Defense Industrialist

Liberalized technology sharing and globalized supply chains are needed for controlling the cost of defense.

I spent last Wednesday in Warsaw at the Polish Institute of International Affairs (PISM), for a conference on Balancing Strategy and Economic Imperatives: the Future of US-Polish Defense-Industrial Cooperation. My task was moderating a panel discussion on "The Industry’s View,” amongst Marek Dras, director-general of Radiotechnika, Henryk Kruszyński, president of Teldat, and Marek Brudka, R&D director for Filbico. All three firms are designers and builders of military electronics and software. They’re smallish firms, with 20 to 200 staff, but of some history—20 to 70 years. They are primarily Polish companies, but they have global ambitions, and that should be taken as a serious boon to the alliance. For the combination of cost and quality that companies in countries like Poland offer is under-leveraged in the global security business.

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While Foggy Bottom and the Pentagon and the White House make policy, the Élysée Palace makes sales.

King Abdullah wants drones, and 23 US congressmen want to loan Jordan some American Predators for the duration of the war. The Emirates want drones, and my colleague Bilal Saab told the Beirut Daily Star that industry there is getting quite capable making its own. Congressman Gregory Meeks of New York notably wanted drones because Da’esh and Boko Haram "don't belong on this earth.” Drones needs missiles, so in February, the USAF ordered $144 million worth of Hellfires for allies in the Middle East. Arthur Herman and William Luti of the Hudson Institute think that Da'esh can be defeated almost with those drones alone. Maybe, as RAND asserts, “drones do not win wars,” but few single weapons are decisive in their own right, and everyone seems to want them. Just a few weeks ago, Deputy Defense Secretary Bob Work admitted that the government "simply underestimated the continued demand” for drones across the Middle East.

Egypt wants fighter jets.

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Pentagon pricing policy should aim for long-term value, not an economically intractable concept.

Shay Assad, the Pentagon’s director of pricing policy, has had over his tenure a tense relationship with industry. At a private meeting at the Aerospace Industries Association last week, and in an interview with Reuters this week, Assad insisted that his accountants haven’t been always and everywhere “asking for certified cost data. We just want to pay a fair price.” But what does he mean by fair? Might not long-term best value be a more suitable objective? Getting this right is not just a matter of treating taxpayers fairly, but of acquiring the best equipment and services possible for the military.

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Against more challenging adversaries, temper enthusiasm for returns to scale.

Ever since I was a midshipman—way back under a Navy Secretary named Lehman—pundits, analysts, and strategists have been wondering whether the US Navy’s supercarriers are too big. And so again in 2015. The new Ford-class ships are a few billion more expensive than their Nimitz predecessors, and Senate Armed Services Committee Chairman John McCain is worked up about that price. The Navy and Newport News Shipbuilding argue that the cost is merited, as the newer ships promise more sorties per hour than those in the fleet today. Even so, Sam LaGrone of USNI News reports that the “Navy is Conducting an Alternative Carrier Study”. He quotes Navy Secretary  Stackley, in testimony before McCain’s panel, telling of how the service wants to know

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What accounts for two multi-industrial companies’ differing views of the attractiveness of similar subsidiaries?

I do not own shares in Sikorsky. None of my friends own shares in Sikorsky. That’s because, since 1929, United Technologies Corporation has in effect owned all the shares in Sikorsky. Indeed, the other four of the world’s five largest helicopter manufacturers are also owned by larger and somewhat diversified companies: Bell by Textron, Eurocopter by Airbus, AgustaWestland by Finmeccanica, and Vertol by Boeing. If I wanted to participate in owning a rotocraft-making enterprise, I could buy into UTC, TXT, EAD, FNC, or BA. I won’t (see below), and as we all know, UTC is now rethinking its participation in that line of business too. A sale or spin-off would then break that uniform pattern of ownership. So what determines the efficient owner of a helicopter maker—or any other company that’s half commercial manufacturer and half defense contractor?

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Thornberry’s aim for agility may mean more agency, with faster-better-cheaper results.

David Ignatius thinks that the "federal government could use more agencies like DARPA”. Earlier this month in the Washington Post, he wrote that the Defense Advanced Research Projects Agency "behaves more like a Silicon Valley start-up than a bureaucracy.” Alex Haber and Jeff Jeffress similarly find the Special Operations Forces Acquisition, Technology, & Logistics Center “fundamentally different." Writing in The Hill the same week, they argued that at the SOF AT&L, the "cultural and business principles are innovative and, more importantly, exportable.” Ignatius lamented that “too often in conversations with U.S. officials, you hear explanations about why government can’t do things.” So what’s to stop all of OSD AT&L from thinking different, like DARPA and SOF AT&L? At the moment, probably plenty, but if Congressman Mac Thornberry has his way, the Congress will have another go at making program managers’ jobs and thinking easier.

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Boeing and Saab’s ground-launched glide bomb is quite possibly a brilliantly cost-effective supplement to close air support.

The defense trade press has devoted a flurry of coverage over the past two days to Boeing and Saab’s announcement that it recently tested a ground-launched version of the GBU-39B Small Diameter Bomb (SDB). The 250-pound unitary is a clean replacement of the cluster munitions on the end of the M26 rocket in the M270 Multiple Launch Rocket System. With quite a few countries that own MLRSs now signatories to the Cluster Munitions Convention, many of those M26s must be scrapped—unless their warheads can be replaced with something that doesn’t potentially litter battlefields with duds. That’s the marketing pitch, though the biggest potential customer, the United States, is just fine with its future, smarter cluster bombs. What’s really interesting about this ground-launched bomb is how a treaty limitation spurred an military innovation that has nothing to do with the original political intention. For while we all argue over the A-10C, this ground-launched SDB might prove a very cost-effective supplement to close air support.

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Northrop, Lockheed, or Boeing may be about to debut a radical new manufacturing technology.

The Senate Armed Services Air-Land Subcommittee will be holding a hearing next week on structure and modernization in the US Air Force. One of the issues sure to arise is the Air Force’s procurement plan for its long-planned Long-Range Strike Bomber (LRS-B). William LaPlante, assistant secretary for acquisition, last week told the House Armed Services Subcommittee on Seapower and Projection Forces that the service will "most likely" use a cost-plus approach, rather than a fixed-price agreement, when it awards a contract for the LRS-B sometime this summer. That’s intriguing; as Aaron Mehta observed last month, “the US Air Force's single biggest research program is also its most mysterious.” But for several years, we’ve repeatedly heard two things: former Defense Secretary Robert Gates had set a price-cap of $550 million per aircraft, and the design of the aircraft would not require a great technological leap forward. Thus Congresswoman Jackie Speier of California thinks the cost-plus contracting strategy means that the Air Force isn’t serious about either promise. Is that a fair assessment?

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Some thoughts at the 2015 EASO seminar in Brunei.

I’m in Brunei today for the 7th annual East Asia Security Outlook (EASO) seminar, held for the Ministry of Defense by the Sultan Haji Hassanal Bolkiah Institute of Defense and Security Studies. To close the day, I was asked to deliver a talk applying our work at the Atlantic Council to the context—what do disruptive military technologies mean for small states? Or specifically, for a sultanate of half a million people on the edge of the South China Sea? How does a small state manage the threat of new technologies when they’re a threat, assimilate their potential when they might contribute to its security, and develop new ones when that’s right for the strategic situation?

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Sharply different histories of two armaments industries have led to a confluence of political and commercial opportunity.

 

No doubt, as Derek Chollet wrote Tuesday on Defense One, "Ukraine’s Military Needs More Than Just Arms”. Training and organizational reform will be essential for recovering its fighting efficiency. But as we should remind Washington and Paris and Berlin, to fight Kiev does need arms. Perhaps, as the interview in Tuesday's Wall Street Journal with Saab’s Håkan Buskhe put it, Kiev is one of those new “Cost-Conscious Weapons Buyers”. Even if Washington did start selling, American arms might not be the affordable choice, and the route to delivery might not be speedy. So when Washington isn't selling (just like Paris and Berlin), it’s all the easier for Kiev to look to a new source of supply. Hence it’s no surprise that Kiev was shopping at IDEX, and on second look, it’s no surprise that Abu Dhabi increasingly has arms to sell.

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