F-35’s operating cost to decline, says DoD acquisition chief

The Pentagon will decrease its $1.1 trillion estimate for the cost of supporting Lockheed Martin Corp. (LMT)’s F-35 fighter jet over a 55-year lifespan, the top U.S. weapons buyer said.

“It will drop to a number that’s not trivial but is not as much” a reduction “as I would like,” Frank Kendall, the Defense Department’s undersecretary for acquisition, said April 3, 2014 at a Bloomberg Government breakfast in Washington.

While debate over the aircraft, the costliest U.S. weapons system, has focused mostly on the price to develop and build the fighter, Pentagon agencies also have disputed its long-term operating costs, from spare parts to repairs.

Kendall declined to elaborate on the reduced 55-year estimate by the department’s independent cost-assessment office. The figure will be released later this month in its next unclassified Selected Acquisition Report. Until then, the official projection is the $1.1 trillion formulated by that office three years ago.

By contrast, the Pentagon’s F-35 program office estimates that the fleet will cost $857 billion to operate and support over its lifetime.

On the separate cost of developing and producing a planned fleet of 2,443 F-35s, the U.S. Government Accountability Office said in February that its projection is $390.4 billion, as adjusted for inflation over the years the plane is produced. The Pentagon’s latest estimate by the same measure is $391.2 billion, about a 1.1 percent reduction from an earlier calculation.

Keep reading this article at: http://www.bloomberg.com/news/2014-04-03/lockheed-f-35-s-operating-cost-estimate-to-decline.html 

Here’s a visual guide to the Defense Department’s FY15 budget proposal

Deciphering the Pentagon’s 2015 spending proposal has been difficult, but Defense News has some charts the could serve as a decoder ring.

Out friends at VisualDoD helped us compile data from the Defense Department’s spending plan to create these detailed graphics, which tell a story on their own.

First, the chart below provides a nice overview of overall DoD spending since 2006. As you can see, defense spending has flat-lined in recent years.

DoD Top Line Spending

Now lets get a little more into the weeds.

Keep reading this article at: http://intercepts.defensenews.com/2014/03/a-visual-look-inside-dods-2015-budget-proposal

Here are the predicted winners and losers in the FY15 budget

While its passage in Congress is far from guaranteed, the Pentagon’s budget request for fiscal 2015 has some clear winners and losers on the weapons-acquisition front.

The Defense Department on March 4 will request its spending plan for the fiscal year beginning Oct. 1. The base budget, excluding war funding, will total $496 billion, Defense Secretary Chuck Hagel said during a press conference Monday afternoon (Feb. 24, 2014) at the Pentagon.

Hagel spent a portion of the hour-long briefing discussing the department’s modernization plans.

To read about the winners and losers in the FY15 budget, keep reading this article at: http://www.dodbuzz.com/2014/02/24/winners-and-losers-in-the-2015-budget

 

OMB says budget deal means no further sequester cuts in FY14

Federal agencies will not face any additional sequester-related spending cuts for fiscal 2014 following passage of December’s bipartisan budget deal, the Office of Management and Budget confirmed in a report this month.

Under the deal, Congress agreed to partially roll back discretionary spending reductions previously mandated in 2011, leaving total defense spending—not counting funding for the Afghanistan war—at $520.5 billion and total spending on other programs at $491.8 billion this year. Lawmakers also reworked the caps for next year to keep overall discretionary spending at about the same benchmark; for 2015, the caps on security and non-security spending are $521.3 billion and $492.4 billion respectively, according to the OMB report.

Keep reading this article at: http://www.federaltimes.com/article/20140217/MGMT05/302170012/1001 

Pentagon said to be planning to boost missile defense spending by over $4 billion

The U.S. Defense Department plans to ask Congress for $4.5 billion in extra missile defense funding over the next five years as part of the fiscal 2015 budget request, say congressional sources and an expert.

Nearly $1 billion of that sum will pay for a new homeland defense radar to be placed in Alaska, with an additional $560 million to fund work on a new interceptor after several failed flight tests, said Riki Ellison, founder of the nonprofit Missile Defense Advocacy Alliance, and two of the congressional sources, who were not authorized to speak publicly.

The Pentagon’s request for added funding comes despite continued pressure on military spending and cuts in other arms programs, a sign of Washington’s growing concern about missile development efforts by North Korea and Iran, the sources said.

Keep reading this article at: http://www.reuters.com/article/2014/02/07/us-usa-military-missile-idUSBREA1605T20140207 

Interview with Frank Kendall, DoD’s AT&L chief

Frank Kendall, US undersecretary of defense for acquisition, technology and logistics (AT&L), oversees hundreds of billions of dollars in procurement programs. But that has not stopped him from taking on some side projects. He recently rewrote the Pentagon’s acquisition bible, known as Defense Department Instruction 5000.02. The new guidance implements “Better Buying Power” initiatives developed by Kendall and his predecessor, Ashton Carter.

Q. Can you talk about the update to DoD 5000.02?

A. I found a couple of gaps that I thought we needed to close that were fairly significant. Also, there were a number of laws that had been passed that needed to be implemented into the [Department of Defense Instruction] somehow. And we had done some things under Better Buying Power that I thought needed to be reinforced through 5000.02.

The gaps have to do largely with the need for a requirements decision point during what is the risk-reduction phase, the technology demonstration phase. Essentially, what we were doing is writing a draft requirements document when we first came through before Milestone A. That Milestone A kicks off a number of risk-reduction activities with industry, usually competitively. Then we were setting up Milestone B, the entry into full-scale development, after the preliminary design review. But nowhere in between was there a place to finalize the requirements. So we added a new decision point, which I’ll participate in for major programs, but it’s largely a Joint Requirements Oversight Council, Joint Staff, service, requirements community decision.

Keep reading this interview at: http://www.defensenews.com/article/20140108/DEFREG02/301080018/Interview-Frank-Kendall-US-Defense-Acquisition-Chief

Federal contract spending down for 4th straight year

Government spending cuts last year contributed to the fourth straight annual decline in federal contracting, the longest stretch since Ronald Reagan was president, statistics show.

The value of contracts to companies such as Boeing Co. and Northrop Grumman Corp. fell 11 percent in the year ended Sept. 30 from the previous period. It is the biggest annual decline since records began in 1984, according to data compiled by Bloomberg Industries analyst Brian Friel.

The reductions led contractors to shed jobs and could spur another round of defense industry consolidation. Analysts tied most of the drop to across-the-board spending cuts under a process known as sequestration, including $85 billion that started March 1 for fiscal 2013. A congressional budget accord relieved the Pentagon of $22.3 billion in cuts set for this fiscal year.

“This is not a case of government functions being moved from federal employees to contractors or vice versa,” said Dan Gordon, associate dean for procurement law at George Washington University Law School in Washington and former top procurement official for President Barack Obama. “This is the government spending less.”

The value of unclassified federal prime contracts, publicly announced deals of at least $3,000, in the 12 months ended Sept. 30 fell to $456.2 billion from $512.8 billion in the previous fiscal year. The totals exclude intelligence projects or awards to subcontractors.

Keep reading this article at: http://www.businessweek.com/news/2014-01-15/federal-contracts-slump-to-reagan-era-pace-amid-budget-battles

Study group issues recommendations to improve DoD acquisition

The IBM Center for The Business of Government has issued a set of eight recommended actions that government can take to improve the federal acquisition process.

The report, the third in a series on the government acquisition process, is entitled “Eight Actions to Improve Defense Acquisition” and can be downloaded here.

While the report centers on acquisition in the Department of Defense (DoD) because of its dominant size in the federal budget, the eight proposed action s— which build on previous acquisition reforms including increased competition, more use of best value contracts, expanding the supplier base, and better tailoring of contract types to contract goals — apply to civilian agencies as well. The authors emphasize the urgency of acquisition reform in DoD given budgetary constraints and security challenges, finding that “DoD will need to gain every possible efficiency, while resisting the temptation to buy defense on the cheap.”

More information, including information on a second report, A Guide for Agency Leaders on Federal Acquisition: Major Challenges Facing Government, is available at: http://www.businessofgovernment.org/report/eight-actions-improve-defense-acquisition.

The first report in the series, Controlling Federal Spending by Managing the Long Tail of Procurement, provides the first quantitative analysis and recommendations about government “tail spend” (smaller, non-core expenditures that often receive less attention in cost control but can add up to a large overall amount).

Budget deal could cause mergers and acquisitions in Defense sector

A U.S. budget agreement making its way through Congress could set off the most robust series of mergers and acquisitions in the aerospace and defense sectors in years, industry leaders and experts say.

The two-year agreement  is expected to reassure contractors on government spending and unleash pent-up demand for deals, according to analysts.

The budget deal will halve the $52 billion in automatic spending cuts facing the Pentagon in fiscal 2014 and would lower mandatory reductions in projected spending in 2015.

“It gives our customers in the U.S. government further certainty for their budget decisions,” Marillyn Hewson, chief executive of Lockheed Martin Corp, said in an interview with Reuters.

“It does give us more certainty and helps us in our planning process,” she said, noting that the company is always looking for acquisitions to tap new markets or round out existing business areas.

Keep reading this article at: http://www.nytimes.com/reuters/2013/12/17/business/17reuters-aerospace-mergers-analysis.html?hp&_r=2&&pagewanted=all

DoD issues class deviation to deal with contracts made in advance of appropriated funds

On Oct. 9, 2013 the Department of Defense issued a class deviation providing instruction to contracting officers who are being pressed to obtain supplies and services necessary to carry out and support the mission of the Department.  This special direction is necessary since DoD, due the Government shutdown and budget uncertainty, does not have access to FY14 funding.  FY14 began Oct. 1, 2013.

Entitled “Contract Obligations in Advance of Fiscal Year (FY) 2014 Funding,” the class deviation directs contracting officers to include a special clause in contracts and contract modifications.  The clause is also is to be included in task and delivery orders, and when exercising options.  The clause reads as follows:

2014-O0001

The deviation does not apply to: 1) actions using existing appropriations that are currently available for obligation and liquidation of obligations, such as prior year funds, or 2) actions under the Pay Our Military Act.

A link to the full class deviation, along with accompanying memoranda, can be downloaded here: DoD Class Deviation 2014-O0001.