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UNITED KINGDOM AND NATO
29 Sep 22. The Royal Navy is seeking expressions of interest from industry to develop and supply a countermeasure system for the Astute, Vanguard, Dreadnought and future SSN(R) class submarines.
The new system will be known as the ‘Next Generation Countermeasure’ (NGCM) and falls with the wider ‘Underwater Defensive Aid Suite’ (UDAS) programme.
According to the contract description, the duration is estimated to be for a period of 6 years.
“Expressions of Interest are sought from Potential Providers that have the capability to develop and supply a countermeasure system for Astute, Vanguard, Dreadnought and SSN(R) Class Submarines. The system will be known as the Next Generation Countermeasure (NGCM) and falls with the wider Underwater Defensive Aid Suite (UDAS) delivery Programme. The NGCM project is to be delivered in accordance with the Statement of Requirement (SOR) and Systems Requirements Document (SRD, which will be issued with the Invitation to Negotiate (ITN).
The Contract is also to provide:
– Trials & Testing
– Combat System Integration
– Initial Support Solution including Equipment & Technical Support
– An initial Training Needs Analysis (TNA) and follow-on training packages
– Post Design Services as required
Potential Providers are to note that in order to fulfil this requirement, the chosen supplier will be exposed to and required to safeguard nationally sensitive information/data bearing a security classification up to and including SECRET UK EYES ONLY level.”
The value of the contract is £100mn and it has a start date of March 2025 and an end date of March 2031.
(Source: NewsNow/https://ukdefencejournal.org.uk/)
27 Sep 22. £1.5m available to experiment on CHERI architecture within defence and security systems. DASA has launched a new competition to trial the cutting-edge CHERI security architecture in a defence and security context.
* DASA has launched a new Themed Competition: CHERI within Defence and Security
* Funded by Defence Science and Technology Laboratory (Dstl) Cyber Programme
* £1.5m funding available to experiment and trial the effects of the CHERI (Capability Hardware Enhanced RISC Instructions) based architecture extensions within the Arm’s Morello prototype System on Chip (SoC)
The Defence and Security Accelerator (DASA) is pleased to launch a new Themed Competition, CHERI within Defence and Security. Run on behalf of the Defence Science and Technology Laboratory (Dstl) Cyber Programme, this competition seeks proposals to experiment and trial the effects of the CHERI (Capability Hardware Enhanced RISC Instructions) based architecture extensions within Arm’s Morello prototype System on Chip (SoC) for defence and security.
Key dates and funding
£1.5m funding is available for this Themed Competition, and we expect to fund several proposals up to £100k.
The deadline to submit a proposal is midday 14 November 2022
Do you have a useful idea for testing CHERI within Defence and Security? Read the full competition document and submit a proposal.
What is Arm Morello and CHERI?
Cyber security needs to keep pace with the rapid evolution of technologies, and currently, a lot of time, effort and money is spent on patching systems so they are more secure. However, in a world with uncertain technological and military challenges, systems that are built from the ground up to be more resilient to attacks is vital for a safer future.
The Arm Morello Program, funded by Digital Security by Design (DSbD), is a collaboration between academia, industry and government to research and create more secure hardware and software to improve built-in security. CHERI (Capability Hardware Enhanced RISC Instructions) is the key underpinning technology that addresses memory safety issues and enables fine grain protection of applications.
Using this technology, Arm has designed a prototype SoC and development board, called the Morello board, the world’s first industrial quality implementation of CHERI. The Morello board is being distributed to industry and academia to test the prototype architecture to investigate and experiment on its capabilities.
Evaluating CHERI within Defence and Security
The CHERI within Defence and Security Themed Competition is aimed at providing the Morello board to the Defence and Security sector for research, evaluation and experimentation. Successful proposals will be provided with the Morello board to trial and evaluate the effect of the new technologies within their defence systems.
Challenge areas
The competition has three challenge areas. Proposals may address more than one challenge.
Code Porting
This challenge area seeks to port an existing codebase or tool (e.g. compiler) into the Morello environment and strengthen its security by using the Morello enhanced security features.
Software Compartmentalisation
This challenge area seeks to refactor an existing application to employ fine grain software compartmentalisation.
Innovation
This challenge area seeks to conduct research in an area in line with competition scope, such as a security enhancing innovation, now enabled by the availability of the Morello features.
To learn more about the challenge areas of the competition, read the full competition document.
Submit a proposal
Do you have an innovative project to test the CHERI based architecture in a defence setting? Submit your idea and help create a safer and more cyber resilient defence.
Learn more and submit a proposal: https://www.gov.uk/government/publications/competition-cheri-within-defence-and-security (Source: https://www.gov.uk/)
26 Sep 22. DASA is searching over the horizon for generation-after-next beyond line of sight communication technologies.
This new Innovation Focus Area seeks novel beyond line of sight (BLOS) communication technologies
- DASA has launched an Innovation Focus Area called Beyond Line of Sight Communications
- Funding provided by the Defence Science and Technology Laboratory (Dstl)
- Funding available for Generation-After-Next (GAN) proposals, which explore and develop new / novel beyond line of sight (BLOS) communications technologies
The Defence and Security Accelerator (DASA) is pleased to launch an Innovation Focus Area (IFA) called Beyond Line of Sight Communications. This IFA seeks innovations that will help contribute to the development of Generation-After-Next beyond line of sight communication options.
This IFA is run on behalf of the Defence Science and Technology Laboratory (Dstl).
Do you have an innovation which could help develop Generation-After-Next beyond line of sight communication options?
The need for novel and efficient beyond line of sight communications
Defence relies heavily on the mature BLOS communication technologies, such as military High Frequency (HF), troposcatter or satellite communications. However, to maintain robust communications in highly disruptive, congested and contested environments, it is vital that military communications change conventional assumptions about BLOS capability.
It is crucial to build a pipeline of future BLOS technologies and have a diverse repertoire of communication approaches to overcome any potential threat and ensure that if one form of communications is denied, there are alternatives available.
This IFA is seeks GAN proposals that explore and develop new / novel BLOS communication options, and alternatives to traditional methods of military that may provide advantage in highly disruptive threat environments. For example:
- BLOS system development
- approaches to understand the “Channel”
- signal processing for new approaches to BLOS communications
- waveforms
- solution hardware development
Submit a proposal
Do you have a solution or novel approach that may help Dstl understand what lies ahead for GAN BLOS technologies?
Read the full competition document to learn more and submit a proposal: https://www.gov.uk/government/publications/defence-and-security-accelerator-dasa-open-call-for-innovation/open-call-innovation-focus-areas#IFA036 (Source: https://www.gov.uk/)
26 Sep 22. DASA seeks innovations to help develop the first generation of Directed Energy Weapons. This new Innovation Focus Area aims to find novel ideas that will shine a light on the future of Directed Energy Weapons across Land, Sea and Air domains
- DASA has launched an Innovation Focus Area called, Making Science Fiction a Reality: Future Directed Energy Weapons
- Funding provided by the Defence Science and Technology Laboratory (Dstl)
- £500k in overall funding available for proposals which present ideas to contribute to the first generation of deployed Directed Energy Weapons
The Defence and Security Accelerator (DASA) is pleased to launch an Innovation Focus Area (IFA) called Making Science Fiction a Reality: Future Directed Energy Weapons. This IFA is seeking innovations that will help contribute to the development of the first generation of deployed Directed Energy Weapons across Land, Sea and Air domains.
This IFA is run on behalf of the Defence Science and Technology Laboratory (Dstl).
Funding
£500k in overall funding is available for this IFA, with £50k-£200k expected to fund each proposal.
Do you have an innovation which could help develop the first generation of Directed Energy Weapons? Read the full IFA and submit your proposal.
Developing the first generation of Directed Energy Weapons.
Directed Energy Weapons (DEW) are systems capable of discrete target selection that emit laser or Radio Frequency (RF) energy as the primary means to cause disruptive, damaging or destructive effects on equipment or facilities.
The vision of the UK Ministry of Defence (MOD) is to make Directed Energy Weapons a realistic choice for our armed forces, which can contribute to a decisive edge and sustain strategic advantage.
This IFA seeks proposals that enhance the performance and/or reduce the size, mass and volume of the system and subsystem areas associated with laser and RF Directed Energy Weapons. For example, innovations that improve:
- laser and RF Source technology
- system automation
- advanced power and cooling technologies that can be ultimately integrated onto military platforms
- beam control
- target detection
- battle Damage indication
- test and evaluation
For more on the competition scope, read the full IFA document.
Submit a proposal
Do you have a solution or novel approach that may help Dstl and DE&S understand the next steps to develop and introduce Directed Energy Weapons into service across Land, Sea and Air domains?
Read the full competition document to learn more and submit a proposal: https://www.gov.uk/government/publications/defence-and-security-accelerator-dasa-open-call-for-innovation/open-call-innovation-focus-areas#IFA035 (Source: https://www.gov.uk/)
EUROPE
29 Sep 22. Lithuania boosts defense budget to buy HIMARS, trucks, drones. The Lithuanian government has decided to allocate additional funds for the country’s Defence Ministry this year, paving the way for the purchase of High Mobility Artillery Rocket Systems, or HIMARS, Oshkosh joint light tactical vehicles (JLTVs) and Switchblade drones from the United States.
In response to Russia’s invasion of its neighbor Ukraine, Lithuania has decided to expand its military budget by some €148 million (US$144.5 million) this year. In total, the government plans to earmark 2.52 percent of the country’s 2022 gross domestic product for defense.
“In the context of the war started by Russia, we are increasing funding for defense, consistently implementing the agreement of the parliamentary parties,” Finance Minister Gintar Skaist said in a press release.
The country’s Ministry of National Defence said in a statement that “Lithuanian and U.S. officials are planning to sign contracts on acquisitions that are important to Lithuania this year” including deals to buy “HIMARS missile systems, Switchblade combat drones, and JLTV armored combat support all-terrain vehicles.”
Since the war’s outbreak, Lithuania has transferred some 50 M113 armored personnel carriers to Ukraine, and the JLTV acquisition is designed to backfill this capacity.
With Ukraine using U.S.-supplied systems to combat Russia’s aggression, Lithuania is one of the region’s countries who plan to buy Lockheed Martin’s weapon to boost their rocket artillery capabilities. Last July, neighboring Latvia sent a letter of request to buy an undisclosed number of M142 HIMARS launchers, two months after Poland filed a letter of request to order about 500 such weapons. (Source: Defense News)
28 Sep 22. French 2023 defense budget adds $3bn to fund ‘war economy.’ Propelled by an edict to make deep investments in its defense industrial base, France’s Ministry of Defense has unveiled a 2023 budget worth billions more than the previous year to launch a new “war economy.”
The proposed €43.9bn ($42.8bn) for the French military represents a 36% increase over the 2017 budget and a 7.4% increase over 2022 funds. The €3bn add for 2023 amounts to nearly twice the year-over-year increases seen in the past couple of years, officials noted during a Tuesday press briefing. Between 2019 and 2022’s budgets, the yearly increase stood at around €1.7bn, which was the target to reach according to the military’s 2019-2025 military program law.
The increase was forecast by Defense Minister Sebastian Lecornu when he met with French lawmakers this summer.
The ‘war economy’
Equipment orders take up the largest amount in the budget, standing at €38bn, or $37bn. The orders, officials said, reflected French President Emanuel Macron’s declaration in July of a “war economy.”
The new funding will launch the “transformation of our industry’s production model towards a ‘war economy,’ and guarantee our sovereignty by renewing our [munition] stocks,” Lecornu said in a statement accompanying the budget documents.
The goal is to boost orders of equipment to keep the production lines moving for France’s defense and industrial base, to keep ammunition supplies high and to prevent any capability attrition in the case of an “engagement,” per ministry documents.
In 2023, the French army plans to order:
* 420 Serval light armored vehicles,
* 8,000 HK416 assault rifles,
* 46 satellite communication ground stations for the Syracuse IV constellation,
* one lot of medium-range missiles,
* 22 next-generation multirole helicopters,
* 22 heavy armored vehicles for special forces.
The navy plans to order:
* 3 naval counter-UAS devices,
* 19 naval SATCOM stations for Syracuse IV,
* one lot of MBDA-built Exocet anti-ship missiles,
* one lot of MBDA Aster-30 missiles for use on the FREMM multirole frigates,
* an “exploratory capacity” for the deep sea beds.
In the air and space domains, the orders include:
* 42 Rafale fighter aircraft,
* One lot of 320 BK 1 NT Aster missiles,
* Various equipment kits for France’s Eurocopter EC 725 Caracal helicopters, along with the CN235 and A400M transport aircraft.
Among major developments, the ministry expects to perform the first firing of the next-generation MICA air-to-air missiles built by MBDA, which will equip France’s fighter jets. Munition replenishment in all services takes up €2bn worth of orders in 2023.
Over €5bn ($4.8bn) in the total budget is earmarked for maintenance, a 12% funding increase over last year, which includes investments in digital tools and additive manufacturing capabilities, as well as optimizing supply chain fluxes, per the ministry.
(Relatively) new focus areas
The French Ministry of Defense highlighted “new” areas of funding in the budget, to include €702m dedicated to the space domain, while €288m is earmarked for the cyber domain. The ministry plans to recruit about 1,900 “cyber combatants” by 2025. The amount of €467m is highlighted for information warfare systems.
The most notable “new” funding category is dedicated to seabed warfare, which would receive €3.5m in 2023. Those funds would cover the protection of sovereign assets deep underwater such as natural resources and deep-sea cables, and invest in tech that could recover “sensitive objects,” per the ministry.
A total of €8bn is dedicated to research-and-development efforts, including €6bn for new development programs, while €1bn is earmarked for “innovation,” the same amount of funding as last year. For R&D, six key priority areas are noted: cyberdefense, counter-UAS technologies, seabed dominance, hypervelocity, and chemical, biological, radiological, and nuclear defense.
Notable exceptions: FCAS and MGCS
Two French-involved programs stand out in the budget thanks to their omission: the Future Combat Air System (FCAS) effort to build a Franco-German-Spanish next-generation fighter aircraft and associated new systems, and the Main Ground Combat System tank in development by Paris and Berlin. The two programs are nowhere to be seen in the budget documents provided by the ministry.
Both efforts have slowed to just about a complete stop at the moment. French ministry officials on Tuesday asserted there was funding in the budget for both efforts to proceed to their next phases of development, but they declined to provide the numbers.
A request for funding numbers to the Ministry of Defense by Defense News was not returned by late Wednesday. Last year, the minister had budgeted €282.7m for the FCAS program to fund ongoing studies and preparations for the demonstrator phase, while the MGCS program was slated to receive €58m for ongoing studies.
Meanwhile, the budget documents laud European-wide defense measures undertaken in 2022, noting that increased tensions in the Indo-Pacific region and Russia’s invasion of Ukraine have led to a “collective awareness to strengthen European defense.” Nearly €8bn, or $7.8bn, will contribute to European-wide initiatives, and France is involved in 47 of the 61 projects selected for the inaugural European Defence Fund cycle announced in July. (Source: Defense News Early Bird/Defense News)
29 Sep 22. France to order 42 Dassault Rafale fighters in 2023. The French Ministry of Armed Forces will order 42 Dassault Rafale fighters in 2023 to close the capacity gap created by the sale of 24 second-hand aircraft to Greece and Croatia. In 2020, then-defense minister Florence Parly announced the objective to raise the number of Rafale fighters, the backbone of the French Air Force, from 102 to 129 jets by 2025. But the recent commercial success of the fighter jet disturbed this roadmap.
In January 2021, Greece signed an order for 18 Rafale F3R fighters for the Hellenic Air Force, in the context of increased territorial tensions with Turkey.
For the delivery to take place as early as possible, 12 of the fighters were deducted from the inventory of the French Air Force. A month later, an order for 12 Rafales was placed to replace the second-hand aircraft.
In May 2021, it was Croatia’s turn to buy 12 used French F3R Rafale fighter jets to modernize the country’s air force. However, this time, no new order was placed by France.
The setback was confirmed by the French Chief of the Defense Staff, General Thierry Burkhard, in a hearing with the French Parliament in October 2021.
“In 2025, the target was 129 Rafale, but once the [24] Rafales have been removed and those that will be purchased added, we will end up with 117,” Burkhard told the Defense and Armed Forces Commission.
By 2025, the French Air Force could be missing 12 Rafale fighter jets, which were deducted from its fleet to supply Greece and Croatia.
And Dassault’s assembly lines should be busy for the foreseeable future as, in December 2021, the United Arab Emirates (UAE) signed a deal for 80 new Rafales, the largest order in the history of the aircraft. Additionally, Indonesia signed a tentative order for six Rafales in February 2022, though that contract is on hold due to funding issues.
Though the goal for 2025 will be missed, the Ministry of the Armed Forces does aim to replace the 12 Croatian Rafales. The 2023 budget presented to the French government on September 26, 2022, confirmed that 42 additional Rafales would be ordered, and delivered between 2027 and 2030.
“The consequences of the slight drop in the Rafale fleet over the next two years will concern less operational contracts than pilot training capacities: this year, 164 hours per fighter pilot compared to approximately 147 hours for the next two years,” Deputy Chief of Staff Frederic Parisot warned in a parliamentary hearing on July 20, 2022. “However, the situation remains acceptable, provided that the aircraft of the [future orders] are delivered on time.”
These 42 new aircraft will likely be delivered in the F4 standard, currently under development. The F4 Standard will focus on improving the connectivity of the Rafale with other systems through new satellite and intra-patrol links, communication servers, and software radio. Flight tests of the Rafale F4 started in April 2021 at the Dassault Aviation Flight Test Center in Istres, southeastern France. (Source: News Now/https://www.aerotime.aero/)
USA
29 Sep 22. Congress reauthorizes DoD innovation grants with new China safeguards. Congress on Thursday renewed a small business innovation grant program heavily favored by the Pentagon with a series of reforms meant to address Republican skepticism, mere days before it was set to expire at the end of the fiscal year.
The reauthorization follows months of uncertainty about the program’s future amid slow-moving negotiations to assuage concerns over abuse of the rewards process.
The 415-9 House vote to extend the Small Business Administration’s Small Business Innovation Research and Small Business Technology Transfer awards came after the Senate passed the reauthorization bill by unanimous consent last week.
The SBIR and STTR programs are meant to incentivize small businesses to engage in early-stage research and development for technologies and products that companies might otherwise shy away from given uncertain returns on investments.
“This bipartisan bill reauthorizes the SBIR and STTR programs for three years and addresses major concerns by establishing research security measures, increasing transparency and oversight and focusing on commercialization,” Rep. Blaine Luetkemeyer, R-Mo., the ranking member on the House Small Business Committee, told Defense News in a statement.
“After discovering China’s influence in the programs, it was vital for Congress to make the national security reforms necessary to protect American small businesses and intellectual property,” he added. “In addition to combatting malign foreign influence, the legislation also strengthens oversight, increases public transparency and safeguards taxpayer dollars.”
Chinese state-sponsored companies have targeted U.S. firms that receive the SBIR and STTR grants, which are awarded jointly by 11 federal agencies and ballooned to nearly $3.3 billion in 2011. The Defense Department accounts for the majority of these awards, which range from tens of thousands of dollars to more than $1 million for a two-year grant.
A 2021 Pentagon report on a small sample of SBIR awardees found China was the ultimate beneficiary of the grants, not the United States.
This discovery was part of what prompted Rand Paul of Kentucky, the top Republican on the Senate Small Business Committee, to hold up reauthorization in order to legislate reforms curbing Chinese influence on the program alongside Luetkemeyer and Sen. Joni Ernst, R-Iowa.
Ernst accused government agencies of allowing “double-crossing companies to take your money and run off to China with the breakthroughs that rightfully belong to the U.S.” in a statement touting her work on SBIR reform.
The reauthorization bill, introduced by Senate Small Business Chairman Ben Cardin, D-Md., and Ernst, requires SBIR or STTR applicants to disclose whether the company has ties to “any foreign country of concern, including the People’s Republic of China.”
The Defense Department and other agencies must then deny awards to applicants that have ties to Chinese companies or have high-level employees that are part of “a malign foreign talent recruitment program.”
The bill requires each federal agency that awards the grants to coordinate with the Small Business Administration in the creation of “a due diligence program to assess security risks presented by small business concerns seeking a federally funded award.”
The Small Business Administration and the White House’s Office of Science and Technology must also consult with the Committee on Foreign Investment in the United States to establish best practices to guide these due diligence programs.
The grants have spurred the development of new weapons systems in some cases, giving Congress more incentive to take measures against China’s exploitation of the program.
SBIR grants awarded by the Air Force to AeroVironment, for example, led to the development of the small, kamikaze Switchblade drones, which the United States has sent to Ukraine as it fends off Russia’s invasion. The Pentagon also relies on SBIR and STTR grants to generate technologies in fields such as artificial intelligence, data processing and munitions development.
But Paul and other Republicans had also voiced concerns that some companies rely entirely on grants to sustain themselves without spinning off new businesses or products.
To that end, the reauthorization bill contains enhanced performance benchmarks that differentiate between Phase I and Phase II SBIR and STRR grants. Under the program, Phase I awards range from $50,000 to $250,000 for six to 12 months. Phase II awards range from $750,000 to nearly $2 million for two years. There are also direct to Phase II awards, which allow companies to receive Phase II grants without first competing Phase I research.
The new legislation doubles the minimum performance standards for each small business that receives more than 50 Phase I grants within five years.
Additionally, a small business that has received more than 50 Phase II awards within the past 12 years must garner “an average of $250,000 of aggregate sales and investments” for each of those awards. And a company with more than 100 Phase II awards within the past 12 years must earn an average of $450,000 in aggregate sales and investments.
If a company does not meet these standards, then it may not receive more than 20 total SBIR and STTR Phase I and direct to Phase II awards for one year per agency. They may still receive unlimited Phase II awards.
President Joe Biden is expected to sign the bill before the end of the week, securing the program’s future through 2025.
(Source: Defense News)
27 Sep 22. US sees chance to gain arms market share from sanctioned Russia. A White House official said Tuesday Russia’s sanctions-struck defense industry is creating an “opportunity” for U.S. and western defense firms to take a bite of Moscow’s share of the market.
“As a practical matter, countries that have had to rely on Russian equipment are going to find it very difficult to get even basic supplies from Russia’s defense industrial base,” Cara Abercrombie, the National Security Council’s coordinator for defense policy and arms control, told attendees of industry conference ComDef. “It is an opportunity, certainly for industry members in the room. It is an opportunity for the United States to provide the support that these countries need.”
The remarks come weeks after the Biden administration notified Congress it would make $2.2bn in new Foreign Military Financing grants available for Ukraine and former Warsaw Pact countries whose Soviet-made gear has been part of international aid to Ukraine.
“In NATO, that could be to transition our eastern flank partners to NATO-standard, western equipment. But certainly as we look to other countries in the Pacific, this is an opportunity as well, not just for the United States, but for western industry as well,” Abercrombie said.
The Pentagon’s chief weapons buyer, Bill LaPlante, said more “interchangeability by interoperability” among allies presents an opportunity, not just economically, but geostrategically. Linking industrial bases, or “friendshoring,” would mitigate supply chain shocks and be essential to the common defense of the U.S. and its allies, he said.
“As we have seen in Ukraine, the weapons and equipment provided by the U.S. and its allies are the best in the world,” LaPlante said in pre-recorded remarks at the ComDef conference. “Continuing to more closely integrate these capabilities with increasingly common standards for munitions, software and other components will provide even greater advantages moving forward.”
Though western sanctions have targeted Russia’s defense industry, Russia was in 2021 the second-largest arms exporter after the United States, according to the Stockholm International Peace Research Institute. Its chief clients are India, China and Egypt.
The head of Russia’s weapons export branch said earlier this year that Moscow’s arms export revenue in 2022 is likely to total about $10.8bn, roughly 26% lower than reported for 2021.
This week, LaPlante is in Brussels convening a meeting of weapons buyers from more than 50 countries to better coordinate defense industrial efforts as they replenish weapons sent to Ukraine from their own stockpiles. The meeting is taking place under the auspices of the 50-nation Ukraine Defense Contact Group.
Dovetailing with Pentagon-led efforts to boost western and allied defense capabilities, the White House will continue the work of a Department of Defense “tiger team” seeking to streamline the U.S. process of selling arms around the globe, Abercrombie said.
“Within the National Security Council, I am looking at basically a baton pass,” Abercrombie said. “As DoD wraps up its initial analysis, we’ll be doing an interagency process to look at the collective [effort and] how can we make U.S. foreign military sales work better for our partners, or at least be a little faster.”
U.S. Defense Secretary Lloyd Austin in August established the task force to address the U.S. foreign military sales process, which spans the Pentagon and State Department. Abercrombie said the streamlining is meant to make the process more nimble without cutting corners.
Asked about trade restrictions by the European Union that could hinder U.S. defense exports, Abercrombie said the administration is seeking to reduce those barriers. Supply chain challenges make clear it’s “time to be looking for opportunities to work together to reduce the barriers,” she said.
The U.S.-led meeting of armaments directors in Brussels also highlights some of the headwinds for allied efforts to arm up. The gathering is aimed at addressing supply chain chokepoints for gun barrels, ball bearings and steel casings as well as how to sustain equipment for Ukraine on a long-term basis.
“Ultimately, more closely integrating with our allies and friends around the world will make us all more secure and resilient,” LaPlante said. (Source: Defense News)
26 Sep 22. Booz Allen values ‘struggling’ EverWatch at $440m in antitrust case. Booz Allen Hamilton, one of world’s largest defense contractors, disclosed in a court filing that its acquisition of “struggling” EverWatch values the supplier of artificial intelligence, cloud services, data science and insider-threat analysis at $440m.
The figure and characterization, included in documents filed Sept. 23 with a district court in Maryland, shed light on a defense industry transaction the federal government alleges is anticompetitive and potentially harmful to national security. An underlying contract, known as Optimal Decision, was unexpectedly released for bidding by the National Security Agency earlier this month and is worth less than $17m in profit over five years, according to the filings.
Booz Allen and EverWatch are thought to be the only serious contenders for the contract, which deals with simulation and signals intelligence.
“Booz Allen’s $440m merger is not about [Optimal Decision]. It is about providing innovative solutions and improving competition for a wide array of procurements worth billions of dollars, many of which are currently dominated by larger entrenched incumbents,” according to a brief from the companies, filed after a hearing. “Put bluntly, EverWatch is struggling in the face of uncertainty, and Booz Allen’s $440m investment in a transaction with EverWatch is being put at risk with every day of further delay.”
A spokesperson for Booz Allen confirmed the valuation Monday.
“Although we didn’t disclose terms at signing, we have since sized the deal publicly as $440m so that number is correct,” Jessica Klenk, a company spokesperson, said in an email.
A telephone message left with EverWatch seeking comment was not immediately returned.
The U.S. Department of Justice in June sued to prevent Booz Allen from acquiring EverWatch. In its complaint, the government alleged the merger would imperil market competition, ultimately harming taxpayers, and crimp services provided to the NSA.
Attorneys for Booz Allen have told a federal court the merger, publicized in March, would accelerate technology development, among other benefits.
Booz Allen has also previously said the revenue generated by Optimal Decision pales in comparison to its grander goals and the price it was willing to pay for EverWatch, which is owned by Maryland-based investment firm Enlightenment Capital. EverWatch is much smaller than Booz Allen, the 22nd largest defense contractor by revenue in the latest Defense News ranking. (Source: C4ISR & Networks)
26 Sep 22. Lockheed Martin Books Bullish F-35 Buys Amidst Turmoil.
Summary
- F-35 program suffered setbacks from the U.S.
- Setbacks are currently temporary in nature due to budget constraints and technology insertion delays.
- Lockheed Martin is on a winning spree in Europe.
- Looking for more investing ideas like this one? Get them exclusively at The Aerospace Forum.
The F-35 most likely is one of the most ambitious military projects ever pursued, and realistically it is one of the most plagued defense programs. One could say that in an effort to address several sets of capabilities with a single defense platform. Costs have risen dramatically and timelines have shifted.
It also seems that the F-35 is so advanced that it was a bit ahead of its time, infusing the timeline with risks that are chasing Lockheed Martin to this day. From an engineering perspective, if you can’t match technological design capabilities of a product with the available and mature technologies at the time, you are going to end up increasing the risk of time delays and cost growth. To me, the F-35, while I am impressed with the product, is a schoolbook example of that.
Also in 2022, we saw some pressures regarding the F-35. However, besides some bad news, there also have been some positive developments. In this report, I will discuss both, demonstrating how an in-demand platform is struggling nearly 16 years after its first flight.
Fewer F-35s Requested
The F-35 program started the year in a somewhat disappointing fashion. While the war in Ukraine unleashed just a month earlier, the Pentagon slashed its budget request by 33 F-35 stealth fighters from a previously planned 94, setting the program back by around $5.8bn, according to my calculations, from the procurement that was initially anticipated. There are two reasons for that.
The first is that, with a limited budget, choices have to be made, and the F-35 is not on the better side of the spectrum in that regard. There are hundreds of aging F-15C/D fighter jets used for homeland defense which need to be replaced. Those could be replaced by the F-35A, but it would be an overkill replacement. The F-35 is built with stealth capabilities in mind, which you don’t need for homeland security.
So, instead, more funds – $1.4 ]bn to be precise – have been allocated to the F-15EX, bringing the FY2023 budget to $2.8 ]bn for the type. That, to some extent, makes sense, as the F-35 has higher sustainment costs over it lifecycle, which is in part driven by its mission capabilities. The F-35 is a stealth fighter, which comes at a cost and for homeland defense, you don’t need that capability. The F-15EX, which does not require a stealth bay to carry weapons, is better equipped as an F-15C/D replacement. By 2019, the F-35 was also more expensive to operate per flight hour, but that is expected to come down significantly in the years to come, though Lockheed Martin has not had the best of success with bringing costs down. So, from a budgetary point of view, getting fewer F-35s make sense as well as from a mission requirement point of view. Simultaneously, it also puts more pressure on Lockheed Martin to deliver cost savings to operators.
Additionally, Lockheed Martin is running three years behind on Block 4 capabilities for the F-35 due to funding constraints and the complexity of the software, which also complicated the Technology Refresh 3. The software for fighter jets, without doubt, is highly complex, as fighter jets cannot be flown just by the aerodynamic properties of the jet and require augmentation. On top of that, you can layer the complexity of the F-35 itself and efforts to modernize the platform. That means that, while the operators seek Block 4 capabilities, they will have to retrofit that later on. By procuring fewer fighter jets now, the operators will have lower retrofit costs for Block 4 capabilities when that becomes available in the targeted year of 2029 and budget space is release for the F-15EX. So, it does make sense that fewer F-35s have been requested.
Inflationary and COVID-19 Pressures Lead To Low Flying Production
Next to that, COVID-19 put a damper on output. Lockheed Martin initially shielded its production system and chain quite well against the pandemic, but the reality is that Lockheed Martin is struggling to boost production. It will be in the 147-153 range in the next two years and production will remain at 156 jets in the years after, whereas production was expected to peak at 180 units previously. In the near term, that damper comes from supply chain constraints, but going forward it is mostly driven by what capabilities operators prefer with the available budget.
Lockheed Martin also went through a tough round of negotiations for production Lots 15 through 17, of which it warned a $500m cost growth could be triggered due to timing of the agreement or a lack thereof on the back of higher costs driven by inflation and supply chain challenges. This ended up being $325m due to incremental and international funding softening the cost growth.
Manufacturing Issues Plagued F-35
By the end of July, the U.S. Air Force grounded the bulk of its F-35 fighter over potential issues with the seat ejector cartridges, commanding a 90-day timeframe to inspect 706 cartridges on 349 jets. The checks were concluded several weeks later without any issues found, but it does show that the F-35 still suffers from some flaws as, in the isolated case, the explosive component of the cartridge was missing. This means that the ejector would likely not have functioned in case it was needed. The issue set a review in motion at the company in Lockheed Martin’s supply chain that manufactures the cartridges: two defective cartridges were found.
This month, Pentagon halted deliveries over the use of a Chinese alloy which is not a safety or security threat but may potentially violate acquisition regulations. It is another instance where even after years of production things seem not to be fully under control or in compliance in the supply chain on the most advanced fighter jet flying around today. The delivery stop has thus far delayed the handover of 8 fighter jets.
Not Only Bad Things For Lockheed Martin
While the F-35 without doubt has more than its fair share of problems driven by the way the project was set up and the complexity of the resulting product, it is not all that bad. While budget ceilings and technological timelines do provide some constraints on the number of jets the U.S. military will take in the coming years, demand for the jet can be labeled as robust. In fact, the F-35 is so advanced that not all countries that want to procure the jet will actually be allowed to, and for some countries, the life cycle costs might simply be too high to support the jet. An example of that is Romania (where I currently live); the country is charmed by the F-35 and intends to buy the jet in the future, but its budget is insufficient. This resulted in the country purchasing F-16s that were previously in service with the Norwegian Air Force.
The war in Ukraine has also reshaped defense budgets of NATO members. Canada has for years been evaluating its options, and in November 2021, evidently before the invasion of Ukraine, the F-35A and Saab 39 Gripen E were left as the remaining candidates to replace the CF-18 Hornets. Ultimately, in March 2022, that led to the selection of the F-35A, of which 88 will be procured. Similarly, in 2021, the Swiss decided to buy 36 F-35s in a deal worth $6.5bn, but a contract was not signed until a few days ago.
There is little doubt that the escalation in Ukraine has accelerated the process of signing purchase agreements. Germany, which went on a buying spree following the invasion of Ukraine, said it will purchase 35 F-35s in a deal worth $8.4bn, going against years of evaluating options in a competition that the F-35 was knocked from in 2019. Also, the Czech Republic declared an intent to buy the F-35, of which it aspires to procure 24, which I estimate to be worth at least $4bn.
Wins and losses F-35 competition (The Aerospace Forum)
When we put things together, what we quickly see is that the loss of business in 2023 from the U.S. is offset by the wins Lockheed Martin booked for the coming years. Nearly $6bn in business was lost for now, but the net positive is $28.1bn.
Conclusion: Lockheed Martin Stock Still In A Buy Spot
While the F-35 has had problems and there are problems and delays still popping today, I do believe that overall Lockheed Martin is positioned well with its stealth fighter jet. There are, of course, concerns regarding the willingness of the U.S. to buy the jet in the quantities previously anticipated, as budgetary constraints exist and other platforms might provide better mission-suitable replacements.
While operators in the U.S. are charmed by the F-35 and intend to buy more jets once Block 4 capability is integrated, I do see that as somewhat of an overhang. However, in Europe, we are seeing that the invasion of Ukraine has led to faster decision-making processes and bigger budgets benefiting the F-35, and there is more to come. (Source: News Now/https://seekingalpha.com/)
23 Sep 22. Department of Defense Selected Acquisition Reports (SARs) – President’s Budget 2023. The Department of Defense (DoD) has transmitted the President’s Budget 2023 comprehensive annual Selected Acquisition Reports (SARs) to Congress. SARs summarize the latest estimates of cost, schedule, and performance status for Major Defense Acquisition Programs (MDAPs) and Middle Tier of Acquisition (MTA) programs that exceed the MDAP cost threshold.
By law, the MDAP cost threshold is an estimated eventual total expenditure for research, development, test, and evaluation of more than $300,000,000 (based on fiscal year 1990 constant dollars) or an eventual total expenditure for procurement, including all planned increments or spirals, of more than $1,800,000,000 (based on fiscal year 1990 constant dollars).
There are 79 MDAP SARs: 15 for Department of the Army, 39 for the Department of the Navy, and 23 for the Department of the Air Force. Two additional MDAPs are direct reports to the Under Secretary of Defense for Acquisition and Sustainment: Chemical Demilitarization – Assembled Chemical Weapons Alternatives and the Ballistic Missile Defense System.
There are 19 MTA programs that met the MDAP threshold and submitted a SAR: 7 for the Department of the Army, 1 for the Department of the Navy, 10 for the Department of the Air Force, and 1 for the Space Development Agency.
SARs are prepared annually in conjunction with submission of the President’s Budget. The President’s Budget 2022 only included one year of funding and therefore DoD did not produce SARs last year.
The President’s Budget 2023 SARs are published by the Washington Headquarters Services at https://www.esd.whs.mil/FOIA/Reading-Room/Reading-Room-List_2/Selected_Acquisition_Reports/. These SARs are filed under “2021 SARs” as consistent with the data reflected. (Source: US DoD)
REST OF THE WORLD
28 Sep 22. Indonesia touts KF-21 fighter jet need, but is mum on laggard payments. Indonesia has reaffirmed its commitment to develop a fighter jet with South Korea, as questions about long-overdue payments for Jakarta’s share of the development remain unanswered.
Muhammad Herindra, Indonesian deputy minister of defense, said in remarks carried on the agency’s social media channels that the Korea Aerospace Industries or KAI KF-21 Boramae fighter program remains of strategic value to the Southeast Asian country.
He argued that the KF-21 can meet the needs of Indonesia’s need for a fighter aircraft from 2025 onwards. With both countries having signed an agreement on technology transfer, the hope is that the program would support Jakarta’s aspirations to develop its own indigenous defense industry.
Herindra was speaking at a ceremony on Wednesday to mark the KF-21’s maiden flight, which took place at KAI’s facilities at Saechon in July.
The deputy defense minister also visited the 37 Indonesian engineering personnel stationed at KAI as part of the joint development program during his visit and expressed hope that the number of Indonesians involved in the program will grow to 100 by the end of this year.
However, he did not offer any more clarity on Indonesia’s arrears in paying its share of the program’s development costs. Indonesia agreed to contribute 20% of the costs when it joined the program in 2010 but started falling behind on payments since 2017.
According to South Korean media reports, Indonesia has failed to stick to a repayment schedule both countries agreed upon in November 2021 despite multiple promises to resolve the issue from various officials, including its president, Joko Widodo. As of July, the country was reportedly behind to the tune of $557m.
Indonesia seeks to buy up to 50 KF-21s and is keen for local industry to take part in the manufacturing process. The country is additionally seeking more developmentally mature fighter types to meet its air-defense requirements and has signed a contract with France’s Dassault for six out of a potential 42 Rafale multirole fighters.
Indonesia is also considering the Boeing F-15 Eagle multirole fighter as part of its ambitious plans to modernize its armed forces, despite budget shortfalls exacerbated by the coronavirus pandemic.
Despite the issues with Indonesia’s contributions, South Korea continues to press on with the development of the KF-21, which it plans to put into production from 2026 to replace older F-4 and F-5 fighter jets.
KAI has also unveiled a model of a carrier-borne version of the KF-21, with South Korea considering the development of an aircraft carrier. (Source: Defense News)
26 Sep 22. Turkey says Malaysia, Indonesia interested in buying armed drones. Turkey said on Monday that Malaysia and Indonesia had expressed keen interest in buying armed drones from Turkish defence firm Baykar, which has supplied the weapons to several countries after battlefield successes.
“Many Asian countries, especially Malaysia and Indonesia, show great interest in our defence industry products. Agreements are being signed,” Turkish foreign minister Mevlut Cavusoglu told a press conference in Tokyo.
“We would most gladly meet Japan’s need for drones,” the minister added, on a visit there to attend the funeral of former Prime Minister Shinzo Abe.
International demand for Turkish drones has soared after their impact on conflicts in Syria, Ukraine and Libya. On Sept. 21 Reuters reported that Baykar delivered 20 armed drones to the United Arab Emirates this month.
(Source: Google/Reuters)
22 Sep 22. Brazil buys new Airbus helicopters for Air Force, Navy. Brazil’s military has purchased new helicopters from Airbus, according to a statement from the European defense company.
The deal includes 27 single-engine H125 helos meant to “boost the training capacity” of Brazil’s Air Force and Navy, the Friday statement said. The new aircraft will replace AS350 and Bell 206 helicopters currently in use by the two services.
“This joint procurement contract represents the realization of a project that will equip both the Brazilian Air Force and Navy with modern aircraft that will meet the needs of the Forces for the next 30 years,” Lt. Brig. Carlos de Almeida Baptista Junior, commander of the Air Force, said in the statement.
Airbus, which lists its “headquarters” in the Netherlands and its “main office” in France, said the H125s will feature a G500H TXi double glass cockpit as well as a vehicle and engine multifunction display. The helicopters will also be compatible with night vision goggles.
An Airbus spokesperson said it is company policy to not comment on the purchase price.
Brazil’s military currently operates more than 150 Airbus helicopters from eight different bases around the country, according to the company, and its fleet ranges “from the light single engine Ecureuil family to the multi-purpose heavy H225M helicopter.”
The H125 helicopter has logged 37 million flight hours, and there are more than 5,300 in operation globally. (Source: Defense News Early Bird/Defense News)
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