About $500 million in business has been divested since June 2019, when Harris and L3 Technologies combined into a single, $17 billion company. That total came by way of three deals that shed the EOTech business, the night vision business, and the security detection and automation businesses.

“Out of the gates, we were really running at this,” said CEO Bill Brown, who noted in previous interviews the audacious goal for divestitures of 8-10 percent of total revenue. “We continue to make progress on others, but obviously with the COVID crisis and the financial impacts of that, it’s moved some opportunities to the right.”

The sale of the security detection and automation businesses to Leidos for about $1 billion will ultimately be one of if not the biggest divestiture for the company, said Brown, who declined to point to any specific portions of business as currently up for sale or likely to be shed.

Thus far divestitures have been driven either by overlap created by the merger — which subsequently raised the alarm bells of regulators — or by a desire to focus the portfolio even more to become what Brown described as a “powerhouse C4ISR company.”

Brown stopped short of stating any intention to exit the commercial or federal business altogether — even as the former took a significant hit from pandemic fallout: Commercial revenues are expected to be down around 35 percent organically for the year.

Also likely to suffer from the COVID-19 pandemic is international business. Foreign sales, which account for 20 percent of total revenue, will likely remain flat, versus the increase in low to mid-single digits previously expected.

“We identify that as an area where we think we can outperform,” Chris Kubasik, L3Harris chief operating officer, said during the interview. “Clearly the global pandemic applies some pressure, especially in the Middle East with the prices of oil and all the countries having their own bailouts or stimulus plans. Just like the U.S., I think the situation is going to call into question how those countries deal with defense going forward. It’s going to be one of these areas that we need to monitor, and are probably going to have to take market share to grow.”

An inability to travel has, however, opened doors to new ways of doing business around the world. Kubasik pointed to a particular deal with a customer in a Far East country that was negotiated via Skype.

“Nobody’s really closed for business,” he said. “We’ve just got to be creative and do it differently. You feel pretty good when you do a one- or two-hour Zoom , where in the old days it would have taken four days by the time you flew to the country, cleared customs, got a good night’s rest, held a meeting, met again and flew back.”

For L3Harris, year two post merger will focus on the remaining $1 billion in divestitures and see a continuation of company integration. In the longer term, those efforts will set the company up nicely for additional acquisitions, which Kubasik called “a clear expectation” for spurring growth.

And C4ISR is the area that will likely be the focus of potential buys.

“The value of those capabilities and technologies will be even greater in the future in a near-peer competition,” Brown said. “It’s not the platforms, but what the platforms do and how they interoperate that requires networks and new ways of communicating, which is in the sweet spot of the company. So I would imagine that anything we would do through acquisition would happen in that broad C4ISR domain.”

But for now, he added, the company is focusing on “the basic fundamentals.”

“And if we do that really well, then we build credibility to go and do another acquisition, another merger over time. The key is earning the right to do that — building the credibility and the muscle to go down that path, and that’s what we’re doing today.”

According to a March 26 announcement from the DOJ, United Technologies Corp. and Raytheon will need to divest Raytheon’s military airborne radios business as well as UTC’s military global positioning systems and large space-based optical systems businesses in order to proceed with the proposed merger.

The divestitures would satisfy a proposed settlement from the department’s Antitrust Division of a civil antitrust lawsuit to block the proposed Raytheon-UTC merger.

BAE Systems agreed in January to buy Collins Aerospace’s military global positioning system business — which is owned by parent firm UTC — for $1.93 billion and Raytheon’s airborne tactical radios business for $275 million.

“Today’s settlement protects the American taxpayer by preserving competition that leads to lower costs and higher innovation in critical military and defense products,” said Assistant Attorney General Makan Delrahim of the Antitrust Division. “The merger, as originally proposed, would have eliminated competition in the supply of military airborne radios and military GPS systems, and would have positioned the merged firm to harm rivals capable of making key components for reconnaissance satellites. These horizontal and vertical concerns are resolved by the Division’s structural remedy, which includes the divestiture of three separate business units.”

Under the terms of the proposed settlement, the companies need to divest Raytheon’s military airborne radios business, including facilities in Fort Wayne, Indiana, and Largo, Florida; as well as UTC’s military GPS business to BAE Systems or another approved acquirer.

The proposed settlement would also require the divestiture of UTC’s optical systems business, including a facility in Danbury, Connecticut, to an approved acquirer.

Raytheon and UTC announced in June 2019 plans to officially merge into a new entity called Raytheon Technologies Corporation, with the deal at the time expected to close during the first half of 2020.

L3Harris signed a definitive agreement to sell the business unit to Leidos, according to an announcement Tuesday. The transaction is expected to close in mid-2020, barring any issues tied to regulatory approvals. Proceeds from the divestiture are expected to be used to repurchase shares and offset dilution.

The deal is part of a larger strategy to reshape the portfolio, focusing on what Brown described on a call with analysts as “high-margin, high-growth, technology-differentiated businesses where we can win and generate attractive returns.”

“Although this is the first and largest transaction we’re contemplating, our portfolio-shaping process is ongoing and may ultimately result in 8-10 percent of total company revenue being divested over time,” he said.

The company’s 2019 revenue of $18.1 billion could translate to as much as $1.8 billion in divestitures.

Brown told Defense News in June 2019 — one month before the merger of Harris and L3 Technologies was completed — about plans to divest a “pretty significant” piece of the business in the first six months as a single company.

“Anytime you put two companies with two portfolios together and you rethink what strategy you want to accomplish, there’s going to be some pieces of the portfolio at the back end of the bus,” Brown said at the time. “We have to look at where we want to put our management time, capital, and [research and development] investment. We can’t put it on pieces that might not be as strategic.”

Brown told analysts that the deal would not impact the company’s $3 billion free cash flow target in 2022. That in theory would set up L3Harris for a sizable acquisition down the road, should the company choose to go in that direction.

A company spokesman could not comment on the specific defense-nondefense split post divestiture, but L3Harris would presumably see a larger slice of the business focusing on defense opportunities.

In the 2019 Defense News Top 100 list of the largest defense companies, Harris and L3 reported 72 percent and 81 percent of revenue as defense-focused, respectively.

L3Harris reported $18.1 billion in fiscal 2019 revenue. Once the deal with Leidos closes, the airport security businesses’ $500 million in annual revenue would transition off the books. That said, L3Harris is forecasting 5-7 percent revenue growth in 2020 — so it won’t be a straight reduction.

SIMI VALLEY, Calif. — Dual-use technology — that is, tech that can be adapted from the commercial market to serve the needs of the military — is core to the U.S. Department of Defense’s innovation strategy.

But those willing to put money toward big ideas argue it’s the wrong approach.

“In terms of how to build a startup and how to scale really fast, you can’t have two missions,” said Katherine Boyle, an investor with venture capital firm General Catalyst, during a Defense News roundtable in California. “You can’t be a 10-person startup saying: ‘OK, we’re going to sell to the DoD, but we’re also going to sell to these commercial customers, and it’s just going to work out magically.'”

For the second year in a row, Defense News hosted the roundtable to dig into Pentagon’s efforts to engage with the commercial tech community — this year digging into the challenges and opportunities that come with investment in defense development.

Click here for all the stories and videos from Culture Clash 2.0: An Economic Crossroads.

To the Pentagon, dual-use technology offers an attractive means of drawing new players into the military fold, while also leveraging the more rapid development that happens on the commercial side. But the model is evolving, said Mike Madsen, director of strategic engagement with the government’s Silicon Valley outreach hub Defense Innovation Unit.

With DoD, “it takes two years to get to a ‘yes,’ when a lot of companies need a ‘no’ in 30 days because they don’t have the capital,” he said. “So we flipped it. Now we start with the DoD problem set and take it out to industry. And we’ve lowered a lot of the barriers to entry — we negotiate [intellectual property] for each contract, we negotiate auditability, we move quickly. We look to award prototype contracts in 60 to 90 days.”

The approach also attempts to rebalance the gradual shift in research and development investments in the last couple of decades. As noted by Tom Foldesi, DIU’s commercial engagement director, one-third of worldwide R&D was tied to the Department of Defense in the 1960s. That percentage has since tanked to 3.7 percent.

A separate business line allows R&D to continue to iterate to the next generation of technology so the DoD can “go back to the cookie jar” and tap into the technology to solve future problems, Foldesi said.

But to Trey Stephens, a partner at venture capital firm Founders Fund and a co-founder and executive chairman of Anduril Industries, the model ensures the large, traditional defense contractors continue to dominate as the small businesses only “dabble in defense.” It also means the DoD won’t bear sole responsibility for the economic growth of these small tech startups.

“Where I’m not on board is where a traditional defense company is being asked by the government to integrate dual-use capabilities as a way to prevent that oligopoly from being shaken,” he said. “We have to break this oligopoly. We can only do it if we find companies that are willing to own their responsibility for execution on programs.”

To be clear, Stephens acknowledged cases where commercial technology companies can be primes. Lawsuit aside, he’s “on board” with awarding the Joint Enterprise Defense Infrastructure contract to a commercial business — Microsoft — “because the capability is similar enough.” Microsoft was awarded the Pentagon’s JEDI cloud contract, but Amazon Web Services has asked a federal court to block the department and the company from beginning work on the project, according to a Jan. 13 court filing.

In terms of new capabilities, Stephens advocates for turning the model on its ear: Enable startups to first development a solution to a problem faced within the DoD, then turn that around and sell it to commercial industries.

“The commercial industry is oftentimes looking to the government for aspirational solutions to some of its hardest problems, whereas the inverse doesn’t really work,” he said.

General Catalyst, which counts The Honest Company, Snapchat and Airbnb among its portfolio of companies, has invested in two pure-play defense companies: Anduril, and Palo Alto machine-learning company Vannevar Labs. The latter is developing a product that would bring natural language-processing technologies to support counterterrorism missions.

“We actually think this is a better model,” Boyle said. “If you’re scaling rapidly, you have to be very focused on your customer set. And if you’re going to have to sacrifice a customer, even if you’re a multibillion-dollar company, you’re going to sacrifice the one who’s moving the slowest. And that’s usually the government.”

The official leading those efforts is Dana Deasy, the Defense Department’s chief information officer. The former top IT executive at JPMorgan and BP, Deasy is leading what some might call a transformation at the Pentagon to modernize enterprise IT and better arm the war fighter for the future fight.

He spoke recently with Jill Aitoro, executive editor of C4ISRNET and its sister brand Defense News, about the tech priorities for the department — and how that Amazon protest of the department’s enterprise cloud contract award impacts his plans.

C4ISRNET: Since you’ve started, what areas have needed your undivided attention?

Dana Deasy: It started way back when I first interviewed with Secretary Mattis, and then Deputy Secretary Shanahan. They kept referring to this national defense strategy and gave me a copy of it to read. There was something that was going to need to be done obviously around the lethality space.

I realized, “Hey, cloud was going to need to be a substantial part of our future.” It could handle the need for speeding up the speed of procurement of infrastructure.

The other thing I noticed was the way that we were building software was very much the way that we had been building software for the last 25, 30 years. Cloud really forces you to think differently about how you want to build applications. So I saw, hey, there was an opportunity for speed of procurement. There was an opportunity for speed of delivering applications. Then finally, it really hit home for me when I took my first trip out to Afghanistan. I always knew that cloud could impact the tactical edge, but it wasn’t until you went out to the tactical edge and you sat down with the war fighter and they showed you what they had to do and the various systems, the data that they had to pull together.

I came home from that trip and basically said, “We have to double down on cloud. We have to do this as fast as possible.” The fourth reason I thought cloud was going to be important, and I kind of went back to my private sector days, for AI, artificial intelligence, for it to really work, it needs three fundamental things. It needs massive compute power. It needs the right data, and you need to have the right algorithms.

As I looked across Department of Defense, it became very clear there was no large scale infrastructure that was available for all the services to quickly take advantage of that they could start to port either experimentation of AI onto, or fielding AI onto.

C4ISRNET: So how disruptive is the current state of your cloud procurement JEDI?

Deasy: We’ve obviously been through this very long drawn out process now with the protest. We’ve gone from GAO to federal claims court, to the IG. In all cases, we’ve come out in a very positive position, which we always felt very strongly we would. It has been really exciting now to finally be able to focus on [starting] to build the cloud capabilities. We recognize that we have to do this alongside of the protest that’s going on with Amazon right now. I’ve told my team, “Let’s not get distracted here.” We have a set of people that are focused on working on the protest, and we have a set of people that wake up every day now and are just getting ready to stand up our unclassified environment, which we hope will be ready by mid-February.

Then our secret environment is approximately six months thereafter. Then our top secret … a lot is going to depend on not only how the protest plays out, but how well and quick and smoothly the unclassified comes up and then the secret comes up.

C4ISRNET: What I’m hearing from you is more, “We need to grasp it now and we need to figure out where it fits and how it can be rolled out in an appropriate way.” Kind of kicking the tires.

Deasy: We are spending a lot of time now getting ready to stand up our first “unclassified” JEDI environment. It’s going to have a whole variety of services. What do we need, what’s the bare minimum we need to be able to stand up a real capability that the services can use come mid-February, but it won’t be the full complement. We will add on more and more services as time goes on. This is a really good example of not waiting until you have a whole complement of services done, but let’s get a capability out there that the services and the co-comms can start to use. We’ll learn about what they need second, third order, fourth order. AI’s the same way. We are putting out there first generation, second generation solutions where the data’s going to get more refined. We’re going to bring in better data and we’re going to refine the algorithms but we’re not trying to get the high degrees of perfection. That is new for the department.

C4ISRNET: I think there’s been confusion in terms of how JEDI ultimately will be used, and whether this is primarily enterprise technology or also for military on the ground. What’s your vision?

Deasy: What the Department of Defense has never had is an environment where you can stand up, unclassified, secret, top secret data. This will be the first and only environment inside the Department of Defense. It’s not three distinct environments. We’re building what’s called cross-domain solutions, and this is the ability to move data, ensure it sits in its right classification. Remember that problem, what I saw in Afghanistan, where they were trying to bring in secret data, unclassified data, top secret data from these disparate standalone siloed solutions? To the war fighter, all they want is what it takes for them to make a decision.

C4ISRNET: Were there any lessons learned?

Deasy: People grabbed hold of [the claim] that this was a 10-year, $10 billion contract. Which has never been the case. This was a two year initial contract of which the only money we put out initially is $1 million. The rest is all dependent on how fast Department of Defense starts to consume the capability.

I’ve seen cloud technology in the last 10 years dramatically change every two to three years. It became very clear to me we needed these breakpoints in the contract to be able to reevaluate.

By the summer of 2018, we [released] the DoD Enterprise Cloud Strategy, which said all of this mess, all of these individual clouds were not a winning hand. I have said from day one we are a multi-cloud environment and we will continue to be a multi-cloud environment.

C4ISRNET: How will there be opportunities for other companies?

Deasy: There is no such thing as one technology that can serve all the diverse needs of the Department of Defense. So there are cloud contracts that have been stood up already inside the Department of Defense. Navy has one for their SAP environment. Air Force has one that they call Cloud One. There are ones that we’re evaluating right now with other vendors that we’ll be making awards on that will all be serving specific needs. We are going to need more than one cloud provider to satisfy the needs of our unclassified environment. It’s too big, it’s too broad for any one vendor to handle.

C4ISRNET: What’s your role in having a more productive relationship between the tech community and DoD?

Deasy: Over the years, we’ve seen a tremendous acceleration of innovation take place in the private sector, to the point where the DoD clearly recognizes that this is not something that we can do on our own, ignore the outside world and just build great innovation.

[The Joint Artificial Intelligence Center] is working with R&E, working with the academic world, working with large established technology firms, and working with small startups.

If you look at the projects that we have underway right now, some of the origins of the algorithms come from the academic world. Some come from small startups, and some of them come from the larger technology players. So I think AI is going to be a space that’s going to accelerate and help to mature how we bring all of this together.

C4ISRNET: Rather than a lot of the small business contracts, can’t DoD put more money into fewer? Invest in 10 rather than 50, for example, but give them bigger contracts to build on?

Deasy: That could be a little shortsighted, because as soon as you start to do that, you may be ignoring three or four or five brand new ones that are coming up that could be doing something really special that the DoD could truly leverage.

The things that government as a whole needs to learn how to do better is how do you bring in small startups. How do you in the procurement processes make sure that you don’t find yourself in these elongated protest periods? How do you get them in the door, on the books so to speak, and allow them to start to innovate? Then finally, even if we could bring them in quicker, and we can set up the right environment for them to innovate faster, we have to solve for how quickly we can field. And field the next and the next. AI is going to force us to solve for that, because you don’t roll out a solution to the field and then walk away and go to the next thing. You are going to constantly reiterate with new data and new algorithms. Small companies are very, very good. They are very adapted to this highly automated rollout, and we’re going to have to learn from them more and more.

C4ISRNET: Can we go back to what you saw in the National Defense Strategy?

Deasy: Inside the NDS is a really interesting statement that says artificial intelligence could change warfare. Under Dr. Griffin in R&E, they are doing some amazing things in basic research of AI. So are a lot of the services. But when you look across the DoD as a whole, what you didn’t see was fielding being done other than in small pockets. There was no attempt to do fielding at large scale and to take that fielding and be able to scale it up across multiple services.

So that is why we created JAIC. If the department is really going to be serious about building and being a world leader on AI, then we have to practice and learn how to accelerate fielding of AI and be able to do that at scale.

C4ISRNET: How is that moving along?

DEASY: We’ve gone from an organization that you could count on two hands to about 110 people today. That is now delivering its second and third sprints, meaning its second and third iterations of the HADR and the preventative maintenance that we talked about before. We are ready to start our first lethality project in the joint war fighter targeting space. We’re looking to do something in the health space as well.

C4ISRNET: Can you give any kind of preview on what we might see or expect to come out of the IT budget for the Pentagon?

Deasy: The spend is about $47 billion. What we’ve done this last year is we’ve put out guidance for the first time that specifically called out the digital modernization program and said in the matter of cloud, AI, C3, and cyber, these are specific things that we want you to put money aside on.

That’s been delivered to the field agencies. That’s been delivered to the services, the combatant commands. So it’s really exciting, because now for the very first time [we are talking] a common language about delivering against a comprehensive strategy.

C4ISRNET: Can you give an update on what DoD is doing to fortify security in the supply chain?

Deasy: When we find companies that we have clear evidence that they’re problematic from an adversary standpoint, we have the ability today to have them stand down. We are starting to take advantage of that. There is this whole complicated problem: how do ensure as you move from your first tier to your second tier- down that chain. Is there technology we can apply to that? I know that this is work that folks like DARPA are looking at. We’re in constant conversations with the NSA. How do we use their tools and their art craft to help us evaluate? We don’t have all the answers. This is the space that I think we’re going to have to spend a lot of time iterating and get smarter and smarter on.

C4ISRNET: There has been talk about DoD embracing more of an agile approach to technology. But others say procurement doesn’t necessarily reflect it. Have you made progress?

Deasy: For years, we have had this very well thought out rigorous process of how you define requirements, how you prototype, how you build, how you test, and how you deploy. When you start using the term and the phrase “agile” all that comes together in a much more compressed set of sprint approaches. It is a different mindset and it is a different set of technical skills you have to be able to use to deploy that.

We have great examples inside Navy Research, inside, for example, Kessel Run over in the Air Force, where we’re starting to show that we can move from small pockets to start to do this at a lot larger scale. We’re going to have to also solve for how can we test and field faster. So for me it’s a procurement issue, it’s infrastructure, t’s culture, it’s training. All these things have to be brought together.

C4ISRNET: Can you talk about the potential for 5G in supporting DoD infrastructure?

Deasy: This is now the third leg of the digital modernization command and control and communications. What you’re really trying to solve for is if the fight needs to occur and you’re bringing together all the services and the right assets, that you have to make sure we’re going to be able to fight through. If we’re spoofed, if we’re jammed, if you’re fighting through a highly contested environment, how do you make sure that’s going to happen? And how do you make sure that as you’re using new technologies where you’re going to use full motion video, where you’re going to use AI, where you’re going to use massive amounts of data, you’ve got to push that out to the tactical edge. You not only need secure, robust communications, but we’re going to need bandwidth.

This is why people are so excited about 5G. It’s the potential of improved throughput and bandwidth, but we’ve got to get the security right. But the use cases are really exciting, and this is why the work that R&E’s been leading through Dr. [Lisa] Porter [to define] the right way to start our experimentations [is so important]. So the work that we’re going to be doing with dynamic sharing, which is one of the pilots, and the work we’re going to be doing with the warehousing, really will start to allow us to understand — can we truly deliver on all the promises of 5G? What if any limitations are going to exist? What new type of security are we going to have to wrap around it that may be very different than we’ve used before?

C4ISRNET: Is there anything else that you feel is important to mention?

Deasy: Every time I talk about the digital modernization, people tend to focus on a part of it. Like the cloud or the AI or the cyber. I truly believe that people will look back on it and say it was truly the integration. It was the fact that we had the foresight to think about massive computing through a cloud, that we knew that AI was going to be a very powerful and very much a game changing technology. All of that doesn’t matter if you cannot get it out to the war fighter. So this next generation, command control communication through things like 5G is really important.

And we can never lose sight that we have a lot of technology that we have used for 20, 30 years that was never designed around a cyber world.

In a perfect world, we would’ve done cloud years ago. We would’ve had an enterprise cloud already in place. But we don’t, so now we’re needing to stand up an enterprise cloud while at the same time learning how to do AI at scale, while at the same time doing next-generation command, control and communication. Yes, it’s risky. But I firmly believe we don’t have a choice.

WASHINGTON — Steven Walker, the 21st director of the U.S. Defense Advanced Research Projects Agency, announced his resignation on Tuesday, which will be effective Jan.10, 2020, Defense News has learned.

Walker will move on to a position in industry, though a DARPA spokesman did not reveal where. DARPA Deputy Director Peter Highnam, a former director of research at the National Geospatial-Intelligence Agency, will assume the role of acting director until a permanent director is appointed. Highnam is also a former director of the Intelligence Advanced Research Projects Activity.

DARPA is responsible for driving development of emerging technologies for use by the military. Walker and Vint Cerf, one of the creators of the internet, spoke to Defense News about that role in March, and how DARPA can support engagement with the tech community.

Among the key efforts launched under Walker’s tenure at DARPA was development and fielding of the Long-Range Anti-Ship Missile, which was accomplished in half the time of a normal development program, DARPA noted in an email.

Walker also reinvigorated the agency’s hypersonic weapons and space efforts, with major programs in boost-glide and air-breathing missile development as well as distributed low-Earth orbit satellite constellations.

Also noted by the agency: Under Walker’s leadership, DARPA launched the three-year, $1.5 billion Electronics Resurgence Initiative as well as the five-year, $2 billion AI Next program. Walker also “made pivotal investments in the realm of engineered biology, resulting in several breakthroughs, chief among them a program that has helped reduce Ebola fatality rates by more than 70 percent,” the email stated.

Walker succeeded Arati Prabhakar, who left the agency in January 2017.

WASHINGTON — BAE Systems Chief Executive Jerry DeMuro will hand over leadership to Tom Arseneault next year, the company announced Tuesday.

Arseneault will transition from chief operating officer to CEO of the U.S. subsidiary of U.K.-based BAE Systems plc in April, with DeMuro taking on a newly created role of executive vice president of strategic initiatives. DeMuro will also continue to serve on the board of directors.

“I think it is one of the primary responsibilities you have, as a CEO, to develop the talent,” DeMuro told Defense News when asked about succession planning in an exclusive interview Dec. 7, during the Reagan National Defense Forum. “And leadership succession, in particular CEO succession, isn’t always smooth. I think this is a natural progression, making it smooth for our customers, our shareholders, all stakeholders and our employees.

“It’s just about progressing to that point where we on the board feel it’s time to hand that baton off.”

DeMuro has served as CEO since 2014, when he succeeded Linda Hudson. Among his key priorities during the last five years has been unifying a business primarily born out of acquisition. With Tom’s April appointment, Jerry will transition to an advisory role, providing advice and counsel to leadership with both BAE Systems Inc. in the U.S. and BAE System plc in Europe on a number of priority programs. Within the scope of his responsibilities will be chairing the internal program reviews for several key international pursuits. He will also continue to advance the defense industry’s positioning regarding evolving cybersecurity requirements.

Arseneault, who in May also added “president” to his title and was elected to the company’s board, is currently responsible for delivering business and functional performance across the company’s three sectors. He’s been with BAE for 22 years, having previously served as president of the company’s electronic systems sector and executive vice president of the product sectors.

“If you’ve been watching, we had him as the COO [chief operating officer] for several years. I also had him doing strategy and corporate development, and rounding out his portfolio” across the various business units, DeMuro said. “[I]t’s just about getting him prepared, and making sure our stakeholders are comfortable.”

BAE is currently in low-rate production for the U.S. Army’s Armored Multi-Purpose Vehicle to replace the M113 armored personnel carrier and family of vehicles. It’s also scheduled to deliver its prototype for the Mobile Protected Firepower vehicle program by 2021 — required ultimately to be a 105-120mm cannon and a tracked vehicle that can withstand a classified level of enemy fire.

DeMuro has pointed to electronic warfare as another key priority area for the company, delivering capabilities to the F-35 and all other fifth-generation fighter jets, as well as precision-guided munitions and technologies that support space resiliency.

Parent company BAE Systems in the U.K. ranked seventh on the Defense News Top 100 list of the largest defense companies in the world. Defense revenue has dropped from $25.45 billion in 2015 to $22.48 billion in 2018. The U.S. subsidiary oversees one of the companies largest operations from Arlington, Virginia.

In the meantime, CIO Dana Deasy confirmed to Defense News during an exclusive interview that the Department of Defense is moving full speed ahead with its choice of Microsoft to serve the Joint Enterprise Defense Infrastructure program — otherwise known as JEDI.

He also said that the first phase of the rollout — the unclassified cloud environment — should be available in February 2020.

“We’ve been through this very long, drawn-out process now. We’ve gone from GAO [the Government Accountability Office] to Federal Claims Court to the [inspector general]. In each and all cases, we’ve come out in a very positive position, as we always felt strongly we would,” Deasy said. “What was somewhat frustrating is we brought together some world-class people to create this vision of a large-scale cloud that you could provision, that you could use to develop [software] differently, that you could put out in the tactical edge and that could support AI. Those same people were constantly being pulled in to have to address all the issues around the protest.”

Indeed, the contract award was delayed for months due to a protest and court case filed by Oracle, which levied several conflict of interest allegations against competitor Amazon. Oracle’s case is currently in the U.S. Court of Appeals for the Federal Circuit, having lost in a lower court. In November, Federal Times broke the story about Amazon’s plans to protest the JEDI award to Microsoft through the U.S. Court of Federal Claims, obtaining a video of Amazon Web Services CEO Andy Jassy at an all-hands meeting with Amazon Worldwide stating that the company will “push the government to shine a light on what really happened.”

A redacted version of the AWS complaint alleges that the DoD source-selection team made several “egregious” and “unfounded” decisions during the cloud award, ultimately not complying with the contents of its own request for proposals.

The complaint also tied the decision to several disparaging statements made by President Donald Trump about Bezos, who also owns The Washington Post.

“These shifts in the DoD evaluators’ assessments of AWS’s proposal, including the significance of AWS’s security advantages, occurred as President Trump increased the intensity of his public attacks against Mr. Bezos, Amazon/AWS, and the Washington Post,” the complaint reads.

On Dec. 7, Bezos spoke during a fireside chat at the Reagan National Defense Forum, but he did not address the controversial cloud contract.

Unlike protests filed in the GAO, protests filed in federal court do not bring an automatic stay in performance. But regardless of regulatory standards, moving forward with Microsoft introduces a risk that a stay later in the process could be more disruptive.

Nonetheless, Deasy said he never considered a delay in performance.

“Never. From the beginning, the way we constructed the teams and organized how to write the RFP to where we are today, there was such deep consideration and due diligence — making sure we followed all the regulations,” he said. “I’ve told the team: ‘Let’s just not sit and wait. Let’s start to get the environment ready so when we come out of the protest, we haven’t lost any momentum.’ ”

Messaging problems

That’s not to say the Pentagon hasn’t learned from all this. Early on, JEDI became branded as a 10-year, $10 billion opportunity. The Pentagon did not do enough to stomp out that depiction, Deasy said.

“I’ve seen this over my 38 years of being involved in technology: If you don’t convey your message right, the media can start to take a message that you intend to be ‘X,’ and the next thing you know you’re sitting way over here in ‘Y’ territory,” he said. “This was a two-year initial contract, of which the only money we put out initially is $1 million. The rest is all dependent on how fast Department of Defense starts to consume the capability.”

Deasy points to what he calls “breakpoints” in the contract to be able to reevaluate, and he said the DoD is, and will remain, a multi-cloud environment. There must be more than one cloud provider to satisfy the needs of the unclassified environment in particular, he added, because “it’s too big, it’s too broad for any one vendor to handle.”

But the many disparate, individual clouds that currently exist — what Deasy described as “this mess” — was also not a winning hand. Step one was making sense of what was already in place.

“Guess what? We don’t know how to do enterprise cloud at that scale, so we need to find a partner,” he said. “We need to start with somebody.”

The DoD is now getting ready to stand up the unclassified environment, which Deasy expects will be ready by mid-February. The department will start with what he calls “the bare minimum we need to be able to stand up a real capability that the services can use.”

More and more services will be added as time goes on. Artificial intelligence components will roll in at the same time but, again, with an understanding that more will come, that data will be refined and that the initial rollout won’t have “a high degree of perfection.”

The secret environment will be ready about six months after the unclassified environment. The timeline for the top-secret environment is a little less clear, depending not only on how the protest plays out, but also how quickly and smoothly the initial two environments roll out.

“It’s not only the fact that there’s an unclassified, a secret and a top-secret environment,” Deasy said. “This is CONUS; this is OCONUS; and this is out to the tactical edge. So this is like a 3×3 dimension that we have to solve for. This will be the first time the Department of Defense will truly have that capability. That is what is unique.”

All four chiefs on Saturday pledged support to Gen. Paul Nakasone, commander of U.S. Cyber Command. But they also acknowledged the challenge that comes with the lack of international doctrine.

“We have international norms in the maritime; we don’t have those in cyber,” said CNO Adm. Michael Gilday, who led the Navy’s component to U.S. Cyber Command, 10th Fleet/Fleet Cyber Command, from July 2016 to June 2018. “It makes it difficult to enforce standard that don’t exist, and to therefore hold nations accountable for nefarious behavior. It’s a challenge.”

“Those types of agreements take time,” he added. “Unfortunately, they sometimes follow a catastrophic event.”

NATO confirmed in 2017 that it could invoke Article 5 of its charter should one or more member nations find themselves under a serious cyberattack that threatens critical military and civilian infrastructure. But while that decision did help inspire the alliance to develop rules of engagement should such an event occur, it did not establish global standards for behavior in cyberspace.

Nonetheless, progress is being made, said Gen. David Berger, commandant of the U.S. Marine Corps.

“We know it’s a collective issue. Documents are one things, but discussions are happening that didn’t happen years ago, and that’s healthy,” he said.

To enhance cybersecurity within the Department of Defense, Gen. David Goldfein, chief of the U.S. Air Force, advocated for greater authority to be given to the head of U.S. Cyber Command for enforcing cyber standards across the services.

“One of the things we’ve got to [provide] Nakasone is increased decision authority,” Goldfein said. “How do you operate at the speed of relevance if decisions are held to the highest level?”

The savings were identified following a review initiated by Esper in August, soon after his confirmation.

“Within the department we are implementing aggressive reforms to free up time, money and manpower to put back into our highest priorities,” Esper said. “In just four months of work we have saved over $5 billion. By decreasing overhead, divesting legacy activities and reducing lower-priority programs, we are able to invest more in the war-fighting requirements of the services.”

The so-called fourth estate includes 27 agencies, such as the Defense Intelligence Agency, the Defense Information Systems Agency and the Missile Defense Agency. A September 2018 report from the Government Accountability Office estimated those agencies collectively have an annual budget of at least $106 billion.

Esper did note that the savings can only be realized with support from Capitol Hill.

“We can’t do this without the backing of Congress,” he said. “When our budget comes to the Hill next year, I ask you to support our proposals and enact the legislative changes needed to get these reforms across the finish line. And to be clear, this is just the beginning.”

Esper expects every leader in each military service, in the Office of the Secretary of Defense, in the Joint Staff and in the combatant commands “to review their budgets with the same rigor, and reprioritize” to support the National Defense Strategy.

“We will continue this process from a clean sheet as we start looking at the 2021 budget to ensure we make the most of every taxpayer dollar,” Esper said.

An Aug. 2 memo kicked off the departmentwide review of programs ahead of the development for the fiscal 2021 budget request. Authored by Deputy Secretary of Defense David Norquist, but clearly the marching orders of Esper, the memo articulated a goal to find savings and drive a “longer-term focus on structural reform, ensuring all [defensewide] activities are aligned to the National Defense Strategy while evaluating the division of functions between defense-wide organizations and the military departments.”

While the emphasis initially has been to find savings through the fourth estate, Esper said in late August that the review will potentially involve cutting legacy programs that are diverting money away from next-generation projects needed to combat China and Russia.