including the $15 billion Aerospace segment into its own publicly traded business.

The separation will take effect in the second half of 2026, and along with the separation of the Automation segment, will be tax-free to shareholders, the company said.

The remaining business, Advanced Materials, will be spun-out as planned, Honeywell said. “As Aerospace prepares for unprecedented demand in the years ahead across both commercial and defense markets, now is the right time for the business to begin its own journey as a standalone, public company,” Vimal Kapur, Honeywell’s chairman and CEO, said in a statement.

Of the 2024 Aerospace sales, 40 percent were defense-related, 14 percent was for commercial original equipment, and 46 percent to the commercial aftermarket. Segment operating margin was 26 percent.

Most of Aerospace sales are to customers in the Americas, 63 percent, followed by Europe, the Middle East, and Africa, 23 percent, and the Asia-Pacific, 14 percent.

The company is forecasting high-single digit sales growth for Aerospace in 2025.

Aerospace products include avionics, engines, auxiliary power units, and satellite content.

The upcoming spin-outs mirror recent trends with other multi-industrial companies such as General Electric and United Technologies Corp. that resulted in the creation of new standalone businesses between their various operating segments.

F-35 Program Says It Has ‘Eliminated’ More Than 20 ‘Readiness Degraders’ in Past Year

In response to a newly released DoD Director of Operational Test & Evaluation (DOT&E) report that has a section on the Lockheed Martin [LMT] F-35 fighter, the F-35 Joint Program Office said that the report “highlights shortcomings without adequately addressing the corrective actions the JPO has taken to address the challenges.”

“Every observation requires—and has received—a response from the JPO, and we have made tangible progress in remediating the issues in the report,” the program said. For example, the JPO said that it ” is focused on improving mission capable and fully mission capable rates and is committed to fleetwide sustainment coverage.”

“While the program has put forth significant effort, a small number of degraders mask tremendous progress that’s been made,” the program said. “Over the past year, we have eliminated over 20 top readiness degraders. That said, our overall readiness rates remain unacceptable. Deployed and operational aircraft demonstrate much higher mission capable rates than the rest of the fleet. It’s essential to invest in spares and repair capacity in a timely manner, as well as attack every other aspect of readiness with our stakeholders.”

The DOT&E report pointed to repairs related to the F-35’s low-observable materials, “adhesive cure times for attaching hardware such as nutplates, and spares posture for those critical items most in demand” as being part of F-35 non-mission capable for maintenance (NMC-M) rates and advised the F-35 program to “continue to pursue maintenance system improvements, training, and tools” for such NMC-M “drivers.”

The F-35 JPO declined to name the more than 20 readiness degraders that the program said it has “eliminated” in the last year.

Meeting the F-35’s JSF Operational Requirements Document’s (ORD) benchmarks for mean flight hours between critical failure (MFHBCF) continues to be a problem, especially for the U.S. Air Force F-35A, which has a 20 flight hour MFHBCF standard in the ORD. Between fiscal 2015 and fiscal 2023, the F-35A never hit 15 flight hours between critical failures, defined as those found in the air or on the ground that make the aircraft unsafe to fly or prevent mission completion.

Section 165 of the fiscal 2025 National Defense Authorization Act stipulates a delay in delivery of 20 of 68 F-35s in fiscal 2025 until the defense secretary submits a report on “certain corrective action plans and acquisition strategies that will improve research, development, testing, evaluation, production and sustainment issues and deficiencies identified across multiple areas within the F–35 program enterprise” (Defense Daily, Dec. 9, 2024).

The law provides that before the delivery of the 20 F-35s, there must be implementation of a plan to minimize F-35 production “disruptions” and the resolution of programmatic flaws with the F-35’s planned new, Northrop Grumman [NOC] AN/APG-85 radar; a fielding of F-35 digital twins; a new cooperative avionics flying testbed aircraft; a “new F–35 mission software integration laboratory to enable concurrent testing of TR–2 [Technology Refresh-2] and TR–3 mission system hardware, software, and any existing or new F–35 capabilities”; implementing deficiency correction recommendations from the 2024 F–35 Initial Operational Testing and Evaluation report by the DoD Directorate of Operational Testing & Evaluation; putting into action counsel by the F–35 software Independent Review Team; and enacting F-35 sustainment improvements and increases to the aircraft’s mission capable rates through the completion of military service depot establishment, reducing parts corrosion, and developing ways to surge support for the F-35 in times of conflict.

As the F-35 program aims to deliver a “fully combat capable” fighter this year with the TR-3 software upgrade–the foundation for dozens of envisioned Block 4 weapons and sensors, a significant part of the effort is rejuvenating laboratory capacity, and Lockheed Martin said that it will invest $350 million over five years for such capacity (Defense Daily, Sept. 18, 2024).

“As of January, we have delivered over 100 TR-3 equipped aircraft, bringing the total number of operational aircraft delivered to more than 1,100,” the F-35 JPO said in response to the new DOT&E report. “All of these TR-3 equipped aircraft now have software, ensuring users have access to robust training capability. The F-35 JPO remains focused on working through known risks to deliver TR-3 combat capability in 2025.”

HII Ends 2024 On Sour Note As Earnings, Sales Decline

HII [HII] on Thursday reported a steep decline in earnings in its fourth quarter driven by lower performance in construction of attack submarines and new aircraft carriers coupled with non-recurring gains a year ago related a tax recovery and an insurance settlement.

Sales also fell across the company’s operating segments, with shipbuilding revenue down on lower volume on amphibious assault ships and aircraft carrier refueling and overhauls, less revenue from contract adjustments on attack submarine and carrier construction, less nuclear support work for the Navy, and less C5ISR work.

Net income in the quarter tumbled 55 percent to $123 million, $3.15 earnings per share (EPS), from $274 million ($6.90 EPS) a year ago, short of consensus estimates by 13 cents per share. Those estimates were already depressed following a difficult third quarter when HII said delays in an omnibus submarine building contract that factors in post-COVID labor and wage-related realities had been stalled, combined with a less experienced workforce and infrastructure constraints cut into the bottom-line (Defense Daily, Oct. 31, 2024).

The company’s guidance assumes the contract for the 17 submarines—to include two

Virginia-class submarines in the fiscal year 2024 bill, one Columbia-class nuclear missile submarine—will be signed, Chris Kastner, HII’s president and CEO, said on an earnings call. He expects the contract for the Virginia submarines to be signed in the “first part” of 2025.

Shipbuilding operating margin in 2024 across HII’s two shipbuilding segments was 5.2 percent, well off the plan of several years ago that called for margins of 9 to 10 percent in these businesses. Kastner believes the company can return to its shipbuilding margin goals, highlighting that the government “has been very receptive to understanding the current economic environment, and we will get inflation protection in those in those new contracts.”

In 2025, about 70 percent of shipbuilding sales will come from contracts that were signed before the COVID pandemic, and that percentage will drop to 60 percent in 2026, and below 50 percent in 2027, Tom Stiehle, HII’s chief financial officer, said on the earnings call.

While HII exceeded its 2024 goal of hiring more than 6,000 shipbuilders, “attrition remains stubbornly high,” Kastner said. The company’s data shows that increasing wages, with help from the Navy, will stabilize the workforce, and also allow the hiring of skilled shipbuilders, he said.

HII’s acquisition in January of metal fabricator W International, which adds 500 workers and 480,000 square feet of additional space, is part of the company’s plan to increase shipbuilding throughput by 20 percent over 2024. The Charleston, S.C., facility is already building aircraft carrier units and soon will be constructing submarine units, Kastner said.

The labor initiatives, ramp-up of the Charleston operations, increasing outsourcing, and the use of contract labor to close skill gaps, are part of the shipbuilding throughput plan for 2025, which is the first of three operational imperatives for HII this year, he said.

The second imperative is achieving $250 million in annualized cost savings already underway, including a new payroll system and reducing the Mission Technologies segment from six down to four business units.

Finally, HII is ensuring that new ship contracts account for the “current economic and production environment,” Kastner said.

Sales in the fourth quarter were down about 5 percent to $3 billion from $3.2 billion a year ago. For the year, sales increased less than a percent to $11.5 billion. Net income in 2024 fell 19 percent to $550 million ($13.96 EPS) from $681 million ($17.07 EPS) in 2023.

HII introduced expectations for 2025, with shipbuilding sales between $8.9 billion and $9.1 billion versus $8.7 billion in 2024. The outlook at Mission Technologies is $2.9 billion to $3.1 billion versus just over $2.9 billion in 2024.

Operating margin at the Ingalls and Newport News Shipbuilding segments combined is expected to be between 5.5 percent and 6.5 percent in 2025. Margin at Mission Technologies is expected in the 4 percent to 4.5 percent range. Free cash flow in 2025 is projected at between $300 million and $500 million, versus $40 million in 2024.

Over the next two years, HII expects to garner $50 billion in contract awards, helping to provide long-term visibility of more than 4 percent growth annually and putting the company on track to $15 billion in sales in 2030, and margins expanding incrementally.

HII tallied $12.1 billion in orders in 2024 and backlog stood at $48.7 billion, up a percent from $48.1 billion at the end of 2023.

Applied Intuition Acquires EpiSci, Creating Multi-Domain Autonomy Solutions Company

Applied Intuition on Thursday said it has acquired EpiSys Science, Inc. (EpiSci) in a deal that complements its capabilities and expertise in applying artificial intelligence and autonomy software to ground vehicles with similar technologies in the air and maritime domains.

The new addition also demonstrates Applied Intuition’s commitment to the defense market. EpiSci was one of several companies with AI-based software used to autonomously pilot the X-62 test aircraft—an F-16 variant—last spring with then-Air Force Secretary Frank Kendall aboard (Defense Daily

, May 3, 2024).

EpiSci’s work in defense was not the reason for the acquisition but “a takeaway is we continue to invest in defense [and] defense is a big priority for us,” Qasar Younis, co-founder and CEO of Applied Intuition, said in an interview last month ahead of the deal announcement.

“We’re very committed to this as a vertical and as a market that we want to grow in,” he said.

Last summer, EpiSci received a contract from the Defense Advanced Research Projects Agency to develop tactical AI algorithms for team-based multi-ship autonomous air combat beyond visual range. The work under the AI Reinforcements program builds on earlier work EpiSci did with the agency for the AlphaDogfight trials and Air Combat Evolution programs.

Applied Intuition is developing its technology for dual-use applications. The California-based company is working with a wide-range of global customers in the automotive and trucking markets, including General Motors [GM], Japan’s Toyota, Germany’s Audi, and others.

Applied Intuition is also developing software for the Defense Department’s Defense Innovation Unit to support the Army’s Remote Combat Vehicle (RCV) and has worked with General Dynamics [GD] on the Army’s Optionally Manned Fighting Vehicle program.

Terms of the deal, which concluded in December, were not disclosed. Merlin, a competitor in the aircraft autonomy space, last year had agreed to acquire EpiSci but that deal fell through (Defense Daily, Sept. 12, 2024).

In addition to providing Applied Intuition capabilities in all-domain autonomy, the company expects the EpiSci acquisition to accelerate growth by quickly maturing their respective technologies.

“We did the acquisition also because we think the combined entities will together grow faster than they would as independent entities,” Younis told Defense Daily. “And the way that you do that is some of the strengths that Applied has will accelerate the work that the EpiSci team is doing, and some of the strengths the EpiSci team has will accelerate the mission that Applied has.”

Younis said the complementary synergies between the companies stem from the different maturity levels in their technologies. The technology stack across autonomous systems has a lot of similarities, he said, highlighting that Applied is mature in some areas and EpiSci in others, “and when you actually combine those systems, we basically have a very productionized solution which neither company would have on their own.”

Collaborative aircraft autonomy has been a big focus for the Air Force—the Navy is also planning to begin a technical demonstration late this year—for manned fighters to work with unmanned aircraft that would conduct autonomous operations with human supervision.

Peter Ludwig, co-founder and chief technology officer of Applied Intuition, said in the same interview that collaborative autonomy is still in the advanced research and development stage but is “within striking distance” of being ready for actual combat. Applied’s expertise, engineering tools, and experience productizing technologies will help further advance EpiSci’s technology to the next level, he said.

Applied Intuition was founded in 2017. Following the acquisition, the company now has just under 1,000 employees. Younis said the late-stage, venture-backed company is valued at $6 billion, has been growing at “double-digit rates,” and has been profitable for “a number of years.”

In the maritime environment, EpiSci has won Navy contracts to demonstrate its multi-agent collaborative autonomy algorithms with surface vessels to discreetly search, localize, and track a maritime target. It is also developing software to enable multi-domain swarms of unmanned aircraft systems and unmanned surface vessels to work together.

The company’s technology prowess goes beyond autonomous aircraft and vessel operations.

EpiSci last year also won a contract from the Office of the Secretary of Defense to develop technology that allows radar and 5G wireless systems to “dynamically co-exist under shared spectrum conditions.”