Sponsored by Bertin Exensor
www.exensor.com
——————————————————————————————————————————————————————————————————————————————————————————————————————————–
23 Oct 24. Pentagon OKs first batch of private capital funds for loan program. The first round of private capital funds flowing through a joint Pentagon and Small Business Administration loan program will invest $1.8bn in more than 1,000 defense-technology companies.
The Pentagon announced on Tuesday its Office of Strategic Capital approved 13 private funds to participate in the first installment of its Small Business Investment Company Critical Technology Initiative, or SBICCT. Established last fall, the effort aims to draw private capital funding to companies advancing technologies like artificial intelligence, quantum computing, space and advanced materials that could have significant implications for national security.
Along with the funds’ expected private capital investments, the funding the Small Business Administration is making available through the SBICCT loans could bring the total investment amount to approximately $2.8 bn. The program has additional proposals in the pipeline that could increase that to more than $4bn.
Over the last 20 years, the Pentagon has seen a drop in private capital investment into the technology areas it deems critical. Many of those areas are hardware intensive and require significant funding to generate a meaningful return for investors. Jason Rathje, who leads the Office of Strategic Capital, told reporters the SBICCT Initiative is specifically targeting that challenge.
“The ‘so-what’ of this program is it allows us to incentivize the capital markets to start investing more into our critical technology areas because it changes the return profile,” he said.
By partnering with the Small Business Administration, the Defense Department wants to take advantage of the organization’s track record of directing venture capital funding toward projects that have significant economic impact.
“This first group of SBICCT Initiative funds represents a consequential milestone in demonstrating the power of public-private partnerships to build enduring advantage by growing and modernizing our supply chains, strengthening our economic and national security, and benefiting the development and commercialization of critical technologies that are key drivers of our U.S. industrial base,” Heidi Shyu, under secretary of defense for research and engineering, said in a statement.
The Office of Strategic Capital was established in 2022 to drive private sector capital toward defense technologies. Tuesday’s announcement follows the Pentagon’s establishment last month of a $1 bn fund to provide direct loans to companies that make in-demand defense component technologies. The effort aims to help companies fund the construction of equipment needed to scale production across 31 technology areas it has deemed critical to U.S. national security.
“In our 2024 investment strategy, we talked about how we needed to build different strategies for different parts of the capital market and different parts of our critical technology space,” Rathje said. “What we have been able to do over the last year is really accomplish the programs, the financial products that OSC is offering.”
Lending tools like these are new to the Pentagon, but federal agencies like the Energy and Commerce departments have a long history of using credit programs to support key industries. OSC projects its SBICCT Initiative will continue to grow. More than 100 funds have expressed interest in the effort, and the Pentagon will now accept applications on a quarterly basis. (Source: C4ISR & Networks)
23 Oct 24. DoD and U.S. Small Business Administration Announce First Licensed and Green Light Approved Funds for the Small Business Investment Company Critical Technology Initiative. The U.S. Department of Defense (DoD) and the U.S. Small Business Administration (SBA) have announced the first group of Small Business Investment Company (SBIC) Licensees and Green Light Approved investment funds approved under the Small Business Investment Company Critical Technology Initiative (SBICCT Initiative). This first group collectively plans to invest over $2.8bn into over 1,000 portfolio companies. The SBICCT Initiative’s primary objective is to attract and scale private investment into technology areas critical to economic and national security. Funds licensed under the SBICCT Initiative are eligible for access to SBA-guaranteed loans designed to enhance fund-level investment returns. Each fund can access up to $175 m in loans which can be accessed through the new Accrual Debenture, which aligns with the cash flows of longer duration and equity-oriented investment strategies and may also be accessed through the longstanding SBA Standard Debentures that aligns to credit strategies. DoD also provides Program Related Initiatives intended to drive value in the implementation of the Licensee’s respective investment strategies. Through this first-of-its-kind partnership, DoD’s Office of Strategic Capital (OSC) and SBA’s Office of Investment and Innovation (OII) aim to increase private investment in critical technologies, including component-level technologies and production processes vital to U.S. economic and national security interests. The SBICCT Initiative formally launched and began accepting SBIC applications in the fall 2023. In early July 2024, the SBA granted the first SBICCT Initiative license. Just three months later, as of October 22, 2024, after taking the significant step to submit a formal application and undergo the rigorous underwriting and due diligence process, 4 funds are Licensed and 9 are Green Light Approved by SBA to raise private capital. These 13 funds, taken along with the other investment funds nearing the end of the diligence process, collectively project to invest over $4 bn in nearly 1700 portfolio companies focused on all 14 DoD Critical Technology Areas and component-level technologies and production processes. In addition, these funds plan to invest across asset classes including seed, venture, growth, buyout, direct lending, special situations, and fund-of-funds. (Source: glstrade.com)
22 Oct 24. GAO: US Armed Forces struggle to keep tactical aircraft mission capable. This means that the rate at which fighter planes are flying, performing at least one mission, is less than is required across all the services.
The US Armed Forces are struggling to keep tactical aircraft ‘mission capable’, according to the latest Government Accountability Office (GAO) review issued on 21 October.
This means that the rate at which fighter planes are flying in service, performing at least one mission, is less than is required across all the services.
Between 2018 and 2023, the GAO found that the Navy, Marine Corps and the Air Force collectively spent more than $57bn to operate and sustain these aircraft. This calls into question the apparent deficit at a time when the military ought to perform optimally to prevent the liberal international order from backsliding.
While previous investigations attributed the mission capable rate shortage to numerous interrelated and complex factors, such as ageing aircraft, maintenance challenges and supply support issues, the latest review points to another unique problem with maintaining the fleet.
The Air Force and Navy generally executed slightly more funding than requested for aircraft sustainment while the Marine Corps executed less. Curiously, the mission capable rates for all Navy and Marine Corps tactical aircraft increased while the rates of all Air Force fleet reduced.
F-35A makes up 30% of USAF tactical aircraft
Currently, the US Air Force operates more than 2,200 combat aircraft according to GlobalData intelligence. Some 400 of these are Lockheed Martin F-35A Lightning II aircraft.
The F-35A, which is considered the most advanced fifth-generation fighter available, makes up approximately 30% of the Air Force fleet today.
However, this figure is set to spike in the coming years as the service ultimately plans to reach its goal of 1,763 F-35As while it also begins to phase out many of its legacy tactical aircraft – the service plans to divest 65 F-15s and 11 F-16s in 2025.
Meanwhile, the Navy and Marine Corps have fewer F-35s. The Marine Corps currently flies the F-35B short takeoff/vertical landing variant and plans to purchase 353 F-35Bs and 67 F-35C carrier variant aircraft. The Marine Corps declared F-35B initial operating capability in July 2015.
Together with the Marines, the Navy will bring fifth-generation capability to the sea with 260 F-35C jets.
Notably, the F-35 is undergoing a costly project – in time and money – to modernise certain aspects of all three variants. Namely, the service aims to increase its power and cooling capability. These sweeping upgrades come under what is called the Block 4 modernisation.
Originally due to be completed in 2026 and determined to cost $10.6bn, the GAO discovered that the Block 4 programme has risen to $16.5bn and is now estimated to conclude in 2029.
Therefore, it make sense that the Air Force has spent more on the operation and maintenance of its tactical fleet to compensate for modernisation delays by keeping a larger number of F-35s mission capable. The service will doubtless continue to do so over the next decade.
US to face “contested logistics” in future conflict
As the US-China rivalry escalates from gray-zone tension in the Indo-Pacific to outright conflict, most likely over Taiwan, the US Armed Forces are adapting for such a scenario.
Mark Cancian, senior fellow, Center for Strategic and International Studies, conducted a wargame scenario exploring this conflict. In conversation with Airforce Technology, Cancian mentioned that the military will face “contested logistics, which is something the US has not had to deal with since 1945.”
In such a vast and largely maritime space, the US Air Force is implementing a strategy wherein its planes will scatter to survive. Through its policy of Agile Combat Employment (ACE), the Air Force will spread its force out across various island territories.
It is a policy that was proven by the same services in the Pacific theatre during the Second World War.
“ACE complicates the enemy’s targeting process, creates political and operational dilemmas for the enemy, and creates flexibility for friendly forces,” the service explained in Air Force Doctrine Note 1-21.
(Source: airforce-technology.com)
22 Oct 24. Lockheed feels financial pinch from F-35 upgrade, contract delays. Contract delays and software problems with the F-35 are costing Lockheed Martin hundreds of millions of dollars, and the company is trying to get the program back on track and start recouping its costs.
Lockheed Martin expects to strike a deal with the U.S. government by the end of the year to build the 18th and 19th lots of F-35 Joint Strike Fighters, company officials said in an earnings call Tuesday.
But the delay in reaching the contract for upcoming batches of F-35s — along with multi-million dollar payments the government is withholding from Lockheed until the newest fighters can fly in combat — is costing the company hundreds of millions of dollars.
Lockheed’s aeronautics sector reported $6.5bn in sales in the third quarter of 2024, a 3% decline from one year earlier, as well as a 2% decline in aeronautics profit. Officials said higher volume on C-130 aircraft and belt-tightening on spending helped it absorb most of the F-35 losses.
The U.S. government at the end of 2023 authorized Lockheed to start initial work on lots 18 and 19, and awarded the company an advance acquisition contract to fund production and ensure they didn’t fall behind schedule.
But that initial funding has run out, Lockheed said, and the company said it incurred about $700m in delayed revenue on the F-35 in the third quarter.
The earnings call with investors provided more insight into the financial repercussions Lockheed is facing as it tries to recover from a year-long F-35 delivery delay, stemming from software and hardware troubles with an upgrade known as Technology Refresh 3, or TR-3.
TR-3 is meant to give the jets improved displays, computers and processing power, beginning with lot 15. But software integration problems and hardware delays meant the upgrades did not work as intended, and the government refused to accept jets intended to have TR-3.
Lockheed developed an interim version of the software that allows TR-3 jets to fly combat training missions, which satisfied the government enough to resume deliveries this summer. But those jets are not yet able to fly in combat, and won’t be until 2025.
Lockheed delivered its first 48 F-35s of the year in the third quarter, chief executive Jim Taiclet told investors, and expects to deliver between 90 and 110 jets by the end of 2024.
That is less than the roughly 156 jets Lockheed typically aims to produce and deliver annually, and about in line with the 98 fighters the company delivered in 2023, as the delivery halt began.
Lockheed expects to take a $600m hit in 2024 on the delays associated with lots 15 through 17 jets, chief financial officer Jay Malave told investors. But he expects the company to recover those costs over the next few years.
While Lockheed Martin won’t deliver its full complement of F-35s in 2024, Malave said the company expects to deliver about 180 annually over the subsequent three years, as it works through its backlog.
Malave also expects the government to start releasing withheld payments starting next year, as TR-3 improves. The F-35 Joint Program Office is withholding about $5 m in payments for each jet until they are fully combat-capable. About 95% of the new TR-3 jets’ combat capabilities have been validated, Taiclet told investors.
Malave expects Lockheed to receive about $300m to $400m more in 2025 as it delivers more jets and withheld payments from the government start to shake loose, with more to come in 2026.
“Cash collections will smooth out over this period of time,” Malave said.
But some lawmakers have lost patience with Lockheed and its difficulties with the F-35.
Reps. Matt Gaetz, R-Fla., and Seth Moulton, D-Mass., on Tuesday introduced a resolution that would say Lockheed and its subcontractors have failed to deliver what the company promised on the F-35, and that the Pentagon has failed to hold the program accountable.
The proposed resolution outlines a litany of shortcomings with the F-35, most recently its TR-3 troubles and the delays in future upgrades known as Block 4 that are now resulting.
“Its unacceptable to leave the American taxpayer on the hook for a broken system and allow appropriators in Congress to divest funds from service members’ child care to invest in broken F-35s,” Gaetz said. “We must stop rewarding failure and prioritize our military families.”
(Source: Defense News)
22 Oct 24. DOD, German Ministry of Defence Enter Into Security of Supply Arrangement. The Department of Defense (DoD) entered into a bilateral, non-binding Security of Supply Arrangement (SOSA) with the Federal Ministry of Defence for the Federal Republic of Germany (DEU MOD). The arrangement will enable both the U.S. and Germany to acquire the industrial resources they need to quickly meet defense requirements, resolve unanticipated disruptions that challenge defense capabilities, and promote supply chain resiliency.
The SOSA was signed on October 22, 2024 by Under Secretary of Defense for Acquisition and Sustainment, Dr. William LaPlante, on behalf of the United States and the Head of the Directorate-General for Equipment within the Federal Ministry of Defence, Vice Admiral Carsten Stawitzki, on behalf of Germany in Brussels, Belgium.
“This SOSA is an important step forward and further strengthens the robust defense partnership between Germany and the United States,” said Dr. LaPlante.
Through this arrangement, the U.S. and Germany commit intent to support one another’s priority delivery requests for procurement of critical national defense resources. The U.S. will provide Germany some assurances under the U.S. Defense Priorities and Allocations System, with program determinations by the DoD and rating authorizations by the Department of Commerce. Germany will in turn establish a government-industry Code of Conduct with its industrial base, in which German firms will voluntarily agree to make every reasonable effort to provide the U.S. with priority support. Participation in this Code of Conduct is made voluntarily.
SOSAs are an important mechanism for DoD to strengthen interoperability and are a proven supply chain tool for enabling a resilient, global defense ecosystem for the U.S. and key partners and allies. The arrangements institute working groups, establish communication mechanisms, streamline DoD processes, and proactively act to allay anticipated supply chain issues in peacetime, emergency, and armed conflict.
Germany is the nineteenth SOSA partner of the United States. Other SOSA signatories include Australia, Canada, Denmark, Estonia, Finland, India, Israel, Italy, Japan, Latvia, Lithuania, the Netherlands, Norway, Singapore, Spain, South Korea, Sweden, and the United Kingdom. For more information on SOSAs, visit: https://www.businessdefense.gov/security-of-supply.html
About the Office of the Assistant Secretary of Defense for Industrial Base Policy (OASD (IBP):
The OASD IBP works with domestic and international partners to forge and sustain a robust, secure, and resilient industrial base enabling the warfighter, now and in the future. (Source: U.S. DoD)
22 Oct 24. Working With Indo-Pacific Allies Key to Maintaining Rules-Based Order, Space Force Leader Says. The commander of United States Space Forces Indo-Pacific today discussed the importance of working with regional allies in order to deter adversaries and maintain a rules-based international order.
While participating in a morning conversation about the Space Force at the Mitchell Institute for Aerospace Studies just outside of Washington, Space Force Brig. Gen. Anthony J. Mastalir said that U.S. forces in the Indo-Pacific region are working to transition from numerous bilateral exercises with partners and allies in the region to more multilateral engagements.
“Demonstrating on a daily basis with your allies and partners that you’re prepared to fight and win a war, should you need to, is really the ultimate way to deter a war; so that’s really important,” Mastalir said.
To that end, he said that Space Force and U.S. Space Command actively work to engage with partners and allies, regardless of the level of space-related capability they are at.
“The interesting thing about Space Force Space Command in terms of military operations is our partners and allies are in different places in their own journey; and we can engage with those partners where they’re at, and really kind of bring them along,” Mastalir said.
He explained how the Space Force is making progress with its partners and allies in Asia, with U.S. Space Forces Korea having been activated in December of 2022 and plans to activate U.S. Space Forces Japan by the end of the calendar year.
“Having the component really allows a tighter integration with the other components and U.S. Forces Korea,” Mastalir said. “And we’re going to put the same construct in Japan when we activate,” he added.
Mastalir said that having Space Force components in both South Korea and Japan helps drive integration not just with other U.S. military components, but also with host nation militaries.
“As build their capabilities, having a component right there in country — working with them having them exercise with us — is really great awareness of how they might consider building capabilities so that they can integrate across the joint force,” Mastalir said.
Touching again on the U.S. military’s efforts to shift from bilateral to more multilateral exercises in the Indo-Pacific region, Mastalir said that partner and ally countries also have a vested interest in protecting the rules-based international order.
“All of those nations — and Japan and South Korea specifically — think about where they were in terms of their own development as a nation at the conclusion of World War II, and where they are today … it’s absolutely amazing,” Mastalir said.
“So, they of course have a vested interest in preserving a free and open Indo-Pacific. Absolutely.” (Source: U.S. DoD)
21 Oct 24. Partisanship will sustain policy stagnation regarding AI bill, decreasing compliance risks for tech. According to reports on 18 October, congressional leaders from both chambers are privately negotiating a deal to address concerns regarding artificial intelligence (AI). The negotiations were reportedly initiated by Senate Majority Leader Chuck Schumer, who aims to move the bill in the five-week lame duck session (beginning on 12 November). If a deal is reached, it will likely focus on already agreed upon areas, such as AI research and workforce training. Continued partisan disagreement will likely increase stagnation over addressing AI’s role in misinformation, the elections and national security. Ultimately, we assess that such a bill remains unlikely to pass, as policy that is considered during this period will be largely impacted by the outcome of the presidential and congressional elections on 5 November. Additionally, Congress must also address funding the government for FY2025, as well as the National Defense Authorization Act and the Farm Bill (all major pieces of legislation) in this timeframe. Rather, we assess that it remains likely that AI and tech firms will face increasing compliance and regulatory risks from state governments in the medium-to-long term. (Source: Sibylline)
16 Oct 24. US Customs halts some drone imports from Chinese manufacturer DJI, company says. The U.S. government is stopping imports of some DJI drones from entering the U.S., the Chinese drone maker told Reuters on Wednesday. In a previously unreported letter seen by Reuters, DJI notified distributors that U.S. Customs and Border Protection is citing the Uyghur Forced Labor Prevention Act (UFLPA) in withholding some drones from being imported into the U.S. DJI,which sells more than half of all drones in the U.S., said no forced labor is involved at any stage of its manufacturing process. It told Reuters it was providing Customs with documentation verifying its compliance with UFLPA. DJI said in its letter the action appeared to be “part of a broader initiative by the Department of Homeland Security to scrutinize the origins of products, particularly in the case of Chinese made drones.” The letter called the claims “unsubstantiated and categorically false, but the law gives them the authority to withhold goods without any tangible evidence”. U.S. lawmakers have repeatedly raised concerns that DJI drones also pose data transmission, surveillance and national security risks, something the company rejects. (Source: glstrade.com/Reuters)
———————————————————————————————————————————————————————————————————————————————————————————————————————————–
Founded in 1987, Exensor Technology is a world leading supplier of Networked Unattended Ground Sensor (UGS) Systems providing tailored sensor solutions to customers all over the world. From our Headquarters in Lund Sweden, our centre of expertise in Network Communications at Communications Research Lab in Kalmar Sweden and our Production site outside of Basingstoke UK, we design, develop and produce latest state of the art rugged UGS solutions at the highest quality to meet the most stringent demands of our customers. Our systems are in operation and used in a wide number of Military as well as Homeland Security applications worldwide. The modular nature of the system ensures any external sensor can be integrated, providing the user with a fully meshed “silent” network capable of self-healing. Exensor Technology will continue to lead the field in UGS technology, provide our customers with excellent customer service and a bespoke package able to meet every need.
A CNIM Group Company
——————————————————————————————————————————————————————————————————————————————————————————————————————————————