Defense firms jockey for Army business; F-35s grounded; One-on-one with DynCorp CEO; and a bit more.

The shift to what we’re calling great-power competition was already visible three years ago, when the tanks and armored vehicles at the Association of the U.S. Army convention began to appear in forest-green paint jobs instead of the desert tan that had predominated for more than a decade.

Fast-forward to this year’s edition of AUSA. Yes, there’s even more of the green that signifies readiness for operations in, say, Eastern Europe. But there were also more tanks, heavily armored vehicles, and electronic warfare equipment.

It’s all being pitched for an Army that is in transition to a state that still hasn’t been fully defined. Secretary Mark Esper is calling it a renaissance. Either way, defense firms are adjusting as they jockey to position themselves for the service’s top six acquisition priorities.

“We’re seeing more dialog with industry on a broader base, sooner in the process,” SAIC CEO Tony Moraco said in an interview. “It’s on mission requirements, of what their intent is. … Mission requirement dialog is really enabling this cycle around the innovation. That’s probably one of the biggest changes we see reflected in how the requirements are being portrayed.”

Welcome

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F-35s Grounded As Mattis Orders Readiness Boost

Just days after we found out (from Defense News’ Aaron Mehta) that Defense Secretary Jim Mattis has ordered the Pentagon’s F-35, F-22, F-16, and F/A-18 fleets to achieve 80 percent readiness rates over the next year, the Pentagon has grounded American and allied Joint Strike Fighters because of faulty engine tubes that might have been behind the crash of a U.S. Marine Corps jet last month.

Here’s the official statement on the grounding, issued by the F-35 program office this morning:

The U.S. Services and international partners have temporarily suspended F-35 flight operations while the enterprise conducts a fleet-wide inspection of a fuel tube within the engine on all F-35 aircraft. If suspect fuel tubes are installed, the part will be removed and replaced. If known good fuel tubes are already installed, then those aircraft will be returned to flight status. Inspections are expected to be completed within the next 24 to 48 hours.

Here are some things to ponder in regard to readiness rates and the the latest F-35 grounding, which doesn’t seem like it will last very long:

• Groundings just shred mission-capable rates.Even if the F-35s are only grounded for one or two days, it will hurt the entire year's overall readiness numbers.
• Typically, those rates also take into account the planes in depot maintenance, which can last months or even years. That means that even scheduled overhauls can bring down flying rates (especially in small fleets like the F-22) because they’re not flying. But try to shrink the amount of time planes spend in military repair depots and you’ll hear congressmen screaming from the rooftops.
• About SecDef Mattis’ suggestion that military aviation should look to the airlines for help: service officials have told me for years that it’s unfair to compare military aircraft to commercial jets. An F-35 is not a Boeing 737. New commercial airliners are built to fly multiple flights with just minor maintenance and inspections. It’s a lot different for military planes with afterburning engines that experience high stresses on each flight.
• The F-35 has long had problems with engines catching fire: in 2014, at Eglin Air Force Base; in 2016, at Mountain Home AFB; that same year, in flight. The fleet was grounded in September 2016 also by crumbling avionics cooling lines inside the fuel tanks.

One-on-One With DynCorp CEO

I had a chance to sit down with George Kirvo, who has been the CEO of DynCorp International since 2017, at AUSA. Here are some excerpts from our chat:

Q. What’s the state of play for you right now?

A. There is a predictability back into the defense and aerospace business, which is nice. Budgets, they're good. They're supportive, they're consistent. Our little company's doing pretty good. We've been able to get it back on track. Probably going to grow profit by 25 percent this year, which is pretty good.

Q. What's the main driver of that?

A. We won a bunch of programs last year. The other thing is consistent budget performance from our customers. They have obligation authority, which is helpful.

Q. What’s your prediction about industry consolidation?  

A. So there's two parts to it. First, there's this international political dynamic. There's a complex and dynamic and uncertainty around the world and it's not just these small-scale insurgency terrorism-based activities. We see more of the peer competitor stuff happening, which looks to me as an old soldier like the old Cold War days, where you've got large nation-states that are looking at large-scale potential conventional operations. Then inside the U.S. defense industry, big consolidation going on, especially in the services business where we are. There's a race to scale. So if you don't have a couple billion dollars in revenue, it's probably going to be hard to compete because you need the past performance, you need a global footprint, and you need the scale in order to have the cost synergy to compete. So I think in the next probably 12 to 24 months, you're going to see a lot of consolidation inside of our business. We started to see that Engility and SAIC and all of the stuff .. SRA, CSC, then [General Dynamics and CSRA]. So you're starting to see it. But there's lot of the, what I would call, the subscale players that are out there — less than a billion dollars, or right around a billion dollars, that are going to need to find a partner in order to be competitive going forward.

Q. Amid the new focus on great-power competition, what’s the market for services related to counterinsurgency?

A. When I was a lieutenant in the Army, you had a huge sustainment brigades. That force structure is all gone and it's contractors now. What happens, even in large-scale conventional operations, there's a requirement for the theater to get set and then for all the logistics to get supported through the national industrial base. The primary contract that's used for that of course is LOGCAP. So even if there were a Korea scenario or a scenario in Europe, the LOGCAP contractor, the services company, [who] is responsible for that area of operation, would have a very large, significant role to play in that contingency operation. So it's even greater for us in the large-scale contingencies then it is for example in Afghanistan or Iraq.There is still a huge role for the services contractor to play. And then of course there is the entire sustainment of those large fleets and formations inside of the conventional forces even during peacetime where most of that maintenance logistics is contracted out. So we're still providing maintenance on 70 percent of the Army's helicopter fleet as an example. And we're still providing maintenance for all of the Air Force's prepositioned stocks in the Middle East. So those missions continue. But if there were to be tensions, yeah, you'd see a big increase in sort of the service contractor scope.

Q. Are you talking to the Air Force about their pilot and maintainer shortages?

A. There's a huge readiness shortfall and it's not only pilots, which is really an element of training but it's also all the maintenance — not only of the training fleets, but also of the tactical fleets. We're seeing additional spending to make up for what happened during sequestration. We're working with [Air Education and Training Command] to come up with a way that we think contractors can augment the U.S. Air Force pilot training capability, undergraduate pilot training capability, because that's not something that inherently has to be governmental. We can go out. We can hire retired pilots, test pilots and provide all the bases and training areas everything else along with the Air Force to help augment that. The Air Force would have a base capability and then we'd an have an ability to surge or bring it down as the Air Force requires.

Q. Is there a formal program?

A. Formal program. We did an unsolicited proposal into AETC. They looked at it. They modified it and put their thumbprints on a lot of it and now they've actually put out a sources sought and they're naturally going to compete it, as you'd expect. So we're seeing increased opportunities as a result of that readiness shortfall that directly impacts service companies like DynCorp and our competitors.

GM Stands Up Defense Business

General Motors turned heads at 2016’s AUSA with a hydrogen-powered truck it was building for the Army. Last year, there was SURUS hydrogen-fuel-cell-powered chassis. Now, as it refines its commercial hydrogen fuel cell development, it’s once again deepening its military ties, formally standing up GM Defense. The division — which is looking to adapt GM’s commercial tech research-and-development for military projects — is led by CEO Charlie Freese (who also leads GM’s global fuel cell business) and President John Charlton, a retired Army major general. Hydrogen fuel cell technology could be in the Army’s next-generation combat vehicle, Charlton said.

Blue Origin, ULA, Northrop Get USAF Launch Deals

SpaceX was noticeably absent from the U.S. Air Force’s annoucement on Wednesday that it would award new-rocket contracts totalling $2.2 billion to Blue Origin (New Glenn), United Launch Alliance (Vulcan Centaur) and Northrop Grumman (OmegA). In an early-evening press conference at the Pentagon, USAF acquisition chief Will Roper said that SpaceX can submit a bid next year when the Air Force solicits proposals for the next phase of rocket development.

Space Force Budget Estimate Still Not Done

Deputy Defense Secretary Patrick Shanahan, who spoke at AUSA, has another press conference this week. But he said not to expect a final cost estimate for the proposed service this month or next month, our pal Paul McLeary reports at Breaking Defense. “As we build out the budget, where would you plug the space money?” Shanahan said. “Do you plug it into the Army or do you plug it into the Air Force, or the Space Development Agency? This legislative proposal that we’re going to put together has to contemplate how it gets aggregated. The simple side of me says ‘if it’s already in place, leave it alone. [But] if it’s for new things — that’s what on the table — what’s the best way to approach it?”

Making Moves

Jeff Davis, a retired Navy captain who was director of Defense Press Operations at the Pentagon, is now senior vice president for communications at General Dynamics.

Stephen Hedger, a former assistant secretary of defense for legislative affairs, and chief of staff to former Deputy Defense Secretary Bob Work, is the head of U.S. business for German defense firm Rheinmetall. (Hedger has been with Rheinmetall since August 2017, but we’re playing catch-up here.)