Defense Roundup: Defense Contractor Blues, Blues and More Blues

Posted by Fred Wellman

Contractors React to News of NSA Leaker

Marjorie Censer (@commoncenser), Washington Post. As we mentioned in last week’s Scout Report, the news that a Booz Allen Hamilton contractor was the source of the leak from the National Security Agency didn’t bode well for the opinion of the contractor work force within DoD and the intelligence community. This week didn’t go quite as badly as we had expected but the claws came out about the size of the contractor work force and the costs associated with their work. Marjorie Censer wraps up some of the opinions from the past week ranging from SecDef Hagel calling for a review of the contractor work force needs, cautions about jumping to conclusions, and the general belief that Booz will emerge relatively unscathed from this incident. The story will likely be placed on the backburner this week as the DC focus shifts to the Obama Administration’s decision to arm Syrian rebels unless even more revelations come out of Snowden. His telling a Hong Kong newspaper that the U.S. has been hacking Chinese networks seems to have turned a bit of his popular support against him.

F-35 Fighter Jet Struggles to Take Off

W.J. Hennigan and Ralph Vartabedian, Los Angeles Times. The LA Times takes a close look at how things are going for the long running F-35 fighter program at Edwards Air Force Base where the aircraft is undergoing testing. In the last few weeks both the Marine Corps and Air Force have moved up their timelines to have the aircraft combat capable while new estimates claim the needed upgrades to future aircraft will be less costly than most recent estimates. None of this has relieved any pressure on a program developed using what’s known as a “concurrency” model of development that fields aircraft while still testing and adding new systems to the program. Frank Kendall, the undersecretary of defense for acquisition, has called this approach “acquisition malpractice” but with production of some parts of the aircraft in 47 states and careful support to politicians across the country, the Lockheed Martin program isn’t in any real danger of being canceled or slowed down any time soon.  

UnitedHealth’s Pentagon Failure Seen Risking Future U.S. Awards

Kathleen Miller (@KathleenEMiller), Bloomberg. It’s commonly held that winning a massive multi-billion dollar government contract is the key to success and future rewards so UnitedHealth fought a long and costly battle to take over the western region for the DoD’s Tricare healthcare program from the former contractor Triwest. Since taking over the program on April 1st though it has been beset by problems that have led to a shake up in company leadership, anger among Tricare Prime beneficiaries and providers, and real concerns for future contracts for the company. They have discovered what many contractors find that sometimes a large government deal can be deadly for a company if they are unprepared and under the microscope. Blaming slow training of new employees and technical glitches, UnitedHealth finds itself under the gun to get things together as analysts and other government agencies watch with an eye on the future. The lessons learned about being ready to hit the ground running on a government program can be applied for massive companies and even the smallest contractor.

Deloitte Details Bleak Outlook For Global Defense Industry

Sydney Freedberg, Jr. (@SydneyFreedberg), Breaking Defense. Deloitte released their 2013 “Global Defense Outlook” report last Monday and, as Sydney says, it “is basically all bad news.” As over 50% of the global markets reduce their defense spending and those that are increasing their spending in the Middle East and Asia aren’t really increasing at a rate and scale that will remotely replace the dwindling purchases of larger nations. On top of that, very few nations are buying the traditional big money items like tanks, fighter jets, and ships. Instead the market increasingly focuses on UAVs, cyberdefense and IT infrastructure that are all filled by companies that don’t necessarily make up the major defense firms and many of the IT related purchases aren’t even part of the defense industry at all. While none of this comes as a terrible surprise to most, it does paint the picture that small, agile companies filling important niches can still find opportunities even as major manufacturers struggle to adjust to the changing landscape. 

U.S. Relies on Spies for Hire to Sift Deluge of Intelligence

Siobhan Gorman and Dion Nissenbaum (@DionNissenbaum), Wall Street Journal. Edward Snowden leaking top-secret NSA documents had many second and third order effects, one of which was putting the role of intelligence contractors under a microscope. With many voices in Congress calling for hearings and plenty of others in DC using the opportunity to jump on an anti-contractor bandwagon, ScoutComms’ client Prescient Edge, an intelligence contractor that also works with commercial clients, spoke up about the gaps contractors fill with no appreciable difference in security. Prescient Edge CEO David Walsh also appeared on CNBC this week to discuss the leak threat faced by private companies.

Noah Shachtman leaves Wired’s Danger Room

Continuing the summer of shifty journalists, Shachtman this week announced he’s headed to Foreign Policy as managing editor. Blake Hounshell, FP’s former editor, is off to Politico to join his old boss Susan Glasser. With Shachtman’s announcement, a series of other changes are afoot at FP—we’re very excited to see what the future holds for it. 

The week ahead:

Tradeshows and Conferences:

50th International Paris Air Show (Mon-Sun, 17-23 June); Le Bourget Exhibition Centre, Paris, France

Paris is the world’s oldest and largest air show—notably one we wish we had an excuse to attend. This biannual show (it trades off with Farnsborough in the UK every other year) will bring together all of the industry players from across the globe to showcase the latest technological innovations in aerospace.  Notably absent this year though will be almost all U.S. military aircraft and uniformed personnel as DoD has cut its participation in the show due to sequestration budget cuts. Some 250 U.S. companies will be displaying their wares however.

AUSA ILW Mission Command Symposium (Tue-Wed, 18-19 June), Kansas City Marriott Downtown, Kansas City, MO AUSA hosts this symposium—not to be confused with IDGA’s newly renamed “Mission Command”–which will address mission command enablers, how to operationalize mission command, and how Army educational institutions can adapt and teach mission command. Senior leaders from the Army’s Combined Arms Center, TRADOC, and other educational arms of the service will be out in force as this symposium takes place not far from Leavenworth. 

5th Annual Soldier Equipment and Technology Expo 2013 (Tue-Thurs, 18-20 June), The Fort Bragg Club/Lafayette Room, Fort Bragg, NC This expo at Bragg offers attendees the opportunity to get their hands on the latest technology in soldiers’ equipment systems—including a live fire day. Military participation looks to be scarce at IDGA’s fifth annual expo, but you can tell who they’re trying to draw with their raffle items: an Xbox 360 and $100 gift cards.

Congress: Both chambers are in session this week. 


Foreign Affairs Subcommittee on Middle East and North Africa: Elections in Iran: The Regime Cementing its Control Who: Mr. Alireza Nader, Senior International Policy Analyst, RAND Corporation, Suzanne Maloney, Ph.D., Senior Fellow, The Saban Center for Middle East Policy, Brookings Institution, Mr. Karim Sadjadpour, Senior Associate, Middle East Program, Carnegie Endowment for International Peace When: 10:30 AM, Tuesday, June 18, 2013 Where: 2172 Rayburn House Office Building

Veterans’ Affairs Subcommittee on Disability Assistance and Memorial Affairs: Why are Veterans Waiting Years on Appeal?: A Review of the Post-Decision Process for Appealed Veteran’s Disability Benefits Claims When: 2:30 PM, Tuesday, June 18, 2013 Where: 334 Cannon House Office Building

Veterans’ Affairs Subcommittee on Economic Opportunity: The Value of Education for Veterans at Public, Private and For-Profit Colleges and Universities When: 10:00 AM, Thursday, June 20, 2013 Where: 334 Cannon House Office Building 


Appropriations Subcommittee on Military Construction and Veterans’ Affairs, and Related Agencies: Hearings to Examine Proposed Budget Estimates for FY 2014 When: 10:00 AM, Tuesday, June 18, 2013 Where: SD-124 Dirksen Senate Office Building

Foreign Relations Subcommittee on Western Hemisphere and Global Narcotics Affairs: Hearings to Examine Security Cooperation in Mexico, Focusing On the Next Steps In the US-Mexico Security Relationship When: 2:30 PM, Tuesday, June 18, 2013 Where: SD-419 Dirksen Senate Office Building

Appropriations Subcommittee on Defense: Joint Strike Fighter FY 2014 Budget Request Who: The Honorable Frank Kendall, Under Secretary for Acquisition, Technology & Logistics, Admiral Jonathan Greenert, Chief of Naval Operations, General Mark A. Welsh III, Chief of Staff of the Air Force, General John M. Paxton, Jr., Assistant Commandant of the Marine Corps, Lieutenant General Christopher C. Bogdan, JSF Program Executive Officer, The Honorable Dr. J. Michael Gilmore, Director, Operational Test and Evaluation, Michael Sullivan, Director, Acquisition and Sourcing Management Team, U.S. Government Accountability Office, Michael O’Hanlon, Senior Fellow and Director of Research for the Foreign Policy Program, Brookings Institution  When: 10:00 AM, Wednesday, June 19, 2013 Where: SD-192 Dirksen Senate Office Building 

Homeland Security and Governmental Affairs Subcommittee on Financial and Contracting Oversight and the Subcommittee on Efficiency and Effectiveness of Federal Programs and the Federal Workforce: Safeguarding our Nation’s Secrets: Examining the Security Clearance Process When: 2:30 PM, Thursday, June 20, 2013 Where: SD-342 Dirksen Senate Office Building 

Think tanks and other news events: 

American Security Project: The Future of Stability Operations: Lessons from Afghanistan What: The first in a series of four events on the New Geopolitics of Petroleum and Natural Gas. This first session will explore the realistic implications of what the tight oil boom means for the country in both economic and geopolitical terms.Who: Sloan Mann, Managing Director of Development Transformations, Eythan Sontag, Director of Overseas Operations Office, Bureau of Conflict and Stabilization Operations (CSO), U.S. Department of State, Lieutenant General Frank Kearney III, (US Army, Retired)President of Inside-Solutions-LLC, Howard Clark, a Senior Intelligence Officer at Homeland Security and a senior consultant to Special Operations Command When: 12:30 PM, Monday, June 17, 2013 Where: 1100 New York Avenue, 7th Floor West Tower, Washington, DC 20005 

Strategic Studies Institute, United States Army War College: The Army and Ballistic Missile Defense What: The U.S. Army plays an important although largely underappreciated role in ballistic missile defense around the world. Is that role likely to grow as a result of Phased Adaptive Approaches in Europe, the Far East, and the Persian Gulf? Should the Army take on greater responsibility in this issue area? Three panelists will address these and related issues in the context of sequestration, the rebalance to the Asia-Pacific region, and questions on the future size and missions of the Army Who: Dr. John Deni, Research Professor of Joint, Interagency, Intergovernmental, and Multinational (JIIM) Security Studies, Strategic Studies Institute, US Army War College, Jim Thomas,  Vice President and Director of Studies at the Center for Strategic and Budgetary Assessments, Amb. Steven Pifer, director of the Brookings Arms Control Initiative When: 9:30 AM, Thursday, June 20, 2013 Where:Reserve Officer Association, 5th Floor, One Constitution Ave. NE, Washington, DC

Brookings Institution: The NSA Versus the Global Internet: How Online Surveillance Could Impact Internet Governance What: A panel discussion to explore how the disclosure of Internet surveillance initiatives, most notably those undertaken by the NSA, could impact global discussion around national and international institutions that govern the flow of data around the world Who: Stephen Crocker, CEO and Co-Founder, Shinkuro, Inc., Board Chair, Internet Corporation for Assigned Names and Numbers, Gene Kimmelman, Senior Associate, Global Partners & Associates, Director, Internet Freedom and Human Rights Project, New America Foundation When: 3:00 PM, Thursday, June 20, 2013 Where: 1775 Massachusetts Ave. NW. Washington, DC 20036

Fred Wellman, President ScoutComms, brings us his weekly review of defense industry news via The Scout Report. Fred served over twenty years as an Army officer in both aviation and public affairs. You can follow Fred on Twitter @ScoutComms.


This entry was posted on Monday, June 17, 2013 8:00 am

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