Atlantic Council

Defense Industrialist

 

What worked on the Soviets may not work on the Chinese.

 

Chuck Hagel’s speech at the Reagan National Defense Forum this past weekend may have been one of the most important by an American defense secretary in recent years. His new 'Defense Innovation Initiative' seems neither a DARPA program writ large nor a mere exhortation to industry to ’think different'. Rather, if we are correctly assessing the speech, and all the preparatory work preceding it by Bob Work and his former colleagues at the CNAS and the CSBA, then this is something very different. Hagel is expressing a firm belief that robotics, miniaturization,computing, and additive manufacturing are changing the art of the possible in military matters, and that force structure and investment must adjust to reflect reality.
 

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Better Buying Power may depend on human capital the Pentagon yet lacks.

 

Frank Kendall, the Pentagon's chief weapons buyer, said this week that his staff has “overreacted” at times to his guidance on improving outcomes and affordability. As Defense Industry Daily put it, this has caused some "tension with the defense industry amid the onset of tighter budgets.” Back in September, during his Better Buying Power (BBP) 3 roll-out speech at the Center for Strategic and International Studies, Kendall specifically admitted how “I know that LPTA is still of concern.” Reflexive use of a lowest-price, technically acceptable contract award criterion is just part of the problem. Mastering the difference between judicious supplier management and overzealous implementation of BBP can require some serious classroom time and on-the-job training. And that’s why the acquisition workforce’s recent self-assessment is quite so disturbing.
 

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The Pentagon needs a lighter touch with low-volume vendors.

 

Last week, in an essay on how software costs are eating the war effort, we wrote about a “bold industrial strategy” proposed by Atlantic Council advisor Harlan Ullman. As he wrote,
 
     one solution is to shift conceptually and practically from a defense industrial base to a defense intellectual property base in which producing military hardware and software is secondary to preserving IP, technology, and manufacturing assets for these extraordinary combat systems. This transition requires a complementary strategy of regeneration and reconstitution, meaning preserving and paying for certain manufacturing capabilities at minimal production rates, especially research and development, that can be expanded if or when legitimate threats emerge.
 
As might have been anticipated, we immediately received some expressions of concern. Some of the strongest objections concerned the fate of the munitions business. And in thinking about this particular line of business, we can generalize a remedy.

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It’s time to look tough on the deficit and tough on defense.

 

With the mid-term elections behind us, but Halloween in fresh memory, it’s time to ask again about BRAC—the Base Closure and Realignment process (boo!). The Army Department clearly wants another round to balance its books. For years, think-tankers and defense officials have held a wide consensus that further closures would be economically important to the Defesen Department as a whole. That effect, of course, is not so widely presumed to apply to the communities surrounding the bases. Back in March, Andy Medici of Military Times asked five congressman and senators if they’d support a 2017 BRAC. Three were from Maryland, one from Virginia, and one from Montana. No points for guessing which one said yes.

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Is Internet conflict NATO's next defense-industrial agenda, or just a matter for industry?

 

"Where [was] the industrial agenda for the NATO Summit?” Hugo Rosemount of Defense One asked after Wales. Successful industrial engagement has not traditionally been NATO's long suit, but after the talks had concluded, we had our answer: cyber was priority one. That might seem some progress for an alliance whose first cyber policy was articulated in 2008, after the attacks on member state Estonia, and was last updated three years ago. Moving at the speed of cyber, movement today is possibly none-too-soon, but at least a sense of urgency has set in. So yesterday, as part of our Cyber Risk Wednesday series, the Atlantic Council hosted an event on “NATO’s Cyber Defense Mission and Capabilities”, a panel discussion amongst Sorin Ducaru, assistant secretary general for emerging security challenges; Jason Healey, director of our Cyber Statecraft Initiative; Christopher Painter, the State Department’s coordinator for cyber issues; and moderator Vago Muradian of Defense News.

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 The pursuit of intellectual property rights in weapons buying cannot focus solely on today’s price.

 

About a year ago, Assistant Secretary of Defense for Research and Engineering Al Shaffer offered some views about the department's view on open architectures for information systems. As reported by Inside Defense (13 & 14 November 2013), he had three comments, offering contractors some views they’d likely consider generally positive: 

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 What makes us think our militaries have the human and organizational capital for counterinsurgency?

 

“Counterinsurgency," John Nagl commented the other day, "can’t be dead as long as insurgency is alive and well — and it is, and is likely to be for some time.” Indeed we may find ourselves, as former Chief of the Australian Army Peter Leahy recently asserted, needing to "fight radical Islam for 100 years”. That fighting, the US Army fears, could be get more daunting in the burgeoning megacities of Asia and Africa. In dealing with these problems, whatever we may wish for, we must avoid what H.R. McMaster calls the twin pitfalls of over-reliance on Special Operations raiders, or on proxies and advisors. These are the alluring answers that Sydney Freedberg respectively calls the 'Zero Dark Thirty' and 'Lawrence of Arabia' fallacies. In truth, that is, there really are some geopolitical problems that require commitment and engagement to resolve.

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Economically Unsustainable Spending Requires a Thorough Rethinking of Defense-Industrial Strategy

 
SoftwareJosh Marcuse told us, is eating the war. An advisor on innovation to the under secretary of defense for policy, Marcuse was speaking at the 2014 Defense Entrepreneurs Forum (DEF), held from 24 to 26 October at the University of Chicago. Echoing Marc Andreessen’s 2011 essay in the Wall Street Journal on “Why Software is Eating the World,” he was reminding us of how demand for new electronic capabilities has been killing affordability. He might have said that costs are eating the war. The problem per se is not that missile defense costs too much, or that aircraft carriers cost too much. It’s that everything costs too much. For as my Atlantic Council colleague Harlan Ullman wrote in this morning’s Washington Examiner, "the soaring cost for pay, allowances, healthcare, retirees and the gamut of weapons and supporting systems,” cannot survive even inside military budgets that are "economically unsustainable.” The question is what we are going to do about it.

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The defense industry may not be headed for another merger wave, but something much more interesting.

 

Bankers, lawyers, and other business advisors have been waiting for years for that coming wave of mergers amongst military contractors. As one consultant told me recently, his firm was founded on the notion that some post-post-Cold War consolidation would eventually make the partners rich. Of late, however, most of what they’ve been seeing is what David Benoit of the Wall Street Journal called (18 February) the "New Push to Throw Assets Overboard”. Sure, the WSJ headlined this week that "Engility, TASC to Merge in $1.1 Billion All-Stock Deal” (28 October). But the two firms only got to that point because Northrop Grumman unloaded TASC back in 2009. The larger enterprise was seeking to avoid the organizational conflict-of-interest inherent in owning a subsidiary that advised the government on how to deal with the parent company. Back in 2001, Northrop’s management thought buying TASC was a great idea. So what accounts for these shifting sensibilities?

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The CDC and the DoD wisely funded an air transport technology for Ebola patients—just not enough of it.

 

In Tuesday’s Washington Post, Josh Hicks observes that Phoenix Air, a jet-charter service based in Georgia, is the only airline flying Ebola patients from West Africa to hospitals in Europe and North America. Help, however, is on the way. The US Air Force is now starting a process for equipping some of its C-17 jet and C-130 turboprop transports with flying isolation wards, and expects to have the first aircraft available by January. Hicks observes that whatever the timeline, this will be a great improvement, for "the military transports would have greater capacity. Phoenix Air can fly only one infected individual at a time, whereas the military’s isolation units will hold up to twelve patients."
 
On the one hand, Phoenix, the Centers for Disease Control, and the Defense Department should be commended for working together back in 2011 to create this capability, just in case an Ebola outbreak managed to infect some American aid workers. Atlanta provided the scientific expertise, and the Pentagon provided advice on how to manufacture the special materials needed. But the CDC and the DoD might reasonably be asked what sort of capacity they had in mind when they only funded Phoenix to create three single-patient wards.
 
Quantity, goes the line sometimes attributed to Stalin, can have a quality all its own. "Two atomic bombs,” whatever John Foster Dulles’ offer to Georges Bidault, might not have saved Dien Bien Phu. Four decent battalions of Ukrainian troops may or may not have mattered in Crimea. Six German Eurofighters in the Baltics are intended to convince Vladimir Putin that NATO is Serious. But three flying hospital beds would hardly contain a pandemic.
 
Perhaps we should call this effort a pilot program. Probably we should not unduly criticize the two agencies, which have many other priorities to fund. We could just be thankful that someone thought of this at all. And yet, that small number three is a reminder that there is a difference, as today’s popular planning construct holds, between capability and capacity. Being able to do something at all is not always being able to do enough.
 
James Hasík is a senior fellow at the Brent Scowcroft Center on International Security.