US Department of Defense FY 2014 Budget: After a Year of Drama, Budget Chairs Prescribe Sequester Painkiller

By releasing its budget proposal for fiscal year 2014 in mid-April, the Obama administration was two months over the legal deadline and later than at any time in the modern record. The Office of Management and Budget (OMB) reiterated the gambit that failed and arguably backfired in the previous fiscal year by ignoring the sequester. In place, President Obama put again on the table the broad terms he had offered earlier to House Republicans, with a mix of spending cuts (translation from Washington lingo: mostly a decrease in the rate of real growth) and tax increases. At the time that was received by most observers as a lack of realism, making the budget request at best relevant in terms of its hinting of relative priorities. Events throughout 2013 would then vindicate the view that the FY14 PB was a fantasy.

India Opens Major Western Naval Base Near Karwar

Latest updates[?]: Almost a year after approval for Phase IIA, India hasn't even picked bid-eligible contractors.

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Karwar, India: The Site

Defense Minister Pranab Mukherjee opened the first phase of India’s giant western naval base INS Kadamba in Karwar, Karnataka state, on May 31/05, saying it would protect the country’s Arabian Sea maritime routes. Kadamba has become India’s 3rd operational naval base, after Mumbai and Visakhapatnam. It is valuable for its location, and also for its ability to transcend the fundamental capacity and security limitations of India’s other 2 naval bases.

INS Kadamba is being built near Karwar in the southern state of Karnataka. That Phase I construction was just part of India’s ambitious “Project Seabird,” a potential INR 50+ billion project that will include the naval base, and much more besides. India finished a scaled-back Phase I a full decade after the originally-envisaged 1995 completion date. As might be expected in India, Phase II is going forward at last, long after it was supposed to have been finished.

Closed, Fragmented Markets More Fragile When Downturns Come

Ammo Concerns

• National Defense on the munitions industrial base in the United States:

“A new Defense Department initiative seeks to ensure that new munitions development efforts include concurrent pursuit of designs for exportability. This is welcome and will be beneficial in the future, provided that the initiative remains adequately funded. Existing ammunition products, however, do not benefit from this effort.

It is imperative that sustaining critical munitions production capabilities become a prime consideration in decisions concerning international sales, especially during periods of reduced U.S. funding.”

• Turning ammo production into a more fungible and viable global market would make sense, but Der Spiegel notes that this is not even happening within just the European Union. Maybe participants in this week’s EU Council on defense should read Antifragile?

High Afghan Exit Costs Force US Military to Contemplate End of Era

Yours for a low, low price

In July 2012, after protracted bargaining over American aid money, Pakistan reopened its roads – the so-called PAKGLOC in military lingo – to NATO traffic in and out of Afghanistan after their closure at the end of 2011. That is the theory at least, but the practice has left much to be desired. Pakistani customs routinely slow traffic to a crawl with clearance paperwork. Add threats of violence from local tribal strongmen, when it’s not customs on the Afghan side suddenly claiming a right to exit taxes, and you end with near-gridlock. Security concerns have led the Pentagon to stop using PAKGLOCs for outgoing traffic as of December 3/13 for an indefinite period. This has forced continued use of the Northern Distribution Network (NDN), at a much greater cost.

Faced with these prohibitive outgoing logistics, the US military has a big incentive to think hard about what it really needs to bring back for future use.

Japan Puts V-22, Global Hawk on Official Program Roadmap

Japan’s Mid-Term Defense Program

• The Asahi Shimbun reports that the new 5-year FY14-19 MTDP – pending cabinet approval – includes 17 V-22s and 3 Global Hawks. For reference: FY11-15 MTDP [PDF].

New SAIC Starts with Slimmed Down Topline

US Business

• SAIC released its first quarterly results since its spin off. Revenue for Q3 FY14 came at $974M, down 18% from $1.18B a year ago. The services business, especially IT, continues to be tough in the current budget environment.

• The Program Manager, Light Tactical Vehicles (PM LTV) within the US Marines’ Program Executive Office Land Systems (PEO LS) will host an industry day for the HMMWV Sustainment Modification Initiative (SMI) on Dec. 19 in Stafford, VA. A draft RFP should follow soon.

US Navy Gets Funding Support for Biofuels from USDA

Pentagon Contract Flow

• The Pentagon announced 198 contracts for a total of $23B in November, showing a return to norm after October’s shutdown. Bloomberg.

• The US Navy is going to ramp up its biofuel purchases, with financial support from the Department of Agriculture via a joint “Farm-to-Fleet” program. An industry day and solicitations are coming early next year. USDA | Biofuels Digest | Brownfield Ag News (audio with Navy Secretary Ray Mabus).

EADS Reorganization: Too Little, Too Soon?

Damned if you do, damned if you don’t

• Giovanni de Briganti argues that EADS’ 5,800 job cuts look like a red rag to a bull to the French and German governments since the company has a strong balance sheet, a huge backlog, and is creating jobs in Poland. Germany will face more cuts as it hosts the vast majority of defense-related jobs, but pushback will be strongest in France, where Minister of Labor Michel Sapin said [in French] that EADS’ announcement was “scandalous” and that the company had a “duty” to avoid redundancies. These are not the words of a lightweight underling: labor is one of the most prominent ministries in French cabinets, and Sapin first met President Hollande while they trained together as reserve Army officers 4 decades ago. And the French government remains a shareholder of the company, even if its influence and the size of its holdings have both diminished.

• However, Briganti also notes that an internal memo leaked [in French] to the Challenges monthly magazine showed that the defense book-to-bill ratio at EADS is expected to slide to 0.8 by 2018, i.e. by then they’d replace each dollar of past sales with only 80 cents of new bookings. In that light the consolidation of very different product ranges under one umbrella may not be enough to solve Airbus Military’s issues.

• In the ramp up to cutting jobs at EADS, Tom Enders had made it clear that cuts in German military orders would have consequences. The US Senate is worrying – but not doing much else – about the future of the industrial base dedicated to manufacturing military helicopters, given the Pentagon’s declining and highly uncertain acquisition pipeline.

US Navy to Review All its Port Services Contracts

Looking for More Leonards

• In the wake of the Glenn Defense Marine Asia investigation, US Secretary of the Navy Ray Mabus ordered [PDF] a review of the service’s acquisition of all port services contracts worldwide.

Beyond Offsets: Are Tech and Industrial Partnerships the Path to Self-Inflicted Peer Competition?

Questions Without Easy Answers

• To grow exports, should US manufacturers stick with offsets or consider genuine work shares? The fear is to eventually spawn competitors rather than partners.

• Have restrictive US Rules of Engagement contributed to a long-standing rise in Afghan battlefield deaths that exceeds increases in troop numbers? It’s a serious question, which has been discussed for several years by veterans in theater. The Washington Times reviews the pro and con arguments.