Defense Daily, Friday, February 15, Vol. 281, Issue 31









Friday, February 15, 2019 • 62nd Year • Volume 281 • No. 31

Navy Starts Looking At Carriers After CVN-81

SAN DIEGO— Under Secretary of the Navy Thomas Modly said now that the Navy found a way to build two new Gerald R. Ford-class aircraft carriers while saving money it is starting to look at future carrier procurement, which might be very different.

Last month, the Navy officially signed a $15 billion contract with shipbuilder Huntington Ingalls Industries [HII] to buy two Ford-class carriers at once, the future USS Enterprise (CVN-80) and CVN-81, to save about $4 billion over the cost of buying them separately (Defense Daily, Jan. 31).

The Navy expects the two carriers combined to cost about $24 billion, compared to $28 billion if bought separately (Defense Daily, Feb. 1).

Modly said Secretary of the Navy Richard Spencer sees $13 billion carriers as not sustainable going forward and the service will be looking at ways to further reduce costs or keep the carrier capabilities more affordable in future ship procurements.

“There was general conclusion that those two for sure would be built” and once that was determined “that was going to happen,” Modly said during the AFCEA West 2019 conference here.

Once the Navy decided it was fairly certain they need to buy at least two more carriers, “it made no sense to say alright, let’s buy one now and then do the contract for the other one two to three years form now when the price is going to be significantly more.”

The $4 billion in savings helped the Navy justify the per-carrier cost this time, but another dual carrier buy after CVN-81 would drive the price down again, Modly said. The Navy is now starting to examine a diverse range of carrier options.

After the CVN-80 and -81 decision was made, “I think a lot of derivative decisions still need to be made. So the secretary [Spencer] would like to take a look at ‘O.K. now that we made that decision, and that second one that comes will be in quite a few years from now, we need to start thinking now about what’s the next one look like.’”

Modly told reporters they are asking questions like “Is it going to be advanced as this one? Or is it going to be smaller or are we going to buy two smaller ones or maybe shift air power to other forms of delivery. And we don’t know the answers of that but we’re looking at this.”

Rich Abott

Reporter: Navy/Missile Defense
Defense Daily
Ph: 703-522-5915

Email: RAbott@accessintel.com | Twitter: ReaderRabott

Army To Award Prototype Contract For Robotic Combat Vehicle In November

The Army on Thursday released the initial acquisition timeline for its Robotic Combat Vehicle (RCV) program that will culminate in a prototype contract award in late November.

RCV is an Army Next-Generation Combat Vehicle effort to find a platform that enables AI-assisted lethality, manned-unmanned teaming capabilities, cyber and electromagnetic activities and expanded robotic warfighter function.

In January, the Army released its development plan for RCV, which affirmed officials would rigorously test prototypes to inform a final “decisive lethality decision point” in fiscal year 2023, and funding priorities for the vehicle’s light, medium and heavy variants (Defense Daily, Jan. 22).

Demonstration days for RCV will be held between May 13- 17.

White papers will be due to the Army be Aug. 23, with a downselect on several potential designs set for Sept. 17.

Select vendors will then have a chance to pitch their RCV concepts during a series of meetings between Sept. 23-27, which will then result in another downselect in mid-October.

A final prototype contract award, to likely deliver four test vehicles, will then arrive on Nov. 22.

Endeavor Robotics has teamed with Textron [TXT] to work on a potential RCV offering. FLIR Systems [FLIR] announced plans on Monday to acquire Endeavor (Defense Daily, Feb. 13).

Matthew Beinart

Reporter: Cyber Security/IT/Military
Defense Daily
Ph: 240-477-2677

Email: mbeinart@accessintel.com | Twitter: mbeinart22

Boeing Wins $43 Million Contract To Build Four Orca XLUUVs

Naval Sea Systems Command (NAVSEA) awarded Boeing [BA] a $43 million contract modification to build four Orca Extra Large Unmanned Undersea Vehicles (XLUUVs), according to a contract announcement.

XLUUVs are over 54 inches in diameter and have long endurance and ranges. They may support missions including mine countermeasures; anti-submarine warfare; and intelligence, surveillance and reconnaissance (ISR).

Boeing based its winning design on its largest UUV, the Echo Voyager. In 2017 the company announced it and Huntington Ingalls Industries [HII] were partnering to support the XLUUV program (Defense Daily, June 8, 2017).

This fixed-price-incentive award covers fabrication, test, and delivery of the four XLUUVs. The announcement characterized the Orca as an open architecture, reconfigurable UUV that “will be modular in construction with the core vehicle providing guidance and control, navigation, autonomy, situational awareness, core communications, power distribution, energy and power, propulsion and maneuvering, and mission sensors.”

The Navy said the XLUUV will have “well-defined interfaces for the potential of implementing cost-effective upgrades in future increments to leverage advances in technology and respond to threat changes” and a modular payload bay.

The announcement noted competition for XLUUV requirements is still in source selection, so the specific contract award amount is considered “source-selection sensitive information” and will not be made public now.

Work will mostly occur in Huntington Beach, Calif.; Virginia Beach, Va.; Waukesha, Wis.; East Auro, N.Y.; and Concord, Mass. It is expected to be finished by June 2020.

In 2017, the Navy awarded two $42 million-$43 million Phase 1 design contracts in September 2017 to competitors Boeing and Lockheed Martin [LMT]. This was Phase I of a competitive two-phase approach (Defense Daily, Sept. 29, 2017).

Last July, Howard Berkof, deputy program manager of PMS-406 within Program Executive Office (PEO) Unmanned Small Combatants (USC), told Defense Daily the Navy was working on detailed design efforts with both vendors and Phase 2 fabrication selection competition was due to be awarded in the second quarter of FY ’19 (Defense Daily, July 3, 2018).

The Navy plan was to downselect to a single winner in phase two to build the first five XLUUVs.

However, in October, Capt. Pete Small, program manager Mine Warfare Systems (PMS 406) in the Program Executive Office USC, said the Navy could award the Orca contract to both contractors, if they are both technically feasible (Defense Daily, Oct. 17, 2018).

The Navy consistently said it planned to award up to but not necessarily five XLUUVS from FY ’20-’22.

Rich Abott

Reporter: Navy/Missile Defense
Defense Daily
Ph: 703-522-5915

Email: RAbott@accessintel.com | Twitter: ReaderRabott

Coast Guard Set For Full-Rate Production on H-65 Dolphin Upgrades

The Coast Guard is set to start full-rate production of an overhaul program to extend the life of its Airbus H-65 Dolphins by 10,000 flight hours and at the same time upgrading the avionics on the short-range recovery helicopters.

Service Life Extension Program (SLEP) work was done at the same time and on the same production line as the avionics upgrades for the first H-65 and finished on Dec. 18

During low rate initial production (LRIP) the service reviewed and validated improvements required after the initial work on the prototype and validation/verification aircraft.

Coast Guard teams discovered that the wire analysis system was not completely ready for full production. “On-the-spot corrections were made to remedy the problem and rolled into the production process for future aircraft,” the service said in a statement Feb. 14.

Avionics upgrades include reliability and capability improvements for the Automatic Flight Control System; installation of a digital cockpit display system and an upgraded digital weather/surface search radar; integration of a robust Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) suite and modernization of the digital flight deck with Common Avionics Architecture System (CAAS), common with the Coast Guard H-60 medium range recovery helicopter and similar Department of Defense aircraft.

At the same time, the Coast Guard is completing SLEP activities to replace five major structural components — the nine-degree frame, canopy, center console floor assembly, floorboards and side panels. These mission-critical improvements are designed to extend the service life of the helicopter by 10,000 flight hours.

The avionics upgrades and SLEP are being completed at the same time to achieve schedule and cost efficiencies, according to the Coast Guard.

The service will also sequence the installation of new upgrade components after SLEP and programmed depot maintenance is complete, avoiding unnecessary rework that would be required if the efforts were conducted separately.

Once the upgrades are complete, the helicopter is redesignated an MH-65E.

Initial operational test and evaluation of the newly named E-model Dolphins began Jan. 7. Two of the three aircraft that been converted to MH-65Es are undergoing airworthiness testing to make sure the new configuration meets the Coast Guard’s operational requirements.

Twenty-one ground events and 56 flights have been planned for the test campaign. There will be three test periods and one make-up test period that take place in a three-month window, according to the Coast Guard.

A final test report of data collected from both the operational assessment and initial testing will be used to support a decision for the program to move into full rate production. The program anticipates an ADE-3 decision in the first quarter of fiscal year 2020.

Projected completion of the MH-65E conversion for all 98 aircraft is fiscal year 2024.

Dan Parsons

Reporter: Ground Forces/Marine Corps
Defense Daily
Ph: 703-522-5917

Email: DParsons@accessintel.com | Twitter: sharkparsons

Republican Senators in ‘Wait and See’ Mode for Trump’s National Emergency Declaration

Republican lawmakers who voted Thursday for a bill to fund the remaining fiscal year 2019 appropriations bills said they wish to learn exactly how President Trump plans to declare a national emergency to find additional funds for the border wall before making a judgment.

The Senate passed H.J. Res. 31, the fourth and final FY ’19 appropriations package that included funding for the Department of Homeland Security, by an overwhelming majority of 83-16 Thursday afternoon. The House is expected to take up the bill later this evening and speedily approve it.

Senate Majority Leader Mitch McConnell (R-Ky.) took to the floor ahead of the vote to announce that Trump indicated to him that he would sign the compromise bill to avoid a second government shutdown, but then move to declare a national emergency to make up the remaining funds he desires to build new barriers along the U.S. southern border.

The compromise bill provides $22.54 billion for border security, including $1.375 billion for 55 new miles of physical barriers along the border. Trump has previously called for up to $5.7 billion in funds for new barrier construction.

While Democratic lawmakers have long resoundingly criticized the tactic, Republican senators were hesitant to judge either way before learning more about how Trump would invoke the national emergency.

“I just don’t know what he will actually cite as the statutory authority that he might wish to carry out,” said Sen. Mitt Romney (R-Utah), a member of the Senate Homeland Security and Government Affairs Committee. “We’ll wait and see what he does and then respond to that based upon the legal theory, the statutory authority that he selects.”

Sen. Rand Paul (R-Ky.), a fellow member of the Senate Homeland Security Committee who voted no on the compromise bill, noted that he does not usually endorse spending funds outside of congressional appropriations.

“But that being said, there are rules that allow some money to be moved around,” he told reporters. “I don’t know what authority he is citing or what he has done so far. I think we have to kind of wait until he announces what he’s actually for.”

Sen. Rob Portman (R-Ohio), another Senate Homeland Security Committee member, said he will have to take a look at the specific declaration before making a decision. “I’m just really glad the president is signing this bill, because I think the shutdown would have been a disaster,” he said.

Republican Policy Committee Chairman Roy Blunt (R-Mo.) said he would be supportive of certain ways that Trump might transfer funds, “and there are other ways I’d have a lot of problems.”

“I’m glad he’s signing the bill and I also appreciate the fact that it doesn’t give him as many tools as he should have to secure the border,” he added.

Senate Armed Services Committee (SASC) Chair Jim Inhofe (R-Okla.) told reporters Feb. 12 that he would not support the president taking funds out of the Pentagon’s military construction fund to build more barriers, but he could reluctantly endorse the idea of using the Army Corps of Engineers’ budget – typically used for civil engineering efforts – instead.

He noted that those were “two bad choices,” but “if it happens to be that way, leave military construction alone.” Inhofe also voted no on the compromise bill Thursday.

There contains about $21 billion in unobligated DD military construction funds that Trump could potentially target for border wall construction, according to congressional aides.

Those military construction and family housing appropriations are  detailed on a project-by-project and location basis, notes Byron Callon of the Capital Alpha Partners in a Thursday email to investors. "Funds are not just for barracks but can include air base modifications for bed-down of new aircraft, such as the F-35," he said. "They are an essential element of military readiness and recruitment and retention of military and civilian personnel."

Rick Berger, a research fellow at the Washington, D.C.-based American Enterprise Institute and a former Senate Budget Committee staffer, noted on Twitter Thursday evening that "unobligated" does not mean the funds are "unused."

“It just means a contract hasn't been signed yet, which takes a long time for construction — up to a decade,” he added. “All this money–tens of billions of dollars–is explicitly authorized/provided by Congress for specific projects.”

Sen. Richard Shelby (R-Ala.), Senate Appropriations Committee Chair and one of the key negotiators for the compromise bill, said he would “probably” support Trump’s declaration of a national emergency. “He's got constitutional powers to do all that, it has nothing to do with us," he added.

Several Republican senators, including Sens. Susan Collins (Maine) and Lisa Murkowski (Alaska), said they did not support the potential of a national emergency. Murkowski told reporters she did not view the situation as “a matter that should be declared a national emergency.”

Collins said in a statement: “I don’t believe that the National Emergencies Act contemplates a President unilaterally reallocating billions of dollars, already designated for specific purposes, outside of the normal appropriations process. … A far better approach would be for the President to submit a timely budget request for additional border security funding and work with Congress through the normal appropriations process.”

The House did not pass the compromise bill by Defense Daily’s deadline Thursday, but is largely expected to do so.

House Speaker Nancy Pelosi (D-Calif.) said she may file a legal challenge should Trump declare a national emergency during her weekly press conference Thursday.

She added that she does not expect the development to affect how the House votes on the spending bill.

Pelosi noted that Republicans should be concerned about the precedent such a declaration would set for the future.

“Just think of what a president with different values can present to the American people,” she said. “Democratic presidents can declare emergencies as well. So the precedent that the president is setting here is something that should be met with great unease and dismay by the Republicans and of course we will respond accordingly when we review our options. First we have to see what the president actually says.”

Vivienne Machi

Reporter: Air Force, aerospace and Capitol Hill
Defense Daily
Ph: 301-538-6290

Email: vmachi@accessintel.com | Twitter: VivienneMachi

Army Holding Industry Day In March For Next-Gen Squad Weapon Fire Control Capability

The Army on Thursday announced it will hold an industry day in late March to detail requirements for its Next Generation Squad Weapon (NGSW) fire control capability, with a prototype opportunity notice to drop two weeks before the event.

Officials said the industry day will detail the program strategy, anticipated schedule and requirements for the eventual NGSW fire control capability, with the goal of accepting the first prototypes for evaluation in the first quarter of fiscal year 2020.

“The NGSW-FC’s objective is to provide a ruggedized fire control that increases accuracy and lethality for the dismounted warfighter on the battlefield,” officials wrote in the industry day notice.

A potential NGSW-FC capability will have to include a “variable magnification, ballistic calculator, atmospheric sensor suite, and laser range finder,” while also being able to combine these tools with an in-scope digital display.

Detailed requirements will be included in the draft Prototype Project Opportunity Notice the Army will release in early March ahead of the industry day.

The industry will take place March 28-29 at the Picatinny Arsenal in New Jersey, and will include an overview briefing followed by one-on-one sessions with individual vendors.

Senior Army leadership previously announced in October that NGSW will be a 6.8mm caliber rifle and will eventually replace its M4s and M249s. Initial tests for potential NGSW offerings are expected to begin this summer (Defense Daily, Oct. 2018).

Matthew Beinart

Reporter: Cyber Security/IT/Military
Defense Daily
Ph: 240-477-2677

Email: mbeinart@accessintel.com | Twitter: mbeinart22

Low Yield Nuclear SLCM Might Wait Until Well After LRSO, Pentagon Official Says

It could take a decade to build the low-yield, nuclear-tipped, sea-launched cruise the Trump administration called for last year, and development might not be able to start until the Pentagon finishes a next-generation, air-launched nuclear missile, a senior Pentagon official said Thursday.

In 2018, the Trump administration’s Nuclear Posture Review called on the Department of Defense and the Department of Energy — the civilian steward of U.S. nuclear warheads — to study a low-yield, nuclear-tipped, sea-launched cruise missile (SLCM) the U.S. could deploy “in the longer term.” The administration said the weapon could match and check similarly powerful Russian weapons.

But the Pentagon is already working on a next-generation air-launched cruise missile called the Long Range Standoff Weapon (LRSO), and former Navy admiral Peter Fanta, now deputy assistant secretary of defense for nuclear matters, said a similarly capable sea-launched cruise missile might tie up the infrastructure needed to create LRSO.

In considering the planned SLCM, “we are looking at the production capacity and capability of both the DoD complex and what time that missile might be available so we don’t disturb other things we are building right now,” such as LRSO, Fanta said Thursday at the ExchangeMonitor’s annual nuclear deterrence summit in Arlington, Va. 

Fanta said it takes about a decade “to build a highly sophisticated cruise missile” like LRSO. Raytheon [RTN] and Lockheed Martin [LMT] started maturing competing LRSO designs in 2017. The Air Force plans to start deploying the missile, with W80-4 warheads provided by the Department of Energy’s National Nuclear Security Administration, in the late 2020s.

“LRSO shows up some time in the late next decade,” Fanta told Defense Daily from the sidelines of the conference. “I understand how long that production time frame is, and sea launched cruise missile, we should not expect that to be any different.”

Fanta hastened to add that the low-yield sea-launched cruise missile would not necessarily be LRSO, or even an adaptation of that planned missile.

Whether the eventual low-yield SLCM bears any resemblance at all to LRSO will not be clear until after the Department of Defense and the Department of Energy complete an analysis of alternatives tentatively slated to begin in 2020. The White House had not released a formal 2020 budget request at deadline Thursday, but the Department of Energy in November said it would support the Pentagon's analysis of alternatives for the low-yield SLCM in 2020.

Fanta would not say exactly when work could start on the low-yield SLCM. He also would not say which Department of Energy-provided warhead would be available to tip the missile. However, he is confident a nuclear warhead will be available by the time the future SLCM is ready for one.

"[I]f you realistically align when the next cruise missile of that capability would be available to be built, we have pretty much determined that there is an availability of [Department of Energy] infrastructure to produce the weapon that would be associated with it," Fanta said.

Dan Leone

Reporter: nuclear weapons
Defense Daily
Ph: 571-527-1406

Email: dleone@accessintel.com | Twitter: Leone_EXM

CYBERCOM Leader: Command Will Need to Grow to Face Future Threats

The Pentagon's newest combatant command has capacity to address current cyber-related threats posed by foreign nations, but may need to grow as adversaries become more adept, its leader said Feb. 14.

U.S. Cyber Command's cyber warfare cadre includes 133 teams, performing offensive, defensive, intelligence and analytic work for the command. Those teams are the "building block" of the command's capacity to counter cyber attacks from both near-peer adversaries such as Russia and China as well as rogue states such as Iran, CYBERCOM Commander and National Security Agency Director Army Gen. Paul Nakasone testified Thursday at a Senate Armed Services Committee (SASC) hearing.

"My sense is, as we continue to operate more, as our adversaries continue to improve, that there will be requirements that will probably be outside the 133 teams that we have right now," he said.

He noted that the Defense Department is in the middle of building a series of "defensive teams" within the Army Reserves and the National Guard, which will serve as "strategic depth for us."

Vivienne Machi

Reporter: Air Force, aerospace and Capitol Hill
Defense Daily
Ph: 301-538-6290

Email: vmachi@accessintel.com | Twitter: VivienneMachi

Security Technology, Coast Guard Acquisition Fare Well In DHS Budget Deal

Although the congressional spending deal for the Department of Homeland Security doesn’t give President Trump near what he wants to fund a physical wall along the southern border, budget negotiators have agreed to hefty increases overall in border security, particularly to inspect vehicles and cargo at ports of entry.

The compromise bill also funds the Coast Guard’s first new heavy polar icebreaker in more than 40 years and provides seed money for the second icebreaker of a planned three-ship purchase of Polar Security Cutters (PSCs).

As advertised, Democrat and Republican negotiators agreed to nearly $1.4 billion in spending for 55 miles of physical barriers in the Rio Grande Valley area of Texas. That amount is far less than the $5.7 billion Trump ultimately sought for wall construction.

Oddly, the original request was for $1.6 billion, an amount agreed to by most Democrats on the Senate Appropriations Committee last June when the committee marked up its version of the bill. But in July, the House Appropriations Committee, at the behest of the Trump administration, put $5 billion toward the wall, with no Democrats in support. Later in the summer, Trump upped the request to $5.7 billion.

The Senate passed the bill on Thursday afternoon and the House was scheduled to take it up in the evening. Trump said he would sign the legislation but also tweeted that he will declare a national emergency to build the wall.

The proposal includes $564 million for non-intrusive inspection (NII) technology at land ports of entry on the southwest border to expand screening of inbound cars and cargo for drugs and other contraband. The NII equipment typically consists of X-ray and Gamma ray-based systems to allow operators to peer inside the contents of vehicles and cargo and is provided by various vendors, including L3 Technologies [LLL], Leidos [LDOS] and OSI Systems [OSIS].

The Trump administration last February only requested $44 million for NII equipment in the fiscal year 2019 DHS bill. Earlier this month, House Democrats proposed $675 million for the systems.

The budget proposal would also provide $77 million for equipment and related staffing to detect opioids entering the U.S. at international mail and express consignment facilities.

Another $100 million is proposed for border security technology between the ports of entry. The administration requested a little more than $40 million for these systems last February and House Democrats had proposed $400 million but the final agreement says that there is still more than $200 million in unspent Customs and Border Protection funds from fiscal year 2018 for these technologies.

Border security technologies include Integrated Fixed Towers, Remote Video Surveillance System, mobile video surveillance systems, small unmanned aircraft systems, and technologies to detect cross border tunnels and surface movement. Elbit Systems [ESLT], General Dynamics [GD] and Secure Technology are among the companiess providing border security sensor systems.

Another $112.6 million is proposed for CBP’s Office of Air and Marine for the purchase of three Multirole Enforcement Aircraft, which are built by Sierra Nevada Corp., related sensors, and marine vessels.

The Coast Guard’s acquisition budget would receive over $2.2 billion, a handsome increase of $362.5 million, including $655 million for first PSC and $20 million in long-lead funding for the second icebreaker. Congress in fiscal years 2017 and 2018 already provided a combined $300 million toward advance procurement of the PSCs in the Navy budget. The Coast Guard and Navy have an integrated program office for the PSC program.

A Coast Guard spokesman told Defense Daily on Thursday the service remains on track to award the PSC contract this fiscal year, which ends on Sept. 30. Bollinger Shipyards, GD, a U.S. division of Italy’s Fincantieri, Huntington Ingalls Industries [HII], and VT Halter Marine, which is the U.S.-based shipbuilding division of Singapore’s ST Engineering, have all completed design studies for the PSC and have submitted bids to build the ships.

The proposed Coast Guard funding also includes $400 million to build the second Offshore Patrol Cutter (OPC) and long-lead items for the third vessel. The service plans to buy 25 OPCs, which are 360-foot medium-endurance vessels under contract to Eastern Shipbuilding.

The agreement also provides $340 million for six 154-foot Fast Response Cutters, $100 million and two more vessels than requested. Bollinger is building the FRCs for the Coast Guard.

The budget conferees recommend $105 million for the Coast Guard’s HC-130J aircraft, which is built by Lockheed Martin [LMT], and $95 million to recapitalize MH-60T Jayhawk helicopters, which are supplied by Lockheed Martin’s Sikorsky unit.

The Transportation Security Administration would receive over $94 million for its initiative to begin replacing existing X-ray systems at airport checkpoints with computed tomography (CT)-based systems to scan carry-on bags. The agency is expected to award its first CT at the checkpoint contract next month to at least one of four bidders, Analogic, Integrated Defense & Security Solutions, L3 and Smiths Detection.

The CT systems provide three-dimensional images for operators and allow the images to be virtually rotated on the screen to enhance decision making. They will also allow travelers to leave their personal electronic devices, including laptop computers, inside their carry-on bags without the need for divestiture. Eventually, TSA hopes that the systems will allow travelers to leave their liquids inside carry-on bags.

Overall, the conference agreement provides $49.4 billion in discretionary funding for DHS in FY '19, $2 billion more than requested and $1.7 billion above the amount enacted in FY '18.

Calvin Biesecker

Reporter: Business/Homeland Security
Defense Daily
Ph: 434-242-7750

Email: calvinb21@aol.com | Twitter: calvinb21

Lower Taxes Drive Earnings Up At Huntington Ingalls In Fourth Quarter

Huntington Ingalls Industries [HII] on Thursday reported mixed financial results for its fourth quarter, with net income higher on lower taxes despite a big dip in operating income at its business segments while sales were strong.

Net income soared 231 percent to $212 million, $4.94 earnings per share (EPS), from $64 million ($1.41 EPS) a year ago, crushing consensus estimates by 43 cents per share. Sales increased 10 percent to a record $2.2 billion from $2 billion a year ago.

At the operating level, income was down primarily due to a drop at the Newport News Shipbuilding segment, which was impacted by lower performance on the Navy’s Virginia-class submarine program and a difficult comparison from a year ago when the segment benefited from higher risk retirements for the refueling and complex overhaul on two aircraft carriers. Profit at Newport News slid 46 percent to $57 million.

The hiccup in the submarine program cost the company $20 million in higher costs in the quarter.

Costs were higher than expected for the final Block III submarine, the SSN 791 Delaware, and the first ship in the Block IV buy, the SSN 794 Montana, Mike Petters, HII’s president and CEO, said on the company’s earnings call. The charge also accounts for impacts from the remaining Block IV submarines, he said.

Referring to the charge, Petters said that “while the situation is very disappointing, the team has bound the problem and taken the necessary actions to minimize these impacts,” adding later that “they recognize how they got here and they recognize the approach to get through it.”

Profit was also down at the company’s Technical Solutions segment, albeit just $1 million lower to $6 million, on a decrease in fleet support performance.

HII’s Ingalls Shipbuilding segment posted a handsome increase in operating profit, up 12 percent to $84 million on higher sales and risk retirements in the Navy’s DDG destroyer and Coast Guard’s National Security Cutter programs.

Overall segment operating margin was 6.7 percent versus 9.5 percent a year ago.

All three segments delivered double-digit sales gains, with Newport News up 12 percent to $1.3 billion on aircraft carrier work and Naval nuclear support services. Ingalls was up 10 percent to $699 million on amphibious assault ships and destroyers, while Technical Solutions was up 10 percent to $267 million due to support for the oil and gas industry and mission solutions for government customers.

Orders in the quarter were $3.3 billion bringing total backlog at the end of 2018 to $23 billion, $17 billion of which is funded. On top of that, at the end of January the Navy awarded HII a $15 billion contract for detail design and construction of two aircraft carriers, the USS Enterprise and another still to be named.

The new carrier contract, combined with strong orders in the fourth quarter for surface ships at Ingalls, and forthcoming contracts on the Block V Virginia-class submarines and additional amphibious assault ships “are forming the foundation to support this business for the next 10 to 15 years,” Petters said.

The carrier contract will allow the ships to be built more efficiently and affordably by stabilizing the workforce at Newport News, allows for higher quantity purchases of production materials, and provides clarity for the supply chain to be more efficient as well, Petters said.

For 2018, net income rose 75 percent to $836 million ($19.09 EPS) from $479 million ($10.46 EPS) on the back of lower taxes. Sales increased 10 percent to a record $8.2 billion from $7.4 billion in 2017.

Petters said margins for the shipbuilding business in 2018 were 8.6 percent and will be between 7 and 9 percent in 2019 before climbing to between 9 and 10 percent in 2020.

Free cash flow for the year was $512 million.

Calvin Biesecker

Reporter: Business/Homeland Security
Defense Daily
Ph: 434-242-7750

Email: calvinb21@aol.com | Twitter: calvinb21

Aerospace Industries Association Urges Flexibility in Export Policy on UAS

The Aerospace Industries Association (AIA) is urging policy makers to consider the weight, speed, and range of unmanned aircraft systems (UAS) so as to allow U.S. company exports of such systems without running the risk that foreign countries could use some of the exports to proliferate cruise missiles.

Eric Fanning, the president and CEO of AIA, on Feb. 14 called for full implementation of the reforms in the Conventional Arms Transfer Policy, including ensuring that export controls on UAS "reflect market conditions and technology trends."

In the past, countries, such as the UAE, Jordan and Saudi Arabia, were denied in their purchase request for U.S. drones, and China stepped in to become a supplier. Under the Missile Technology Control Regime, the Trump administration has advocated facilitating the export of any UAS, such as the General Atomics MQ-9 Reaper, that flies under 650 kilometers per hour.

The administration's Conventional Arms Transfer Policy, announced last April, says that among the considerations involved in the executive branch making an arms transfer decision will be "the recipient’s ability to field, support, and employ the requested system effectively and appropriately in accordance with its intended end use" and "the risk that the transfer could undermine the integrity of international nonproliferation agreements and arrangements that prevent proliferators, programs, and entities of concern from acquiring missile technologies or other technologies that could substantially advance their ability to deliver weapons of mass destruction, or otherwise lead to a transfer to potential adversaries of a capability that could threaten the superiority of the United States military or our allies and partners."

Fanning also made a pitch on Feb. 14 for infrastructure investment in the National Aerospace System to deal with growing air space traffic and future UAS and urban air mobility needs.

AIA said that it would like to see a 3 to 5 percent increase above inflation in defense and non-defense aerospace spending in the administration's FY 2020 budget release, which is likely to come next month. In 2017, aerospace contributed $865 billion in economic output to the U.S. economy and employed some 2.4 million people–about 20 percent of the U.S. manufacturing workforce, according to AIA.

Aerospace industry leaders are pushing for a return to "regular order" in the federal budget process and an end to the partisan brinkmanship in continuing resolutions.

On Feb. 14, Fanning called for a budget deal that covers FY 2020 and 2021–the final years of the Budget Control Act–and a "multi-year program authorization for NASA to provide stability to their programs."

Frank Wolfe
Email: fwolfe@accessintel.com |

Navy Adding Anti-Ship Harpoons Back On Los Angeles Subs Until Tomahawks Ready

SAN DIEGO — The Navy is going to start putting anti-ship Harpoon missiles on Los Angeles-class (SSN-688) submarines this year until the new anti-ship Tomahawk is ready for use on the submarines in about five years, a top service official said Tuesday.

This initiative to refurbish and re-certify the Boeing [BA]-made anti-ship UGM-84 Harpoon is meant to help the Navy “seize the initiative” in long-range combat with near-peer competitor ships.

“So we are bridging a gap to our maritime strike Tomahawk in the interim with bringing Harpoon back,” Rear Admiral Daryl Caudle, commander of the Submarine Force for the U.S. Pacific Fleet, said at the annual AFCEA West 2019 conference here.

In 2017, Tomahawk builder Raytheon [RTN] won a $119 million Navy contract to start integrating an enhancement to the Tomahawk Block IV to make it able to hit moving sea targets, focusing on a new multi-mode seeker (Defense Daily, Sept. 12, 2017).

While the Navy decommissioned the anti-ship Harpoon over a decade and a half ago, “we made a decision that we still needed a little bit more stand-off capability. So we tasked our technical community to build a system to bridge” to the Tomahawk, he said.

In December the Navy posted a notice of intent to FedBizOpps to sole source Harpoon refurbishment, repair, upgrade, and recertification to Boeing for use on the SSN-688 submarines.

Caudle noted the Navy conducted a successful launch of a Harpoon off a submarine during RIMPAC 2018 this past summer.

At RIMPAC, the USS Olympia (SSN-717) fired a Harpoon at the ex-USS Racine (LST-1191) in July 2018, the first time a Harpoon was fired from a U.S. submarine in over two decades.

Caudle explained the Navy will use the 120 anti-ship Harpoons they have remaining over a five-year timeframe, adding them to five to seven submarines in a year.

“I’m expecting to see that, kind of kicking off in the next year, and probably maybe about 5 to 7 submarines will get that in the next spiral development.”

Caudle said if he had to, he could put the temporary missiles on any of the Los Angeles-class submarine combat control systems to fill the need quicker, but that would not take in to account how to mix torpedo tube loads.

Caudle said the Navy always has to balance torpedo tubes and Harpoons will have to be balanced with Mk 48 Advanced Capability (ADCAP) torpedoes and special equipment for special missions.

“That’s going to be a delicate balance based on what the mission planning is and the expectation on the respective COCOM (combatant command) where that submarine’s being deployed.”

The Navy is still in a robust spiral development, with continuous improvements to the combat control systems, “so that’s how we’re kind of handling that piece,” Caudle added.

Rich Abott

Reporter: Navy/Missile Defense
Defense Daily
Ph: 703-522-5915

Email: RAbott@accessintel.com | Twitter: ReaderRabott

Raytheon Receives $406 Million For Army Aircraft Radio Upgrades

Raytheon [RTN] said Thursday it has received a $406 million contract to continue providing hardware support and software upgrades for Army aircraft radio systems.

Under the contract, originally awarded on Feb. 7, Raytheon will support upgrades for up to 5,000 of its ARC-231A Skyfire radios currently used on the Army’s UH-60 Black Hawk, UH-72 Lakota and AH-64 Apache helicopters.

"These radios are the backbone of rotary-wing communications. The ARC-231A enables U.S. forces to maintain the edge in secure communications, whether they're flying in contested or congested environments," Barbara Borgonovi, Raytheon’s vice president for integrated communication systems, said in a statement.

Raytheon was the only company to submit a bid for the work.

The ARC-231A radios are software-denied and designed to more easily introduce upgrades without having to remove the systems from its platform.

Work on the latest deal is expected to be completed in December 2023.

Matthew Beinart

Reporter: Cyber Security/IT/Military
Defense Daily
Ph: 240-477-2677

Email: mbeinart@accessintel.com | Twitter: mbeinart22

www.defensedaily.com
©2019 Access Intelligence, LLC. Federal copyright law prohibits unauthorized reproduction by any means and imposes fines up to $150,000 for violations.