Category Archives: Budget Industry

HII CEO Mike Petters Talks Business

HII CEO Mike Petters Talks Business

Mike Petters has been the chief executive officer of Huntington Ingalls Industries since the shipbuilder was spun off from Northrop Grumman in 2011. On Thursday, Petters briefed reporters in the state of the company almost 18 months after the spin-off.

It was our first full year as a public company. We spun off in 2011 from Northrop and we did that in the end of March. We really had three quarters in 2011, but last year was the first full calendar year. As a public company there are lots of things you are doing that you weren’t doing before that you do for the very first time. There are lots of things that were done by other people before you became public. And our team did a very credible job working its way through that and we’re at the point where we’re doing it again. . . . We did that in an environment where there’s more than usual uncertainty in the economy, the business environment, and politically. . . . You couldn’t go a day without hearing someone talk about the level of uncertainty in the business climate.

petters_hiresFor businesses in that environment it was a turbulent year. Usually aerospace and defense companies tend to be a little bit insulated from that kind of discussion. But I think the Budget Control Act of 2011 put defense contractors front-and-center in that conversation in a way that we were not before. I think as the year played out you saw different companies react to that in different ways. For us the issues were to pay close attention to our own knitting. When we spun the business from Northrop Grumman we said we have five contracts that we have to negotiate. We have five ships that we have to deliver that are troubled ships. It’s going to take us a couple of years to get those ships out of the way.

I’m happy to tell you that three of those five ships have been delivered. In 2012 we delivered LPD-23 and -24. LPD-22 was delivered at the very end of 2011. We still have two ships to deliver this year, LPD-25 and LHA-6. . . . Getting those ships delivered has been our focus. . . . We have to finish those two ships and get them delivered. In that regard execution and operations have been continuing to steadily improve. On LPD-25 and LHA-6 we had quality launches last year.

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Top Sub Shop

Top Sub Shop

Naval History Magazine, January 2013
The shipyard in Portsmouth, New Hampshire, turned out boats at a torrid pace, setting the gold standard for submarine construction during World War II.

On 27 January 1944, the Portsmouth Navy Yard achieved two things no shipyard had ever done—launching three submarines simultaneously and a fourth on the same day. The Ronquil Redfish , and Razorback lifted off their blocks in Dry Dock #1 at 1300, and a few hours later the Scabbardfish , slid down Building Way #4 into the Piscataqua River. Secretary of the Navy Frank Knox sent a congratulatory message to the yard: “In the launching of four submarines in a single day, the Portsmouth Navy Yard sets another record in the submarine program.” Before 1945 arrived the yard would complete a record-setting 32 submarines. No U.S. shipyard before or since has built so many submarines in a single year. 3

Pressure-hull sections in a submarine basin at the Portsmouth Navy Yard in March 1943. The shipyard had developed and refined sectional construction in the years leading up to World War II, and when war came the yard was poised to capitalize on a sudden surge in demand and the need for mass-production methods, University of New Hampshire Library.

Pressure-hull sections in a submarine basin at the Portsmouth Navy Yard in March 1943. The shipyard had developed and refined sectional construction in the years leading up to World War II, and when war came the yard was poised to capitalize on a sudden surge in demand and the need for mass-production methods, University of New Hampshire Library.

After averaging the completion of less than two submarines a year in the 1930s, the Portsmouth Navy Yard built 79 submarines between 1 July 1940 and 1 July 1945. The average construction time for those boats was much shorter than those of the same class built at other yards. Shipyard employment also reached unprecedented heights during that time. After providing jobs for an average of about 2,000 people annually in the 1930s, in November 1943 employment peaked at 23,465.5

To examine the yard’s wartime success it is necessary to first review events in the interwar years that set the stage for the remarkable wartime production record.

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How a Defense Bill Becomes Defense Law

How a Defense Bill Becomes Defense Law

Congress closed its 2010-2012 session by passing a fiscal package that delays deep cuts to the defense budget and other executive branch agencies for two months, averting the “fiscal cliff” that threatened to slash nearly $50 billion from DOD’s 2013 appropriations ledger.

The negotiations offered a very public look at the high-drama posturing that has become a hallmark of dealings between the White House and Capitol Hill. To many casual observers, the back-and-forth signaled a new low in relations between the two branches, but to many on the inside, it was symptomatic of the legislative process that grinds on every day, usually outside of public view.

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The hard work of crafting bipartisan legislation may take months of talks behind closed doors but produce only a few days of newsworthy drama. The annual National Defense Authorization Act (NDAA) is one of those must-pass measures that enjoy overwhelming bipartisan support but take months of meetings, briefings, hearings and tense negotiations among members of the House and Senate from both sides of the aisle and DOD. The Hill and Pentagon trade budget requests, legislative proposals, cost estimates, testing data, planning documents and long-term strategy to craft each year’s spending priorities and an overarching national-security policy. The House Armed Services Committee (HASC) leads the four defense committees each year, followed by House and Senate Defense Appropriators — the HAC-D and SAC-D — and finally the Senate Armed Services Committee — SASC.

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China: Birth of a Global Force?

China: Birth of a Global Force?

In 2010, Rear Admiral Zhang Huachen, China’s East Sea Deputy Commander, said, “With our naval strategy changing now, we are going from coastal defense to far sea defense.”[1] Over the past 30 years the People’s Liberation Army Navy (PLAN) has built a defensive navy operating within coastal waters, but in late 2008 the PLAN seemed to be transitioning towards becoming a global naval force—the capability to project power or diplomacy through sustained maritime operations anywhere in the world.

China’s far-sea defense—far-seas operations—comprises the maritime area 1,000 nautical miles beyond its territorial waters.[2] Based on that definition, far seas operations equate to approximately three days’ travel from China’s mainland and require at least six days of total transit time to include at-sea refueling operations. Since late 2008 the PLAN has achieved four significant metrics in the far seas:

  • Task forces deployed to the Gulf of Aden
  • A flotilla of warships operating in the Philippine Sea
  • The “Harmonious Mission” of the ship Peace Ark, and
  • The training ship Zheng He’s worldwide deployment

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This Time, It's Different

This Time, It’s Different

Proceedings, January 2013

A close observer of defense-spending trends takes a look at dollars and sense and the looming budget challenges in the Pentagon.

Defense-budget headlines of late have concentrated on sequestration, as hand-wringing increased about the so-called fiscal cliff. Most coverage has focused on defense officials predicting dire consequences for the Department of Defense (DOD), or industry officials warning of job losses and collapse of certain technology sectors and associated businesses. The U.S. Naval Institute recently hosted Defense Forum Washington with a program titled “The Fiscal Cliff: What Does This Mean for Defense and National Security?” The conference focused on sequestration and its impacts. Speakers and panelists offered different perspectives on impact, ranging from disaster to a mere “pothole,” and on occurrence from irresponsible to a fait accompli that should happen to provoke fundamental changes in DOD.

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Combat Fleets: Final Lewis and Clark Launched

Combat Fleets: Final Lewis and Clark Launched

Proceedings, Jan. 2013
The U.S. Navy’s 14th and final Lewis and Clark –class dry-cargo/ammunition ship was delivered on 24 October. Built by General Dynamics National Steel and Shipbuilding Company, the USNS Cesar Chavez (T-AKE-14), pictured here while still under construction, was launched on 5 May.

NASSCO Photo

NASSCO Photo

Named for the Mexican-American activist, the 689-foot ship has a beam of 105.6 feet and a draft of 30 feet and is operated by the Navy’s Military Sealift Command. The 14 ships of the class are tasked primarily with transporting and delivery of logistics supplies to include ammunition, food, fuel, repair parts, and ship-store items to U.S. and allied vessels at sea. The Cesar Chavez and her sisters each displace roughly 41,000 tons and can carry more than 10,000 tons of cargo. The Lewis and Clark class forms a sizable percentage of the 34 ships that make up Military Sealift Command’s Combat Logistics Force.

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Historic Fleets - The Saga of the Williebee

Historic Fleets – The Saga of the Williebee

Naval History Magazine, December 2012
Shortly before the end of the midwatch on 8 December 1941, a radioman on board the destroyer-seaplane tender USSWilliam B. Preston (AVD-7), at anchor in Malalag Bay off Davao Gulf, Mindanao, in the Philippines, picked up an urgent message: JAPAN HAS COMMENCED HOSTILITIES. GOVERN YOU[R]SELVES ACCORDINGLY.

Lieutenant Commander Etheridge Grant, the ship’s commanding officer, seeing no mention of exactly where the Japanese had “commenced hostilities,” immediately put his ship on a full war footing. Bluejackets belted ammunition for the ship’s four .50-caliber water-cooled Browning machine guns on the galley deckhouse amidships.

Within hours, 13 Nakajima Type 97 B5N “Kate” attack planes and nine Mitsubishi A5M4 Type 96 “Claude” fighters from the carrier Ry­u­jo swept in, destroying two Consolidated PBY-4 Catalina patrol bombers moored a mile from the ship, killing one man and wounding two. The William B. Preston slipped anchor and zigzagged out of the bay Noting the enemy approaching from downwind, Grant remembered he “had always had a tendency to over-shoot [in those situations] . . . thinking that the Japs weren’t any smarter than I had been I applied that lesson to good advantage.” Thus when the B5N pilots reached the drop point on the beam, Grant had the ship turned toward them. “We took aboard some muddy water and a few bomb fragments,” he noted later, “but no one got hurt.” The William B. Preston , the first ship of the Asiatic Fleet to come under Japanese attack at the start of the Pacific war, had survived her first battle.

The William P. Preston (AVP-20) as she was first commissioned as a small seaplane tender in the summer of 1940, painted in No. 5 Navy Gray with her identification number in white with black shadowing. J.M. Caiella

The William P. Preston (AVP-20) as she was first commissioned as a small seaplane tender in the summer of 1940, painted in No. 5 Navy Gray with her identification number in white with black shadowing. J.M. Caiella

Authorized on 6 October 1917, the William B. Preston (Destroyer No. 344)—named for the Secretary of the Navy under President Zachary Taylor—was laid down at the Norfolk Navy Yard on 18 November 1918, a week after the Armistice that ended World War I. At launching on 7 August 1919, however, it appeared as if the ship did not want to go to sea, for she proceeded just 28 inches in 45 minutes before she stuck fast. The next day a tug pulled her an additional 190 feet before she once again stopped. Divers discovered her weight had forced the ways apart some 10 feet. A 150-ton yard crane was positioned and put into use, allowing the William B. Preston finally to enter her element at 2022 on 9 August.

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Policy Difference Could Scuttle Second Virginia Submarine in 2014

Policy Difference Could Scuttle Second Virginia Submarine in 2014

Two weeks before budget-makers face the fiscal cliff deadline, there continues to be a great deal of uncertainty within the Pentagon. If the sequestration trigger goes into effect, program offices will be forced to cut billions of dollars from line items across the board. But within the Navy’s shipbuilding office, planners are already dealing with cuts that could impact the Virginia-class submarine program. The Navy and Congress have fought hard to institute a buy-rate of two Virginia-class boats a year, laying the groundwork for a five-year buy of the newest fast attack boat, beginning in 2014. But when the Navy delivered its budget request earlier this year, one submarine had been moved from the front of the line to the back so that budget planners could meet spending top lines mandated by last year’s Budget Control Act.

“We did not have sufficient headroom to fully fund the second boat in 2014,” Sean Stackley, the Navy’s top acquisition official, told the Senate Armed Services Seapower Subcommittee in April.

With a price tag of more than $2 billion, it’s easy to see how a submarine that’s two years away from construction ended up on the chopping block. But the costs associated with each boat have come down significantly since the program began, and opponents of the cut say removing one boat from the program now could reverse that trend.

USS Hawaii returns to Joint Base Pearl Harbor-Hickam after completing a six-month deployment to the western Pacific region In November. U.S. Navy Photo

USS Hawaii returns to Joint Base Pearl Harbor-Hickam after completing a six-month deployment to the western Pacific region In November. U.S. Navy Photo

The Navy estimates that sliding the submarine back to Fiscal Year 2014 from 2018 would reduce the total cost of the other nine boats in the current multiyear deal by roughly $900 million. Cost savings on par with the Navy’s estimate mean building the sub in 2014 would be 35 percent cheaper than doing it four years later. Virginia-class shipbuilders General Dynamic Electric Boat and Huntington Ingalls Industries’ Newport News Shipbuilding add that the continuity of two boats in 2014 would help maintain stability between the supplier base and the workforce.

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Sequestration: Coming Soon?

Sequestration: Coming Soon?

Sequestration has lately been hotly debated and often derided. Many probably have heard the term, aware it involves budget reductions, and possibly many know it could come to pass on Jan. 2, 2013. These potential spending reductions and simultaneous expiration of tax cuts have been collectively dubbed the “fiscal cliff,” receiving increased, post-election media attention as the President and lame-duck Congress negotiate a potential deal to change or avert both. But what does sequestration mean, and in context of the Department of Defense (DOD), what is its impact?

Sequestration could still be avoided (the President alluded to this in the Oct. 22 final campaign debate). Likewise, another outcome could be modification of the amount of budget reduction and/or the mechanisms by which it is conducted. However, worst-case sequestration under current provisions, coupled with previous budget reductions under the Budget Control Act (BCA) and compounded by other long-standing trends in defense spending, will be extraordinarily disruptive and damaging to the long-term defense program. Any change to sequestration requires passage of new legislation and presidential signature before Jan. 2, 2013 which very well may not happen. Therefore, assuming sequestration does trigger as planned in both timing and manner, let’s consider implementation impact on DOD.

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