Business Trends for the U.S. Defense Enterprise $700 Declining - - PowerPoint PPT Presentation

Business Trends for the U.S. Defense Enterprise

$0 $100 $200 $300 $400 $500 $600 $700 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $Billion, TY

PB 2012 PB 2013 PB 2014 PB 2015 Actuals

Analysis does not include funding for Overseas Contingency Operations.

Ten-Year ∆’s (FY12-23)

PB12 to PB13:

• $500B

PB13 to PB14:

• $80B

PB14 to PB15:

• $190B

PB15 to PB16:

• $30B

PB16 BCA caps:

• $170B

Total under BCA Sequester: -$970B

Declining Revenue Trends

PB 2016

Potential Unfunded Liabilities (Average Per Year)

• Board of Directors Disapproved Efficiencies (so far)

– BRAC ~$2B – Compensation reform ~$4B – Equipment retirement ~$6B – Cruisers ~$1B – Efficiencies denied ~$3B

• Sequestration

~$24B

• OCO to Base

$TBD Total ~$40B

Shrinking New Product Pipeline

R&D Investments FY1998-2015 Appropriated & FY2016-2020 PBR

5 10 15 20 25 30 35

FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 PB16 FY16 PB16 FY17 PB16 FY18 PB16 FY19 PB16 FY20

DOD RDT&E (FY 15 Constant Year Dollars in Billions)

DOD BA 1 DOD BA 2 DOD BA 3 DOD BA 4 BA 4 Sequester DOD BA 5 BA 5 Sequester DOD BA 7 BA 7 Sequester

Today’s Force Next Force Force After Next

Declining Next Force 5-15 years Largely Flat 8-20 years

Today

Competitive Landscape

• Potential peer competitor revenues growing ~10% per year
• Competitor’s New Product Pipeline is Robust
• 5th Generation Fighters
• Advanced air-to-air missiles
• Radars operating in non-conventional bandwidths
• Longer range and precise ballistic and cruise missiles –

land and ship attack

• Improved undersea warfare systems
• Cyber and information operations capabilities
• Extensive Electronic Warfare Systems
• Advanced Air Defense Systems
• Competitor cycle times and costs benefiting from industrial

espionage

Technological Superiority Trends Relative to Competitors

Near Term (2020) Mid Term (2025)

Air Domain Maritime Domain Undersea Domain Electromagnetic Spectrum Space Domain Resilient Comm, ISR, PNT Resilient Basing

What We’re Doing

• Secretary Carter: Building the force of the future
• Defense Innovative Initiative (DII)
• Advanced Capabilities Deterrence Panel (ACDP)
• The Third Offset Strategy
• Long Range R&D Planning Program (LRRDPP)
• Aerospace Innovation Initiative (AII)
• Acquisition Reform / Improvement – Better Buying Power 3.0

Better Buying Power 3.0 DRAFT

Achieve Affordable Programs

• Continue to set and enforce affordability caps

Achieve Dominant Capabilities While Controlling Lifecycle Costs

• Strengthen and expand “should cost” based cost management
• Build stronger partnerships between the acquisition, requirements,

and intelligence communities

• Anticipate and plan for responsive and emerging threats
• Institutionalize stronger DoD level Long Range R&D Planning

Incentivize Productivity in Industry and Government

• Align profitability more tightly with Department goals
• Employ appropriate contract types, but increase the use of

incentive type contracts

• Expand the superior supplier incentive program across DoD
• Increase effective use of Performance-Based Logistics
• Remove barriers to commercial technology utilization
• Improve the return on investment in DoD laboratories
• Increase the productivity of IRAD and CR&D

Incentivize Innovation in Industry and Government

• Increase the use of prototyping and experimentation
• Emphasize technology insertion and refresh in program planning
• Use Modular Open Systems Architecture to stimulate innovation
• Increase the return on Small Business Innovation Research (SBIR)
• Provide draft technical requirements to industry early and involve

industry in funded concept definition to support requirements definition

• Provide clear “best value” definitions so industry can propose and

DoD can choose wisely Eliminate Unproductive Processes and Bureaucracy

• Emphasize Acquisition Executive, Program Executive

Officer and Program Manager responsibility, authority, and accountability

• Reduce cycle times while ensuring sound investments
• Streamline documentation requirements and staff reviews

Promote Effective Competition

• Create and maintain competitive environments
• Improve technology search and outreach in global

markets Improve Tradecraft in Acquisition of Services

• Increase small business participation, including more

effective use of market research

• Strengthen contract management outside the normal

acquisition chain

• Improve requirements definition
• Improve the effectiveness and productivity of contracted

engineering and technical services Improve the Professionalism of the Total Acquisition Workforce

• Establish higher standards for key leadership positions
• Establish stronger professional qualification requirements

for all acquisition specialties

• Strengthen organic engineering capabilities
• Ensure the DOD leadership for development programs is

technically qualified to manage R&D activities

• Improve our leaders’ ability to understand and mitigate

technical risk

• Increase DoD support for Science, Technology,

Engineering and Mathematics (STEM) education

Achieving Dominant Capabilities through Technical Excellence and Innovation

Continue Strengthening Our Culture of: Cost Consciousness, Professionalism, and Technical Excellence