US Air Force Launches Bomber RFP Likely After Years of Classified Work

• The US Air Force asked for proposals for its new LRS-B strategic bomber, on which it plans to spend [PDF] more than $900M during the coming fiscal year, and more than $3B/year by FY18. A memo from the Congressional Research Office explains that there’s probably been classified funding for it for years. A Lockheed Martin-Boeing team will be competing with Northrop Grumman for the eventual production contract. Northrop said it would use its Palmdale, CA plant if they win.

• The Aerospace Industries Association published its recommendations [PDF] to improve defense procurement. The trade group pushes back against regulatory and audit creep as well as the Pentagon’s mounting requests for data rights, which they say defeat the aim of acquiring more commercial items.

• The US Senate’s Permanent Subcommittee on Investigations might have a different take on how much procurement oversight is necessary, if their review [PDF] of all that went wrong with the Air Force’s botched Expeditionary Combat Support System (ECSS) is any indication.
  

Sued from Orbit: SpaceX and the EELV Contract

SpaceX Falcon

On April 25/14, aerospace innovator SpaceX filed suit in US Federal District Court against the US government and the firm’s ULA competitor. Their legal challenge centers around the USAF’s multi-year sole-source, 36-core EELV contract with ULA, which was finalized on Dec 16/13. SpaceX claims that the USAF changed the rules for eligibility mid-stride, bent its own rules to remove planned competitive launches, locked in a contract with secret terms that further restrict competition, and made commitments that will cost the USA more than $6 billion.

The suit is significant enough that upon review, DID has expanded our coverage, and decided to dedicate a specific article to the suit as a single point of reference.

Thailand Nixes Second-Hand U206 Submarine Deal – But Stands up a Sub Squadron

German U206A

At the end of March 2011 Jane’s reported that the Thai government had agreed to buy 2 of Germany’s retired Type 206A diesel electric submarines, for a bargain price of about $220 million. There was reportedly an agreement in principle, with funding expected in the FY 2012 defense budget. Changes of government, and the real commitment needed to have a submarine force, kept that report from becoming a reality.

The Thais remained interested, but international competition has emerged for the German boats, and the deal finally unraveled entirely. That leaves an interesting asset on the global market. At just 500 tonnes submerged displacement, the 48.6m long U206 boats are among the world’s smallest attack submarines:

Modi Government Rolls Out First Budget, Wants Faster Procurement and Better Logistics

• India’s new government introduced its 2014-15 budget with a focus on economic growth and public deficit reduction. Defense sees a 12% increase to Rs 2,29,000 crore (about $38.2B). The Indian press was surprised by finance (and defense) minister Arun Jaitley‘s taste for small budget allocations to a high number of initiatives (Rs 100 crore means 1 billion rupees or less than $17M). Jaitley intends to speed up defense procurement, as well as improve logistical access to border areas. The government also confirmed the lift in the limit to foreign direct investment in defense firms from 26% to 49%.

• Britain’s foreign minister William Hague was in India earlier this week where he pitched the Eurofighter since the Rafale deal has still not been finalized. In the meantime the UK got a £250M ($428M) order for MBDA ASRAAMs to equip the IAF’s Jaguars. India is also equipping their Jaguars with GPS-guided tank-killing cluster bombs.

• India’s government announced a $100M line of credit to support the sale of defense items to Vietnam.

Britain Adds to Its C-17 fleet

RAF C-17

In 2000 the UK’s Ministry of Defence (MoD) signed a 7-year ‘lease-and-support’ agreement with Boeing and the United States Air Force for the use of 4 Boeing C-17 Globemaster IIIs (3 + 1 “active reserve”) for the period 2001 – 2007, with an option for a possible extension to 9 years. Although it has the ability to operate from unprepared strips, the RAF uses the C-17 as a strategic transport aircraft to established bases, especially those that are far from Britain. The C-17 made its RAF operational debut during the Afghanistan conflict in 2001.

Front line needs soon had the C-17 fleet in high demand, and a combination of an aging C-130K Hercules force and delays to Britain’s 25 22 planned A400M transports stretched the RAF’s transport fleet even more. Instead of extending the C-17 lease, therefore, a deal struck with Boeing in 2006 saw the UK buy all 4 aircraft outright, and add a 5th aircraft to the RAF’s C-17 fleet at RAF Brize Norton in Oxfordshire. Since then, the fleet has kept on growing. A 6th C-17 was ordered in 2007, a 7th was ordered in 2009, and #8 was ordered and delivered in 2012.

UK Boasts Double Digit Defense Export Order Growth in 2013

• The UK’s government released 2013 defense export numbers up 11% to £9.8B ($16.8B), thanks to helicopter sales to Norway and South Korea, ongoing Middle Eastern deals, and a still respectable billion pounds worth of orders from the US. The report shows the UK far ahead of Russia, France and Germany, though it does recognize that relying on publicly acknowledged deals may overstate Britain’s actual market share. Another caveat is that this data tracks bookings rather than billings, but large defense contracts often follow a tortuous path to actual completion and payment.

Prescription Drugs Crowd Out Shipbuilding in US Defense Budget

• Bloomberg has seen the US Navy’s latest 30-year shipbuilding plan, which finally acknowledges that it “requires funding at an unsustainable level” to deliver the number of new vessels in the plan. The Congressional Budget Office (CBO) has been saying so for years.

• When the Government Accountability Office pointed out last month that the Pentagon was paying prescription drugs at a higher prices than Medicaid, the Pentagon had no comment to offer. With drugs now accounting for more than $5B/year in the Pentagon budget (i.e. separately from Veterans Affairs), you would think that would elicit some response. It seems clear that paying near-retail rates for most drugs for military personnel is not optimal when you’ve become one of the biggest drugs buyers in the country.

• TRICARE reform is one of the big potential money savers within military pay and benefits, as outlined in a recent presentation [PDF] from CBO analyst Carla Tighe Murray. She projected [PDF] last year that military healthcare could grow from less than 10% of DoD’s budget to more than 14% by 2030. A more recent, formal CBO report shows a gentler scope, but the trend still points upward. That’s only 16 years away, which in shipbuilding time is not that much. Who would have thought General Dynamics would end up competing with Pfizer?

Japan, Indonesia Look at More Assertive Security Stances While Xi Jinping Purges for Power

• Last week Japan’s cabinet changed its constitutional interpretation of the country’s right to collective self-defense. Ryo Sahashi, a visiting professor at Stanford University, argues that Prime Minister Shinzo Abe still has much convincing to do in order to change a Japanese public opinion that’s deeply averse to the use of force. There are months of legislative work ahead to reflect this change into bills.

• East Asia Forum expects a military buildup in Indonesia no matter who wins the forthcoming presidential elections:

“Even with modest economic growth projections, an Indonesian military build-up is inevitable. Both candidates, running on nationalist platforms, desire a more powerful Indonesian military that can project its power. The only difference is that Prabowo prefers a powerful — yet stationary — military presence initially and power projection capabilities later on, while Jokowi seems to prefer it the other way around.”

• China’s Communist Party under general secretary/president/chairman Xi Jinping is increasingly sounding like it’s in the middle of a full-blown purge, after it expelled former vice-chairman of China’s Central Military Commission Xu Caihou last Monday. See the language of state and party-sanctioned headlines: People’s Daily scolds ousted military leader; Battle against the enemy within. Xu Qiliang, a former PLA Air Force pilot, replaced Xu Caihou as the CMC’s #3.

• C. Christine Fair from Georgetown University thinks the Pakistani army’s operation against the Taliban in North Waziristan should be met with deep skepticism. Hundreds of thousands of civilians have fled the area… and business has been booming for barbers.

Clash in Karbala Hints of Complexity of Iraq’s Ongoing Internal Conflict

• Iraqi forces clashed with a militia following a local Shia cleric in Karbala, south of Baghdad. Prime Minister Maliki seems to be losing support even from his Shia backers.

• Meanwhile fighting against ISIL continued in the north in several contested areas of strategic significance.

• The sites for these clashes are familiar and echo fights that took place after the First Gulf War.

• Like Jordan, Saudi Arabia is deploying troops along its border with Iraq.

France, Germany to Create Export-Savvy Land Forces Specialist

• France’s state-owned Nexter and Germany’s privately-owned Krauss-Maffei Wegmann (KMW) have announced [PDF] their intent to form a joint holding company. If this alliance (the word merger is studiously avoided) is completed as expected next year, the French government will hold 50% of the new entity, though Les Echos reports [in French] that it will also maintain a golden share to preserve strategic interests in ammunition supply. The fact the joint press release is issued from Munich and Versailles only increases the symbolic value of this move.

• French defense minister Le Drian hints that other similar mergers may be in the wings, as France can no longer support military manufacturers dependent on just waning internal demand.