Outsourcing US Defense

As regular readers know, a major piece of controversy over the prospect of awarding the KC-X contract to EADS North America is the assertion that this will outsource US defense procurement to a foreign company.

We’ve noted in this space many times before that this issue, in this context, is a red herring, because the Defense Department has been doing so for years and is increasingly doing so–without the hue and cry that accompanies the prospect of EADS getting this contract.

A recent article by George Talbot of The Mobile Press-Register illustrates the outsourcing to foreign companies. While Talbot talks about EADS, because Mobile (AL) (which is, one may be reminded, part of the United States–the Confederacy did lose the Civil War) is where EADS plans to build the tanker, it is also the location of an Australian company called Austal that is poised to receive a contract to build the Navy’s Littoral Combat Ship (LCS).

Talbot’s article illustrates many parallels between EADS and Austal, except for one–there doesn’t seem to be any objection to awarding the contract to Austal by the so-called Buy American crowd.

But this is only the tip of the iceberg. In an article we did for the January issue of National Defense magazine, we point out more of the iceberg and the DOD’s outsourcing to foreign sources–not all of which are necessarily considered friendly to US interests, such as the EADS/Airbus NATO allies, Germany, the UK, Spain and France (though we freely acknowledge France’s mercurial nature as an ally). China and Russia are key suppliers of materials. China produces 97% of the rare earth materials. Russia is a major supplier of titanium. The US doesn’t produce a single ounce of cobalt, a required material in jet engines–it all comes from foreign producers.

We’ve since learned that some of the computer security for DOD contractors comes from none other than Russia.

We agree that outsourcing Defense to foreign sources is a major concern. But it’s been going on for a long, long time.

22 Comments on “Outsourcing US Defense

  1. Remember “Freedom Fries” and all that jazz about Buy American?
    Rumsfeld kept very quiet on that topic ( and that was in 2001/2).

    The tanker deal is “in your face” nonUS while most earlier projects
    were cloaked in nice names like Stryker ( a Swiss MOWAG design ) or
    otherwise labeled in an obscure way like intelligent munitions from Diehl
    or the Abrams main gun ( Rheinmetall but initially derived from a british design )
    IMHO the intellectual imports from pre/post WWII time have run their course
    in the US.

  2. Isn’t the LCS being built by two different contractors? The USS Freedom, LCS-1 and the USS Fort Worth, LCS-3 (commissioned just two weeks ago) are built by LM at their Marinette Marine, Marinette, Wisconsin facility. USS Independence, LCS-2 and USS Coronado (scheduled commisioning in May 2012), LCS-4 are built by GD and Austal. In fact, I believe the Coronado is being built at the Bath Iron Works GD facility in Portland, Maine and not in Mobile, Alabama, like the Independence was.

    Both designs are totally built in the US, not just assembled here, like the A-330MRTT would be.

    So this is not like any EADS contract would be. Unlike much of Europe, Austrailia is a much closer friend and ally (save for the UK).

    • Ever heard of Eurocopter and their ARMY contract, look it up it is good reading.

    • so while under the umbrella of NG, the 330mrtt was allowed to win.

      If you or the US Gov’t are worried about work-share, just make it part of the requirements and/or law.
      But no… that would actually hinder BigB (and all others in the Military Industrial complex). They would no longer be able to re-wing A-10’s in Korea… maybe they would even have to declare how much of the actual work-share on the 767 is foreign…

      and about allies – EADS is actually incorporated in the Netherlands. You want to talk about close allies?

  3. I don’t suggest the DoD take this into account when making decision about who to give the tanker project to. But I think it would be good for the US aerospace industry that EADS set up in Mobile, should the award go that way. Maybe somewhat of a screwdriver operation to start with, but you have to start somewhere and you can always negotiate the offsets. With the industry fragmenting on a global scale and Boeing increasingly outsourcing abroad, getting the no 2 company to start US operations has to be a good thing.

  4. Just out of curiosity, how do they get any ships built in Wisconsin into the water (not counting the lakes)?

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  6. Weather the KC-67 or the KC–45 wins the tanker/transport competition, must be based on merits
    and not on political considerations and or whether the decision is considered to be outsourcing of work, for the following principal reasons!
    1 In the interest of securing the “biggest bang for the buck,” as well as the interest of the US
    taxpayer, the best product should always win.
    2 It is a two-way street and should the US not stick to the above principle, the consequences
    could be very serious for the very US industries we would be trying to protect.

    After Lockheed won the JSF fighter-bomber contract, the US insisted that the Europeans applied the same principle of purchasing the best product for the monies spent.
    Therefore, in spite of the fact that several European countries had invested billions on the Euro-fighter/bomber program, the US insisted that the Europeans applied the above principle and to include the F-35 in the competition, before committing to order more Euro the-fighters.
    I do not know anything about modern fighter-bombers, but I can safely assume that the JSF
    or F–35, is the best fighter bomber of the two by a large margin and if not, the Europeans would never have purchased large numbers of F 35’s. in the face of strong opposition from within the labor unions, instead of or in addition to Euro-fighters, England ending up with both!
    So much for efficiency!

    Ever since the KC–45 was offered by AEDS, not a single country purchased the KC–76, after
    Italy and Japan had committed to that tanker/transport, after Boeing overt it many years ago
    and being several years late with deliveries.
    But the Air Forces of four very close US allies, England, Australia, Saudi Arabia, and Qatar, all purchased KC–45 as soon as it became available, two of them having already gone into service with the Australian Air Force.
    It must be assumed, therefore, that the KC–45 is the superior T/T and if so, damaging as it will unfortunately be for Boeing, the KC-45 with a 60 to 70% US content, would appear to provided the best overall product for the U.S. Air Force and the US taxpayer!

    • There have been no KC-30s or A-330MRTTs delivered to anyone. The RAAF is not flying two of the five they have on order, they are not flying any of them, yet.

      The A-330MRTT does not have a 60%-70% US content. It has a 53%-55% US content.

      The KC-767NG has a 78%-83% US content.

      • Just wondering where you got your numbers for american content for both of these aircraft.

        Could you share your source with us?


      • I think Rudy’s main point is:

        Ever since the KC–45 was offered by EADS, not a single country purchased the KC–767.

        So fair enough there has been no delivery yet, but still, the current status is quite clear.

    • The F-35 is a project to tactically bind resources of all kind at the involved “partners” similar to ISS, SOFIA and some other joint project.
      It will be a nonfunctional dud performancewise and it will have been exceedingly depleetive on available budgets with a lot of that transfered to US located coffers.

      • How do you know all of this?

        I am not a fan of the F-35 program, but even I dout it will be a “non-functional dud”.

    • Rudy; Some wisdom in your words. Some not so much.
      First i really like your point 2. I hadn’t heard of your example but can see it might easily be true.
      I would like to know what you think of mandatory offset/subcontract requirements for government contracts – e.g. 66% of all monies payed by the government to contractors must be income-taxable by the US or some such.
      I of course heartily agree with your analysis that the mrtt is the better tanker. Even the USAF accepts this – see the IFARA score.

      The example breaks down on the fact that no JSF’s have been ordered yet other than flight test aircraft, and the Israeli order is in it’s final stages (or did it go through yet?)

  7. KC135TopBoom :
    How do you know all of this?
    I am not a fan of the F-35 program, but even I dout it will be a “non-functional dud”.

    Well, I guess I can be cavalier about this here and ask you to
    give factual indication why this project should reach its targets
    as advertised. i.e. a given set of (1)capabilities for a given (2)amount of money
    on a (3)given date. It may one day reach (1) it will never ever be able to achieve (2) and (3) compare to the V22 1985 tech with an EIS of 2008 ( Airbus could do about 2 VLA projects on the money sunken there )

    And IMHO the same problem the 787 faces: Even if performing to spec it will be 2008 attached performance for a 2012 EIS product. outdated.

  8. I’m not persuaded that Buy-American is a red herring, simply because past policy blunders went unchallenged. The fundamental question is should be addressed directly.

    It is bad policy to make short-term decisions that de-industrialize our defense industries. A series of bad decisions is still bad policy. Bad decisions don’t become wise ones through repetition.

    • Lets look elsewhere:
      How would you view the (dis?)advantage of having foreign
      car manufacturer sites in the US that trump the resident
      manufacturers by quite a margin.
      It took US consumers quite some time to realise that rooting
      for the detroit five was rooting for uncompetitive cars based
      30ties and 40ties technology.

      • Defense policy is different from purchasing office supplies. It is also different from individuals who purchase personal automobiles made in Korea or Germany.

        America has a strategic interest in a strong and capable defense industrial base. Ideally, domestic companies would express some intrinsic connection to national security. I would be happy to have foreign investment in our domestic industrial base. Perhaps EADS has a connection to our domestic security – arguably as strong as Lockheed or Boeing has. It’s not my first choice, but it is better than losing our industrial base. Lowest strategic value goes to purchases that de-industrialize our defense industries.

        Shopping for consumer goods at Wal-Mart has strategic consequences – local businesses are wiped out. If we needed mom-and-pop stores for national defense, then I would argue for more careful behavior in personal consumption.

  9. Stan Sorscher :
    Defense policy is different from purchasing office supplies. It is also different from individuals who purchase personal automobiles made in Korea or Germany.

    I was talking about developement aid by foreign companies producing _IN_ the US.

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