Defense Daily

SECNAV Nominee Says He Will Work To Improve Industrial Base, Evaluate Contracts

President Trump’s nominee for Secretary of the Navy promised legislators Thursday he would evaluate contracts and improve the shipbuilding industrial base, while justifying his utility as an outsider businessman with no military or government experience.

“Every shipbuilding delay, every maintenance backlog and every inefficiency is an opening for our adversaries to challenge our dominance.  We cannot allow that to happen. Naval innovation must also extend beyond hulls and keels, strengthening relationships with the defense industrial base, incorporating lessons from recent conflicts and integrating emerging technologies are essential to maintaining our competitive advantage. This requires more than just funding. It requires a relentless focus on execution, innovation and accountability,” John Phelan, the financier and Trump donor tapped to be Navy Secretary, told the Senate Armed Services Committee on Thursday.

Trump announced Phelan for the Navy position on Nov. 27. Phelan is the founder and chairman of Rugger Management LLC, having previously served as managing partner and co-founder of MSD Capital, LP, a private investment firm that works for Michael Dell and family, the founder of Dell Technologies [DELL] (Defense Daily, Nov. 27, 2024).

During his confirmation hearing, Phelan emphasized the Navy and Marine Corps need to focus on their historically embodied resilience, ingenuity and adaptability.

“I’ve analyzed thousands of organizations. A common refrain among those that are failing is this is how we’ve always done it. Yes, there is great value in stability and tradition, which I will respect and do appreciate. But when it suffocates adaptability, innovation, collaboration and trust, it erodes an organization’s ability to win,” he continued.

Phelan said Trump is already pushing him to focus on shipbuilding, which he intends to do by working to reinvigorate the defense industrial base from several angles, namechecking the SHIPS Act first introduced last year and opportunity zones announced in September.

“I think the SHIPS Act, I know, is something that’s being considered. I think there’s some very good ideas in the SHIPS Act in terms of trying to reinvigorate the industrial base, such as opportunity zones for ship building. And I think that if we can incentivize the private sector in the right way, and I think that’s by telegraphing demand, then you will get the private sector to actually invest in these yards.  And I think that that’s an important thing.”

Last year the Navy announced the first new public-private partnership for an opportunity zone meant to spur an increase in submarine manufacturing facilities in Mobile, Ala. (Defense Daily, Sept. 20, 2024).

When Sen. Dan Sullivan (R-Alaska) pressed how he will help the U.S. Navy increase shipbuilding capacity and working with allies, Phelan said industrial base improvement should continue to involve partner countries and companies, like Hanwha buying the Philadelphia Shipyard, but that could also include component production outside the U.S.

“Look, this is a critical issue. I think all options have to be on the table. We cannot fall behind. We’re already too far behind. So I think that we have to definitely look at expertise and skill that foreign partners have, whether that means they build components – we need to look at that or, as you know, Hanwha recently bought the Philadelphia shipyard, so they’re going to look at enhancing that and making that better. So bringing their capital and skill sets here, I think will be important. I think this is a very, very critical thing…”

Last month, Trump suggested the U.S. might use allies to build ships to match China’s naval production (Defense Daily, Jan. 7).

Phelan also noted he plans to look at existing contracts to see where they can be modified or changed going forward to address current production timeline deficiencies and better share risk between government and vendor.

While discussing submarine production, Phelan said, “I’ve not reviewed contracts, from what I can see, I’m candidly fearful of what I’m going to find when I read some of these contracts and get in there in terms of their [provisions for the private sector side]…If they need to be restructured, then we’re going to have to do that, but we have to get back to more of a concept of shared risk.”

“I think it’s fine for the private sector to earn a profit. They should make a profit based on the risk that they’re taking, and that’s what we need to really get back to and look at,” he continued. 

When Sen. Elizabeth Warren (D-Mass.) pressed Phelan on contracts that limit the Navy’s ability on right to repair for regular maintenance and repairs of its systems without flying in contractors, he agreed that kind of thing sounds like it puts readiness at risk.  

“As I mentioned earlier, these contracts are something that really need to be reviewed and better understood. And I think that if confirmed, that’s something I intend to do is focus on that.”

After Sen. Gary Peters (D-Mich.) noted the Constellation-class frigate program is delayed at least three years, Phelan characterized it as “a mess” and he plans to dig into it quickly upon confirmation to understand the issues and tell the committee the root cause of the problem.

He added that from news reports it seems to be requirements creep as the parent design was modified from keeping 80 percent to only 20 percent of the original design.

Last week, former Assistant Secretary of the Navy for Research, Development, and Acquisition Nickolas Guertin said the modified parent design choice for the frigate ended up being more difficult than the Navy thought it would be and the service can only really go fast on a program like that with enough upfront modeling, prototyping and risk reduction analysis (Defense Daily, Feb. 20).

Last year, previous Secretary of the Navy Carlos Del Toro argued before this committee that part of the frigate problems were that the first Trump administration underbid for the ship (Defense Daily, May 24).

“I think we now have a frigate that potentially looks more like a carrier or a battleship, actually, or a destroyer, I would say. Again, I don’t know, until I get in there and go take a look at it. There are a number of issues, and there’s a lot of pointing fingers at one another. If confirmed, I pledge to work with you on this and get our arms around this and get this resolved quickly and understand what we need to do,” Phelan said Thursday.

In December, Program Executive Officer for Unmanned and Small Combatants (PEO USC) Rear Adm. Kevin Smith said the Navy is looking to distribute frigate production the way it has on submarine production to improve production rates (Defense Daily, Dec. 12, 2024).

Separately, Phelan argued his outside business perspective would be a good fit to manage the Navy and Marine Corps.

“If confirmed, I will use my business and military charitable work experience to ensure that our Navy and Marine Corps are prepared to meet the moment. The U.S. Navy and Marine Corps remain the most formidable expeditionary force in the world, but the U.S. Navy is at a crossroads, extended deployments, inadequate maintenance, huge cost overruns, delayed shipbuilding, failed audits, subpar housing and sadly, record high suicide rates are systemic failures that have gone unaddressed for far too long. And, frankly, this is unacceptable.”

He understands that some might question his background as a businessman without uniform experience.

“The Navy and the Marine Corps already possess extraordinary operational expertise within their ranks. My role is to utilize that expertise and strengthen it to step outside the status quo and take decisive action with a results oriented approach.”

Rich Abott Reporter: Navy/Missile Defense Defense Daily Ph: 703-522-5915 Email: [email protected] | Twitter: ReaderRabott

Army Interested In Developing Larger M-MET Logistics Ground Robot

The Army is looking to build a new, larger version of its equipment-carrying ground robot, with plans to consider approving a requirement for the program this spring.

Maj. Gen. Michelle Donahue, head of the Army’s Combined Arms Support Command, said this week the Medium Modular Equipment Transport (M-MET) concept would look to develop a platform that’s larger than the current Small Multipurpose Equipment Transport (S-MET) robot but smaller than its Oshkosh Defense [OSK] Palletized Load System (PLS) logistics trucks.

The M-MET concept will be presented to the Army Requirements Oversight Council for approval this spring, Donahue said in remarks at the National Defense Industrial Association’s Tactical Wheeled Vehicles Conference, adding the idea is to have an unmanned platform that’s “tethering a forward support company to that forward logistics release point” to assist with transferring supplies.

Col. William Arnold, the Army’s chief of transportation, told Defense Daily the Army envisions the M-MET as a roughly 7,500-pound platform.

“[M-MET would be] a versatile platform designed to enhance the flexibility and responsiveness of our logistics operations. We envision the M-MET to offer a diverse load-carrying capability and off-board power generation enabling forward sustainment units to effectively resupply company-size operations,” Arnold said in remarks Tuesday at the conference.

The Army has been fielding the S-MET Inc. I equipment-carrying ground robot, built by General Dynamics Land Systems [GD], which it has described as a “single radio-controlled, eight-wheeled platform designed to carry payload, generate power for organic electronic systems and conduct unconstrained movement” capable of carrying 1,000 pounds of equipment.

This past September, the Army announced it had selected American Rheinmetall and HDT Expeditionary Systems for the S-MET Inc. II prototyping effort, with plans to potentially award a production contract in late fiscal year 2027 that may cover more than 2,000 systems (Defense Daily, Sept. 25 2024).

For S-MET Inc. II, the Army said it aims to “double the payload capacity,” while also getting after capability for higher exportable power to enable drones and communications equipment, further reducing the audio signature, supporting dismounted wireless mesh communication networks, increased reliability and further the platform’s modularity with open architecture designs for easier upgrades.

The Army has also said it will look to “drive commonality” with S-MET Inc. II as it aims to integrate payloads that expand the robotic platform beyond its equipment carrying role, eyeing multi-mission capability with weapons and equipment packages that can enable mission areas for “movement to contact” and “suppression and overwatch” (Defense Daily, Oct. 25 2024). 

Arnold said the Army is envisioning a similar modular design concept for the future M-MET that would allow for reconfiguration to work with “any type of load.” 

“We can put ammunition on it. We can deliver water with it. We can deliver fuel with it. [We can do that] all at the same time by having the ability to generate power and have that power available on the battlefield. That also is going to be a game changing capability,” Arnold said.

Arnold said the Army sees the M-MET as part of an ecosystem of platforms supporting future logistics operations alongside S-METs and autonomous PLS trucks utilizing the future Autonomous Transport Vehicle System (ATV-S). 

“Imagine all that working together on the battlefield,” Arnold said. “That’s what we’re driving toward and that’s what we’re trying to bring to bear.”

The Army is aiming to begin fielding its first autonomous PLS trucks integrated with ATV-S in fiscal year 2027, with the program currently in a competitive prototyping phase with Forterra and Carnegie Robotics (Defense Daily, Feb. 26). 

Maj. Gen. Robert Barrie, the Army procurement office’s deputy for acquisition and systems management, said this week the service plans to deliver “thousands” of S-METs and GM Defense [GM] Infantry Squad Vehicles in the coming years as it moves out on its Transforming in Contact initiative to rapidly field new capabilities (Defense Daily, Feb. 25).

Matthew Beinart Reporter: Cyber Security/IT/Military Defense Daily Ph: 240-477-2677 Email: [email protected] | Twitter: mbeinart22

DIU Lacks Performance Goals For Scaling Commercial Technology, GAO Says

A recent shift in plans by the Defense Department’s Defense Innovation Unit (DIU) to accelerate efforts to speed the adoption of commercial technologies for use by warfighters is lacking the establishment of performance goals to measure success of the effort, the Government Accountability Office (GAO) says in a new report.

DIU needs a performance management process to define goals, collect related data, and then use the information to chart progress toward the goals and inform its decisions, the congressional auditors say in the report, DIU: Actions Needed to Assess Progress and Further Enhance Collaboration (GAO-25-106856).

“DIU does not yet have clear insight into whether it is making progress to achieve its 3.0 strategic goal of helping DoD solve its most critical operational gaps,” GAO says. “This is because DIU does not have a complete performance management process to assess its results.”

DIU is working with the secretary of defense on measurable performance goals such as the number of capabilities that have transitioned to fielding but told auditors it did not have a date for establishing success metrics. Showcasing the number of commercial technologies that transition to the warfighter is an important market to incentivize industry to work with DoD, and to demonstrate success to Congress, the report says.

DIU in August 2023 transitioned to its current plan, DIU 3.0, which is aimed at rapidly scaling the transition of commercial technologies to meet DoD’s most critical needs. The plan was released publicly last February (Defense Daily, Feb. 7, 2024).

The plan also called for DIU to integrate two other entities, the National Security Innovation Network (NSIN) and National Security Innovation Capital (NSIC), into the office by early 2024. NSIN builds relationships among academia, startups, and defense organizations around innovative solutions that meet national security needs while NSIC provides resources to startups for dual-use hardware.

GAO says that DIU still has not said if NSIN’s and NSIC’s goals align with that the goal of DIU 3.0. Still, the report says some of these entities’ activities support DIU’s goal, highlighting that NSIN supports venture capital backed companies that are developing dual-use technologies that meet DoD needs.

DIU said it welcomes GAO’s recommendations and remains committed to quickly transitioning commercial technologies at scale to warfighters.

“With the release of the DIU 3.0 strategy in late 2023, DIU has been implementing against the plan, formally integrating the National Security Innovation Capital and National Security Innovation Network teams into a new Commercial Operations structure, embedding personnel into the Combatant Commands, re-evaluating current and future prototype projects in close partnership with the Services and other DoD components, establishing new bodies that help coordinate on DoD-wide innovation efforts like Replicator and the Defense Innovation Community of Entities that are designed to deliver critical capability fast while helping the Department build new muscle to do so again and again, and rethinking how we evaluate and measure success on accelerating commercial technology into the DoD,” DIU said on Thursday in a statement.

Cal Biesecker Reporter: Business/Homeland Security Defense Daily Ph: 434-242-7750 Email: [email protected] | Twitter: calvinb21

Kratos Ends Strong Year With Solid Fourth Quarter; Sees $1 Billion Sales Potential With Prometheus

Kratos Defense & Security Solutions [KTOS] on Wednesday reported solid fourth quarter financial results on growth across its operating segments, although bottom-line results were mixed as operating income fell but net income overall was higher after excluding a bump from non-controlling interests a year ago.

Net income was up 63 percent to $3.9 million, 3 cents earnings per share (EPS), from $2.4 million (2 cents EPS) in the fourth quarter of 2023. Adjusting for taxes, interest expense, restructuring costs, stock-based compensation, amortization and other non-operating items, per share earnings of 13 cents in the fourth quarter topped consensus estimates by 3 pennies.

Operating income fell due to lower earnings in the Kratos Government Solutions segment, down on revenue mix and resources. The Kratos Unmanned Systems segment swung to a loss on revenue mix, increased subcontractor and material costs on some multi-year fixed-price contracts, and higher research and development expenses.

The company’s sales in the quarter rose 3 percent to $283.1 million from $273.8 million on the strength of increased revenue from targeting drones, turbine technologies, C5ISR, defense rocket support, and microwave products. Growth was hampered by an expected $16.1 million decline in the space and satellite business, due in part to delays at Airbus Group and Thales on the manufacture and delivery of software defined satellites.

Overall, in 2024 Kratos swung to a net profit of $16.3 million (11 cents EPS) from a loss of $8.9 million (7 cents EPS) in 2023. Adjusted earnings of 49 cents EPS were up 7 cents while adjusted margin rose 10 basis points to 9.3 percent. Sales for the year increased 10 percent to $1.1 billion versus $1 billion a year ago with 9 percent of the growth organic.

Kratos tallied $1.4 billion in orders in 2024, representing a book-to-bill ratio of 1.2 times sales, and backlog stood at over $1.4 billion, up 18 percent from more than $1.2 billion at the end of 2023.
The outlook for 2025 is for sales to increase 10 percent to $1.3 billion and adjusted earnings of between $112 million and $118 million versus $105.7 million in 2024. Free cash flow is expected to be negative $75 million to $85 million due to planned capital expenditures of between $125 million and $135 million in production facilities related to the Valkyrie unmanned system, microwave, hypersonic and engine facilities, and other facilities.

Excluded in this year’s capital spending plans is Kratos’ half of a $175 million investment it is making with Israel’s Rafael Defense Systems in a new energetics facility in Indiana that will leverage Rafael’s rocket motor and warhead experience in Israel to create a new U.S.-based merchant supplier. Most of the expenses for the 500-acre Prometheus Energetics facility will be borne in 2026 with production set to begin in 2027 pending certification and qualification, Eric DeMarco, president and CEO of Kratos, said Wednesday evening on the company’s earnings call.

DeMarco expects industrial-base funding will largely offset or reduce the company’s costs to stand up Prometheus, which he said will ultimately have about 300 employees. Once the facility is at rate production, it expects to generate “several hundred million” dollars in sales annually, proving the business case for Prometheus, he said.

The potential long-term sales for Prometheus are $1 billion annually as the business adds new customers, DeMarco said.

Rafael will initially be the “anchor customer” for Prometheus and eventually also address U.S. requirements for solid rocket motors and warheads, DeMarco said, nodding to the Trump administration’s new Golden Dome for America homeland air defense initiative. The various energetics produced by Prometheus will be based on the same qualified technologies Rafael uses in Israel, which will make certification and qualification in the U.S. happen relatively quickly, a competitive advantage versus the various new entrants in the domestic rocket motor space, he said.

Kratos also offered rough guidance in 2026, with sales expected to grow 13 to 15 percent over 2025 and adjusted operating margin also increasing.

During the earnings call, Kratos disclosed that it recently acquired Norden Millimeter for $37.8 million in stock, adding to its growing microwave business.

Cal Biesecker Reporter: Business/Homeland Security Defense Daily Ph: 434-242-7750 Email: [email protected] | Twitter: calvinb21

Navy Issues RFI Survey For More Counter-Uncrewed Systems

The Navy on Wednesday issued a Request for Information (RFI) survey to find a wider range of low collateral defeat (LCD) Counter Uncrewed Systems (C-UXS) solutions.

According to the notice, the survey is meant to act as a “living document” so respondents can save and update their responses with LCD capabilities that can focus on homeland defense and defending U.S. installations. Submissions will be evaluated for potential inclusion in future test events, demonstrations and continuous monitoring of the C-UXS market.

The RFI is focused on helping DoD’s Executive Agent for Counter-Small Unmanned Aerial Systems (C-sUAS), the Joint C-sUAS Office (JCO).

The notice described LCD as a method to counter sUAS with “minimal collateral damage in situations where friendly forces and/or civilians are in close proximity to the threat” or regulation does not allow for electronic attack or kinetic effectors with a broader down-range impact.

Thus, LCD is designed to avoid harming innocent bystanders, structures and anything not targeted with precisions and creating low probability of collateral damage. Defeat is not just destroying a UXS, but can include disruption, disabling or neutralizing the threat system.

The RFI description noted while the C-sUAS community has generally viewed low collateral defeat as requiring airborne intercept and capture solutions, it acknowledged that “alternative methods of low collateral sUAS defeat exist in various stages of development and an intercept vehicle is not the only method available to achieve a low collateral sUAS defeat.”

The Navy notice said it is “incumbent on the C-sUAS [Community of Interest] to explore the full range of low collateral defeat options.”

The survey lists four methods for the low-collateral defeat of small UASs: energy like coherent monochromatic light or electromagnetic radiation/lasers and high-power microwave; kinetic means to defeat the system via kinetic impact interceptor or ballistic projectiles; seize, disrupt or physically disabling sUAS in-fight and deliver to a safe location to be made inert; and electronic warfare systems to jam its communication and navigation systems, attack control systems or protocol manipulation.

The survey asks respondents questions including where in the kill chain their capabilities operate; how long does it take to export data from its system for post-event analysis; what domain components primarily operate in; if the system is fixed, mobile, or man-portable; does it have a LCD capability; the cost of 1, 10 and 100 systems; what type of detection capability, mitigation technology in the kill chain, defeat capability effectors, and system track methods do they use; maximum ranges for different size targets;  and typical lead time needed to participate in an experimentation event.

Notably, the survey confirms they are looking for systems to defeat various sizes of unmanned aerial, surface and subsurface vehicles, including from UUVs that can be launched and recovered from submarines.

Rich Abott Reporter: Navy/Missile Defense Defense Daily Ph: 703-522-5915 Email: [email protected] | Twitter: ReaderRabott

Pentagon Says SDA Meeting Minimum Viable Product, But GAO Notes Problems

DoD says that the U.S. Space Force’s Space Development Agency (SDA) has met the “minimum viable product” (MVP) standard for the agency’s Proliferated Warfighter Space Architecture Tranche 0 Transport Layer communications satellites and Tracking Layer missile warning satellites, but a Government Accountability Office (GAO) report said that four evaluated contractors for the Tranche 0 satellites have only met standards four times out of 32 in eight optical communications terminal (OCT) categories.

SpaceX hit the mark three times–in the category of Tracking Layer space-to-space laser links among SpaceX satellites in the same orbital plane, Tracking Layer space-to-space data transmission among SpaceX satellites in the same orbital plane, and Tracking Layer space-to-ground laser links.

York Space Systems passed muster in the Transport Layer space-to-space laser links among York satellites, while Lockheed Martin [LMT] and L3Harris Technologies [LHX] did not hit any of the marks, according to the GAO report, Laser Communications: Space Development Agency Should Create Links Between Development Phases (GAO 25-106838).

“SDA has met the MVP for [Tranche o], which is to demonstrate the feasibility of the proliferated architecture in cost, schedule, and scalability towards necessary performance for beyond line of sight targeting and advanced missile detection and tracking,” the Pentagon wrote on Feb. 6 in response to the GAO report. “SDA’s MVP for the [Tranche 0] Transport Layer includes periodic regional access for low latency data connectivity, data directly to tactical elements, and data disseminated to theater targeting cells.”

“[Tranche O] validates our approach and achieved stated objectives: Link-16  from space-to-ground, air, and sea; and forming an optical network in low Earth orbit for both the Transport and Tracking Layers,” DoD said. “SDA continues to incorporate lessons from [Tranche 0] into [Tranche 1], Tranche 2, and future tranches.”

OCT laser links among satellites built by different companies has been a point of concern and one that DoD has sought to alleviate with the Enterprise Management and Control effort (Defense Daily, March 19, 2024).

SDA developed an OCT standard of 2.5 gigabits per second data transmission–“relatively lower than some commercial technologies that transmit data at 100 gigabits per second,” according to GAO.

“DoD officials stated that the lower rate was due, in part, to the need to conform to DoD data encryption requirements, which do not support the higher data rates,” the report said.

The OCTs are to accelerate communications with military forces in the field significantly, compared to traditional radio frequency communications.

COVID-19 related supply chain problems, such as with electronic boards, slowed the efforts of SDA, which has had two-year “tranche” advanced system development/fielding cycles under fixed price contracts as the agency’s lodestar (Defense Daily, May 24, 2022).

“While SDA has taken considerable steps to prioritize speed, this has had consequences,” according to the new GAO report, adding that “SDA does not yet fully understand what will and will not work in [Tranche 0].”

“Without demonstrating key laser communications technology capabilities, or MVPs, SDA is risking not being able to leverage past experiences into the investments either under contract or planned for in the future,” GAO said. “These investments are substantial–nearly $35 billion.”

Frank Wolfe Email: [email protected] |