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19 Jan 22. White House tells chip industry to be ready for potential Russia export curbs. The White House told the U.S. chip industry to be prepared for new restrictions on exports to Russia if Moscow attacks Ukraine, sources said, including potentially blocking the country’s access to global electronic supplies.
The warning followed inquiries by the industry after reports by Reuters and the New York Times on potential curbs. read more
In a phone call on Friday, White House National Security Council officials Peter Harrell and Tarun Chhabra told executives from the Semiconductor Industry Association, a chip lobbying group, to be ready for unprecedented actions against Russia if it invades Ukraine.
“The NSC relayed in blunt and stark terms the gravity of the situation they are currently grappling with in Ukraine, noting that this is an extraordinary situation and potentially the worst cross border invasion to take place since WWII,” an SIA director wrote to members following the call, according to an email seen by Reuters. “The NSC indicated that the administration is actively considering any and all options.”
According to the email, SIA had sought clarity about the probability of a range of measures, including financial sanctions, broadening export restrictions to Russia to be like those for Iran and North Korea, and applying to Russia a 2020 rule that vastly expanded the government’s powers to block shipments of foreign made goods to China’s Huawei.
One person on the SIA call with its members said getting ready could include checking on employees in Moscow to make sure they have good IT protection and preparations to shut down exports to Russia at a moment’s notice.
Expanding the scope of the so-called Foreign Direct Product Rule to Russia, in a way that mirrors a Trump-era move against Chinese telecoms giant Huawei, could allow the Biden administration to stop shipments of chips, computers, consumer electronics, telecommunications equipment, and other items made anywhere in the world if they were produced using U.S. technology.
“We have been very clear that if Russia further invades Ukraine, the United States is looking at a range of options – with allies and partners – to deliver severe costs to the Russian economy,” a White House spokeswoman said, while declining to confirm the phone call.
“Any details in this regard that make their way to the public only demonstrate the extensive detail and seriousness with which we are discussing and are prepared to impose significant measures in coordination with our allies and partners.”
SIA held a conference call with dozens of members on Tuesday to detail the conversation with the NSC, the sources said.
“We could be in uncharted waters with such a potentially broad export control measure. We are still trying to assess what the ripple effect may be to global supply chains,” SIA government affairs official Jimmy Goodrich said in a statement.
It is not the only industry group that has been in touch with the White House. SEMI, the global industry association representing the electronics manufacturing and design supply chain, also raised the topic on a call with NSC officials on Tuesday, saying it was concerned about the potential impact on U.S. technology, according to a person familiar with the matter.
Biden is seeking to deter Russian President Vladimir Putin from invading Ukraine after Russia massed tens of thousands of Russian troops in and near its neighbor. Russia denies planning a new military offensive but has made several demands and said it could take unspecified military action unless the West agrees to them. (Source: glstrade.com/Reuters)
19 Jan 22. New bill aims to cut the price of spare parts for DoD. House Oversight Committee Chairwoman Carolyn Maloney on Wednesday proposed legislation to force government vendors to publicly disclose data about their costs, a move meant to help the government negotiate better deals for spare parts.
“We are here today to say enough is enough,” Maloney, D-N.Y., said Wednesday at her panel’s hearing on findings by the Pentagon’s inspector general that it overpaid for commercial and military aircraft parts from manufacturer TransDigm Group.
“Congress must act to empower contracting officers when they’re negotiating with greedy contractors like TransDigm,” Maloney said.
The legislation would require companies to provide the government with uncertified cost data when contracting officers need it to determine whether a price is fair and reasonable. The bill, released as a discussion draft, would apply to contracts government-wide, starting a year after enactment.
At the hearing, the Pentagon’s principal director for defense pricing and contracting, John Tenaglia, said Maloney’s legislation has the support of the Pentagon.
Contracting officers routinely look at historical prices paid or prices for equivalent commercial parts, he said. When those are not enough, they can request companies provide cost information ― but they don’t always get it.
“I believe access to cost data would give our contracting officers a better chance to negotiate fair and reasonable prices,” Tenaglia said.
The hearing comes as the Pentagon is seeking reimbursement of $20.8m from TransDigm ― the second such request in three years, after its watchdog found the firm had earned “excess profit” from its defense contracts. A 2019 audit found the company received $16.1m in excess profit on 112 contracts between 2015 and 2017 ― and TransDigm subsequently refunded DoD the money.
The Defense Logistics Agency said in a statement it is “requesting voluntarily refunds for excess profit paid on repair parts,” as recommended by the inspector general. Bloomberg, citing an official familiar with the matter, reported letters were sent to 32 specific TransDigm units requesting all $20.8m flagged by the IG.
The inspector general and lawmakers on Wednesday criticized TransDigm’s business model, saying the firm identifies and acquires companies with highly-engineered sole-source spare parts, making them the exclusive provider to DoD. The recent audit found TransDigm made excess profit on 105 spare parts through 150 contracts.
TransDigm executives argued the company has broken no laws or rules, and that the audit’s yardstick for acceptable profit ― 15% ― was “arbitrary.” TransDigm chief executive Kevin Stein also said the company hadn’t decided whether to pay the $20.8 m.
“The IG failed to acknowledge that the majority of the audited parts have commercial equivalents and that, on average, DoD received a 25% discount,” Stein said. “The question is not how much it costs to produce a part, but whether the government is getting a fair and reasonable price.”
While most panel Democrats took aim at TransDigm, Republicans largely argued TransDigm was being singled out for systemic issues at the Pentagon. The panel’s ranking member, Rep. James Comer, R-Ky., called on DoD to better consolidate its orders, keep more spare parts in inventory and leverage information technology to anticipate its needs.
“These are changes we should be focused on, making the government more efficient. What we should not discuss today is placing more burdens on businesses, especially American businesses,” he said.
Along these lines, the Pentagon IG recommended DoD pursue alternative contracting strategies and combine purchases of parts to get savings. In 60% of DoD contracts with TransDigm, it purchases fewer than 25 spare parts, the inspector general found. (Source: Defense News)
19 Jan 22. DOD Hopes for Legislative Action on Product, Services Pricing Policy. Pricing of contracts for military materiel and services at a reasonable cost was the topic of a congressional hearing today.
John Tenaglia, the principal director, defense pricing and contracting in the office of the undersecretary of defense for acquisition and sustainment, and Theresa S. Hull, deputy inspector general, spoke at a House Committee on Oversight and Reform hearing.
The Defense Department’s contracting officers sought to award contracts at prices that are fair and reasonable to taxpayers, to the department and to the contractor, Tenaglia said.
“Ideally, our contract pricing is based on competitive market pressures that dictate boundaries of what is fair and reasonable. In procurement of military spare parts, we don’t always enjoy the benefit of competitive market forces,” he said.
On a positive note, the Defense Logistics Agency was successful in awarding 93% of its contract actions and 77% of its obligated contract dollars through competitive procedures last year, he said.
This includes, but is not limited to, procurement of all consumable spare parts the military departments require to sustain their weapons systems, Tenaglia said.
However, the department has significant concerns about contracting officers’ abilities to obtain data that is necessary to negotiate fair and reasonable prices, particularly for commercial sole-source items, he said.
“Armed with relevant supporting factual data, our contracting officers will negotiate better prices. However, I must clarify, even where we have obtained data such as uncertified cost information, our contracting officers will continue to face challenges where they lack negotiation leverage with sole-source contractors who refuse to yield,” he said.
Tenaglia mentioned that there are two issues regarding pricing.
First is the change needed for contracting officers to obtain data to analyze and negotiate fair and reasonable prices, he said.
The second relates to the business model and whether the law should provide a check against the government paying higher prices for contractors to cover their expenses to acquire companies in the supply chain, particularly where that business model precludes effective competition, he said.
“If unchecked, these expenses will continue to be embedded in the contract prices taxpayers pay for products the warfighter must have to perform the mission,” he said.
“The price we pay matters because the more we pay, the less combat capability we can acquire for a ready force,” he added.
Hull told lawmakers that fundamental regulatory and statutory changes are urgently needed.
“Without legislative changes, the DOD will continue to be unable to perform adequate price reasonableness determinations, and the other price analysis methods are not always effective in identifying excessive prices. Therefore, we support the legislative reforms proposed by the DOD. Without these steps, we believe that the DOD will continue to pay excessive prices for spare parts that it needs,” she said. (Source: US DoD)
19 Jan 22. Biden predicts Russia will ‘move in’ on Ukraine. US president admits ‘differences’ with allies over Kremlin sanctions as Macron calls for new EU plan. US President Joe Biden predicted Russia would “move in” on Ukraine, and warned an invasion would be a “disaster” for Vladimir Putin, as he urged the west to remain united in holding Moscow accountable for any aggression. At a news conference in Washington on Wednesday, Biden said Russia would “pay a stiff price, immediately, short-term, medium-term and long-term” in the event of an invasion of its neighbour Ukraine. However, the US president’s comments on the western response to Russian aggression were muddied by his suggestion that a “minor incursion” into Ukraine might yield lighter retaliation, which the White House was later forced to clarify. “If any Russian military forces move across the Ukrainian border, that’s a renewed invasion, and it will be met with a swift, severe, and united response from the United States and our Allies,” said Jen Psaki, the White House press secretary.
“President Biden also knows from long experience that the Russians have an extensive playbook of aggression short of military action, including cyber attacks and paramilitary tactics. And he affirmed today that those acts of Russian aggression will be met with a decisive, reciprocal, and united response,” she added. A senior administration official added that “if the Russian military, conventional military forces are acquiring land, in Ukraine, through force, in violation of Ukraine’s territorial integrity and sovereignty, that’s an invasion . . . whether it’s a small portion of territory or acquiring a large portion of territory, that’s still an invasion”. Biden’s remarks and the subsequent clarifications follow escalating warnings from senior US officials who now believe Russia’s attack on Ukraine could happen at any moment and are desperately trying to cobble together last-minute measures of deterrence and potential punishment for Moscow with European allies.
“I think he is saying out loud what everybody understands: that it is increasingly likely that something is going to happen, and nobody knows right now whether they are going to move their forces 10 or 20 miles, or whether they’re going to try to move all the way into Kyiv,” said Chris Murphy, a Democratic senator on the foreign relations committee who had just returned from a visit to Ukraine. “What I know is that he is putting together a set of crushing sanctions that hopefully will be enough to dissuade,” he told reporters. Biden acknowledged there were still “differences” among western allies on the details of their reaction, which needed to be cleared up. “It’s very important that we keep everyone in Nato on the same page. That’s what I’m spending a lot of time doing. And there are differences . . . in Nato as to what countries are willing to do,” he said. Biden’s comments came as Emmanuel Macron, France’s president, called on the EU to forge its own plan for “security and stability” with Russia, in a move that risks undermining western solidarity in the face of Kremlin aggression towards Ukraine. In a speech to the European Parliament, Macron called for EU states to “conduct their own dialogue” with Russia rather than support diplomatic efforts led by the US and Nato, in sharp contrast to a plea from Antony Blinken, US secretary of state, for “unity”. Macron said that despite the joint EU-US diplomacy, Europeans had to offer Russia a solution to de-escalate tensions with Moscow in the “coming weeks”. “We should build as Europeans working with other Europeans and with Nato and then propose it for negotiation with Russia,” he told MEPs in Strasbourg on Wednesday. “It is good that Europeans and the United States co-ordinate, but it is necessary that Europeans conduct their own dialogue.” Macron’s intervention is the first example of public dissent between Nato members since the US first warned of a potential Russian attack on Ukraine more than two months ago. Speaking during a visit to Kyiv on Wednesday, Blinken stressed the need for a unified approach ahead of his planned meeting with Sergei Lavrov, his Russian counterpart, in Geneva on Friday. “The strength of our diplomacy, our deterrence and any response to Moscow’s aggression demands unity among allies and partners, as well as within Ukraine,” he said. Russia has long sought to sideline the EU in favour of negotiating with individual countries. Sergei Ryabkov, Russia’s deputy foreign minister, pushed back against broader multinational talks, saying Moscow would prefer to deal primarily with the US. “We would prefer to find an understanding and do a deal with the Americans foremost. Bringing in too broad a circle of countries into these processes seems counterproductive to us,” he said. (Source: FT.com)
18 Jan 22. U.S. Aircraft Will Not Return to Taliban. When the U.S. left Afghanistan in August 2021, so too did many members of the Afghanistan Air Force. Some Afghan pilots took themselves and their families out of the country to nearby Uzbekistan and Tajikistan, aboard aircraft which had belonged to the Afghanistan Air Force. Included among those aircraft were some which had been provided by the United States.
The Taliban, who overran Afghanistan as the U.S. exited the country, would like to have those aircraft back now. According to the Defense Department, when it comes to the U.S.-made helicopters, that’s not likely to happen.
“We’re still working out the disposition of those helicopters … I don’t have an update … on any decisions about how they will be handled,” said Kirby. “But I think it’s safe to assume that they will not be sent into Afghanistan to be used by the Taliban.”
The final decision on what happens to those aircraft, Kirby said, is something the Defense Department is still working on.
Currently, Kirby said, the Taliban are not recognized by the U.S. as the official government of Afghanistan, though he added that such decisions are not the purview of the Defense Department.
“What we would say is I think what everybody has said across the administration: that we want to see human rights, civil rights, we want to see the promises made by the Taliban actually delivered in terms of how people are going to be treated in Afghanistan.”
Kirby also told reporters that the Defense Department’s mission is to continue to protect the United States, including from any terrorism threats that may emanate from Afghanistan.
“We’re going to stay eyes-on to what’s going on there,” he said. “We have serious, significant counterterrorism responsibilities. We have over-the-horizon capabilities that we can avail ourselves of, and we’re going to continue to make sure that Afghanistan doesn’t serve as a safe haven for an attack on the homeland again.”
Also in the Middle East, Kirby touched on a terrorist attack in Abu Dhabi, which killed three civilians.
“We remain committed to the UAE’s security and ability to defend itself,” Kirby said. “We stand united with our Emirati partners in defending against all threats to their territory.” (Source: US DoD)
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