With American elections approaching, questions are being asked in the industry about the potential implications for American defense policy. In January 2007, “The Impact of Recent Political Changes on the Defense Sector” transcribed Loren Thompson of the Lexington Institute think tank, during the Raymond James Washington Technology & Services Summit. It offered some interesting thoughts on the contractor/ military political gap, and added:

“The bottom line on the Democratic defense agenda is that it doesn’t reflect much support for new technology outlays, but it also doesn’t herald an era of rapidly declining defense budgets. What’s likely to change is the composition of defense spending rather than the scale.”

Fast forward to February 2008, where Thompson is speaking to US Army Leaders at the RAND Arroyo Center. “The Role Of Party Politics In Shaping Defense Priorities” offers an impartial presentation of how the two major parties evolved, how they think about national security, their inclinations and allocation preferences with respect to the defense budget, and what a victory by either side probably means. Unusually, it is a fair presentation that puts forward each party’s broad view reasonably faithfully. Which matters, because:

”...we need to understand how party politics shapes defense policy—not because we like it, but because it is a fundamental reality of life in a democracy. Did you know that a recent study of weapons outlays found 91% of all the variation in spending over the last four decades was traceable directly or indirectly to which party controlled the Senate and the White House? Like me, you probably thought that threats were the main driver of weapons spending, but the data show otherwise.

Read both speeches, consider your own experiences, and decide what you think. Thompson also changes his tune slightly, however, when he says that:

”... if the Democratic Party wins control of the White House and Congress in November, it will take a huge demand stimulus from the likes of Osama bin Laden to prevent a leveling off and then decline in defense spending in subsequent years.”

Galileo concept
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Large space projects with long lead times can be politically perilous. The USA’s Transformation Satellite Network (TSAT) aims to create a system that can deliver fiber cable class bandwidth to or from any point on the globe, using lasers as the space transmission backbone. Funding and technical progress issues have pushed the project back from its originally intended date of 2008-2009 to likely operation in 2014 or so – and doubts are emerging re: the entire $20+ billion project.

Across the Atlantic, the European Union is cooperating with China and other outside investors to replace the USA’s free Global Positioning System service with an alternative under their own control. Organizational issues and shortfalls in expected progress have pushed the “Galileo” project back from its originally intended operational date of 2008 to 2014 or so – and doubts have manifested in Europe re: the entire project, even as security issues around Chinese involvement and their forthcoming COMPASS satellite system persist.

The EU has decided to press on, however, and has gained initial-stage approval for its plan to finance the program with tax dollars instead of the expected private investments. Mindful of the pitfalls in this approach, however, they have decided to raid other EU accounts for over EUR 3 billion (about $5.35 billion) in funds, rather than asking for more money from member states. This has not gone over well in all quarters. Britain’s multi-party Parliamentary Transport committee, for example, released a stinging report that recommended scrapping Galileo unless key deliverables are met. The EU’s structure allowed it to brush those objections aside, however, and the organization is well on the way to approving the new arrangements and beginning to issue contracts. Meanwhile, key technical protocols are released for discussion, a second satellite is planned for launch in April 2008, and an influential American think-tank raises security and policy concerns that could have broad impacts on transatlantic defense industry relationships.

• What Is Galileo?
• “Eppur, Si Bloccare”: Trials & Tribulations
• Contracts and Key Events
• Appendix A: The EU Proposal – Going Forward ( ? )
• Appendix B: Additional Readings
• Appendix C: Additional Readings – The Security Dimension
  
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F-22s for Australia?
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In their October 2006 article, “Rapped in the Raptor: why Australia must have the best,” Australian newspaper The Age reported that:

”[Recently] Retired RAAF air vice-marshal Peter Criss has put aside usual conventions to openly question the wisdom of Canberra spending about $16 billion for the F-35 Lightning, also known as the Joint Strike Fighter. The Government committed an initial $300 million to become an early partner in the JSF program, with a final decision to be made by 2008. But Mr Criss says the RAAF should, in fact, consider buying the F-22 Raptor…”

Criss’ disquiet was the first significant breaking of ranks by top military brass over this issue, but Australia’s opposition Labor Party soon stepped into the fray with a formal statement, discussing the fighter gap that will exist between the F-111’s planned retirement early in 2010 and the proposed F-35A LRIP purchase in 2013 or later.

A subsequent purchase announcement and follow-on contracts for 24 F/A-18F Block II Super Hornets have only intensified the discussion. While that F/A-18F purchase is very close to a fait accompli, Australia’s F-35 purchase has moved from an assumed conclusion to a very serious debate – and now that the opposition Labor party will form the next government, the opposition statements and positions of new defence minister Joel Fitzgibbon take on added weight. DID’s Spotlight article chronicles those positions, while offering links and background materials from both sides of the Australian debate. Recent developments include a formal Air Combat Capability Review, the decision to go ahead with the F/A-18F Super Hornet buy, and sources in the USA that appear be considering F-22 export requests seriously…

• The Dissenters
• The Australian Debate: Key Readings.
• The Australian Debate: Situation Updates [new]
  
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KC-X contenders
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As the $35 billion KC-45 tanker purchase flies into the teeth of Washington’s political battles, the Lexington Institute think-tank discusses the relative ratings of each contestant in the USAF’s aerial tanker competition. This is a bit unusual, as even Boeing has yet to hear the official debrief – a fact that has them somewhat upset. DID would not normally consider a report of this nature credible, but the think-tank has a wide range of contacts in Washington, and has been focusing on this deal for some time. Their broad assessment also mirrors commenets made by Sen Richard Shelby [R-AL], so it is possible – but not certain – that their report is correct.

Lexington defense analyst Loren Thompson contends that the Airbus/Northrop Grumman proposal would be able to deliver 49 operational tankers by 2013, whereas Boeing would have been able to deliver just 19 aircraft within that timeframe. That’s an interesting calculation whose basis DID would be interested in viewing, but public access may be an issue as it was attributed to USAF reviewers. Beyond that, Thompson concludes that Boeing lost out on 4 of 5 key measures, and tied on the 5th. Of course, sharp-eyed DID readers will recall that they were 9 Key Performance Parameters listed in the RFP…

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NH90: TTH & NFH
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The NH90 helicopter emerged from a NATO requirement that created NATO’s own helicopter development and procurement agency in 1992 and, at almost the same time, the consortium to build the hardware – NHIndustrie (62.5% EADS Eurocopter, 32.5% AugustaWestland, and 5% Stork Fokker). It was originally developed to fit between light naval helicopters like AW’s Lynx and Eurocopter’s Panther, and medium-heavy naval helicopters like the European EH101. A quick look at the NATO Frigate Helicopter design showed definite possibilities as a troop transport helicopter, however, and soon the NH90 project had branched into 2 versions, with more to follow. The nearest equivalent would be Sikorsky’s popular H-60 Seahawk/ Black Hawk family, but the NH90 includes a set of innovative features that give it some distinguishing selling points.

While battlefield damage to composite airframes can be more difficult to repair in the field, the combination of corrosion-proofing, lower maintenance, greater troop or load capacity, and the flexibility offered by that rear ramp have made the NH90 a popular global competitor. Orders currently stand at 507 machines, on behalf of 14 nations. This is DID’s FOCUS Article, offering an in-depth look at the multi-national NH90 program, its customers, and its chronology from 1995 to the present day.

During that time, the NH90 has become a sales success – but as many business people discover the hard way, success can be almost as dangerous as failure. NH Industries has had great difficulty ramping up production fast enough to meet promised deliveries, which has left several buyers upset at their lack of operational helicopters. Finland has announced a settlement in this regard, Australia’s deliveries seem to be on track so far, and Germany has just added a contract for key mission control software, and a Finnish government report re: their NH90 program’s problems…

• The NH90 Platform(s)
• The NH90 Production Program
• Contracts & Key Events, 1995-present [updated]
• Additional Readings & Sources
  
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E-2C Hawkeye
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On Dec 4/07, the US DSCA announced the United Arab Emirates’ official request for 3 used, refurbished E-2C Hawkeye Airborne Early Warning (AEW) aircraft with radar and antennae. Upgrades and refurbishments include E-2C Group II Navigation Upgrade configuration, and 8 improved T56-A-427 Turbo Shaft engines, which extend its range and cruise time vs. the standard T56-A-425s.

When combined with the UAE’s $9 billion request for Patriot missiles, and other recent initiatives, it would appear that the UAE is taking strong steps to beef up its defensive and surveillance capabilities. The DSCA release did not mention Co-operative Engagement Capability, however, which confer anti-ballistic missile capabilities and would have been present in the 5 Hawkeye 2000 aircraft the UAE requested in 2002. DID explains what happened to that sale, how it fits into a larger picture, and where things stand now…

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Low value. Corrupt. Aid-driven. Despite the odd exception like Algeria, and South Africa’s indigenous defense industry, most people think of these terms when they think of the African defense market. Analyst firm Forecast International sees a different picture, however: “tomorrow’s growth market for the global defense industry.”

This assessment didn’t come from reading Nigerian email solicitations. F.I. admits that overall African spending isn’t expected to suddenly become impressive: 3.5% increases year-on-year from 2007-2011 to $15.9 billion, with under 20% of defense budgets slated for procurement. That isn’t much to write home about, but “African Market Overview” author Matthew Ritchie sees the opportunities in much more specific terms:

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In November 2005, “UAV Market to Top $13.6B from 2006-2014” covered a Forecast International report. In September 2006, a Teal Group market study added R&D, maintenance, related sensors, et. al. to their total, and came up with a much higher total from 2006-2016 – $54 billion.

The Teal Group is now issuing their 2008 World Unmanned Aerial Vehicle Systems annual sector study, and the total is holding steady at a projected $55 billion. They see the current worldwide UAV expenditures of $3.4 billion annually to $7.3 billion within a decade, with the USA accounting for 73% of the worldwide RDT&E spending on UAV technology and about 59% of the procurement (vs. overall global defense spending shares of 67% and 37%, respectively). Even so, European UAV markets are becoming increasingly important, and UAV projects in countries like Turkey, Pakistan, the UAE, Argentina, et. al. are demonstrating that the sector’s dynamism at the low-medium end is well within the reach of local players around the world. Maintenance will also grow as more UAVs enter service, and so will the complementary sensors market that Teal includes in its forecasts as an integral part of platform costs. Teal Group release | Report overview page.

RAH-66 Comanche
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The Defense Procurement Death Spiral. It’s what happens when the costs of each successive generation of equipment rise faster than inflation, leading to smaller, longer production runs that inflate costs further and often force additional rounds of cuts, as weapons programs collide with one another inside limited budgets. That isn’t what’s happening to the US Army’s helicopter modernization program, which canceled the world-leading RAH-66 Comanche scout/attack helicopter in favor of less capable but cheaper and more numerous off-the-shelf designs in the light utility (UH-72A) and armed reconnaissance (ARH-70A?) space, and is sticking with the proven CH-47 Chinook family (heavy lift) and H-60 Black Hawk family (utility) as its new-build options. A choice that’s creating a niche for new options and features in the utility space like the NH90 TTH, and Sikorsky’s H-92 Superhawk.

Even so, the Congressional Budget Office sees choppy air ahead. The US Army’s helicopter fleet has plunged from 9,000 at the end of the Cold War to 3,500 just 20 years later, and the “procurement holiday” of the 1990s plus high demand in the current conflict means that most of the helicopters in today’s fleet already exceed or soon will reach ages “greater than the Army considers practical.”

ARH-70A testing
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The CBO estimates that the Army’s modernization plan will cost $3.3 billion per year, on average, from 2007-2030, significantly more than the $2.2 billion annual average the Army has spent between 1986-2005. Military planners who propose future spending boosts are usually deluding themselves, unless the country embarks on a major increase in the defense procurement budget as a whole, or other areas are short-changed in exchange. Worse, this proposed spending boost comes in the same post-2020 time frame that the Army expects to invest heavily in the new $260+ billion Future Combat Systems (FCS) family of equipment. Yet short of shrinking the force again, or accepting further aging in the fleet, the low-cost approaches pursued by the US Army mean that there’s little potential to reduce spending on its overall helicopter modernization programs – as the CBO’s 4 alternative scenarios demonstrate. Read “Modernizing the Army’s Rotary-Wing Aviation Fleet (November 2007)” [PDF format, 878k]

APG-79 AESA
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Market analyst firm Forecast International projects that the worldwide radar market will be worth $50 billion from 2007-2016, with at least 11.306 units produced. “The Market for Radar Systems,” is based on a review of 107 radar production, operations & maintenance, and RDT&E programs.

One trend noted in the report is the consolidation of platforms into single radars that can perform multiple tasks, while operating close to the enemy and in urban areas. Another is the growth of the airborne early warning and control (AEW&C) market, thanks to smaller radars like the MESA radar (E-737), Saab’s Erieye (EMB-145, S-100), and IAI’s EL/M-2075 Phalcon (Gulfstream 450) that can be mounted on smaller aircraft. A third is the growth of Active Electronically Scanned Arrays. These radars boast a number of important multi-tasking, performance, maintainability, upgradeability, and capability advantages over traditional mechanically-steered radars. While more mechanically-scanned arrays will be produced, AESA radars will catch up in terms of overall value, and will become increasingly important.

Raytheon and Northrop Grumman are expected to continue to top the top 5, but consortia like AGS Industries creating the TCAR radar in NATO’s new ground surveillance planes; the MEADS International anti-air missile project; and the Euroradar consortium are beginning to appear on the leader board. Forecast International release | study.