Latest F-35 Airframe Contracts Coming in Spring; Engine Deal Later in 2025

Jan. 17, 2025 | By John A. Tirpak

The F-35 Joint Program Office doesn’t expect to sign a contract with Lockheed Martin for production Lots 18 and 19 until the spring, while a deal for the engines powering those aircraft may take longer to reach, a spokesperson told Air & Space Forces Magazine.

While that timeline pushes the contracts into the administration of incoming President Donald Trump, sources told Air & Space Forces Magazine they have discounted the idea that the government has slowed negotiations in hopes that Trump will intervene in the program and demand or impose price reductions.

The JPO and Lockheed announced a “handshake deal”—a basic understanding of costs and quantities with details still to be worked out—on airframe production Lots 18 and 19 in December, but a similar agreement with Pratt & Whitney for the F135 engines is still pending.

The JPO “plans to definitize the air vehicle contract in the spring,” a spokesperson said in response to queries, adding that the office “plans to award the engine contract in 2025,” suggesting that will happen even later in the year.

Unit costs for the three variants of the F-35—A, B and C—will not be released until both the air vehicle and engine contracts are signed, the spokesperson said.

A Pratt & Whitney spokesperson was not immediately able to offer comment on the extended engine negotiations, and a Lockheed Martin spokesperson said the company is making no public comments until its January earnings report comes out.

Just before Christmas, the Pentagon announced a deal in principal to pay up to $11.8 billion for the next 145 F-35s as part of Lot 18. That would translate to a per-jet price of some $82 million, but that cost does not include the engine. The previous contract, for lots 15-17, was for $75 million per aircraft without the engine.

Based on previous contracts, the F135 is estimated to have a price of about $15 million per copy, mostly dependent on whether it includes the “lift fan” feature in the short takeoff/vertical landing (STOVL) version of the powerplant.

Combining the two would suggest the F-35’s full cost under Lot 18 will be a cross-variant average of around $97 million per airframe.

Throughout the program, the F-35A conventional takeoff and landing (CTOL) version used by the Air Force is the lowest-price version, while the F-35B short takeoff and landing version used by the Marine Corps is the priciest, and the Navy’s carrier-based F-35C comes in between the other two in cost.

Trump may have keen interest in the F-35’s price as he returns to the White House. He intervened in the program in 2017, even before taking office, pressuring Lockheed for lower costs and higher employment on the program; both of which were effectively already in motion because the F-35 production volume was rising sharply at that time.

Elon Musk, co-chair of Trump’s so-called Department of Government Efficiency, has recently ridiculed the F-35 as obsolete, and has said the U.S. needs to invest more substantially in autonomous combat drones, even though Trump himself spoke favorably of the program during the presidential campaign.

However, the Pentagon has been working on this most recent contract for months. The handshake deal was originally expected to be inked in December 2023. Lockheed and program officials have telegraphed that the new unit cost would be higher due to inflation, labor and supply chain issues, and the fact that the latest jets are more complex and have the foundational elements for the Block 4 upgrade.

It’s not clear whether the F135 Engine Core Upgrade (ECU), a series of improvements needed to give the F135 more thrust, longevity and electrical power generation capability, is a major factor in the extended negotiations with Pratt & Whitney.

While the JPO has typically negotiated three lots at a time, Lot 20 is being negotiated separately because it could be the first in a series of multiyear buys. While some aspects of multiyear buys are already in place—allies are buying F-35s under the “block buy” rubric—the multiyear status requires that the program complete operational testing and pass Milestone C, full-rate production. That declaration was made in March 2024.

Negotiations have also been extended and complicated by the yearlong hold on F-35 deliveries. The hold was due to jets being built with the Tech Refresh 3 hardware and software, testing of which was still underway when those jets rolled off the production line. The hold was lifted in July when the program executive officer, Lt. Gen. Michael Schmidt, deemed the TR-3 configuration safe for routine operations.

Experts: Troop Pay Report Is a Big Step Forward. Now They Want Policy Changes

Jan. 17, 2025 | By David Roza

Experts and advocates commended a new Pentagon report on military pay and compensation, saying the document will help guide much-needed changes to how the Defense Department sets benefits and bring more awareness to the role of military spouses in service members’ financial health.

“The importance of this study cannot be overstated,” Derek Doyle, director of public affairs for the Military Family Advisory Network, told Air & Space Forces Magazine. “The financial security of military families is an issue of national security. Financial health and compensation are inextricably connected, as are financial well-being and overall well-being, and the propensity to recommend military service.”

Released Jan. 15, the 14th Quadrennial Review of Military Compensation took a sweeping look at the military compensation system, including basic pay, housing allowance, cost of living allowance, child care incentives, bonuses, and other benefits.

The report determined that military compensation is strongly competitive with the civilian labor market, but the Defense Department needs to update its methodology for several of its allowances and rethink support for military spouses. Those include:

The basic allowance for housing (BAH), which can change wildly year to year and is not always aligned with expensive areas where troops are stationed.

Cost of living allowances (COLA), which covers non-housing expenses in pricey areas. The report said COLA rates are sometimes thrown off by incomplete, outdated surveys.

Non-cash compensation (such as retirement options, child care support, employment initiatives) to provide financial stability for spouses after permanent change of station (PCS).

BAH

The rapid economic shocks of the COVID-19 pandemic played a significant role in QRMC’s recommendations, said Katherine Kuzminski, director of the Military, Veterans, and Society Program at the Center for a New American Security.

“In 2020 and 2021, we saw this huge jump in the cost of housing across the country … and BAH is recalculated just once a year,” she said. “All the reporting that came out at the time about junior enlisted service members and families being food insecure, that was all linked to the fact that if you’re ordered to move, you have to move, and if there’s price gouging in the housing market, you absorb that cost.”

In response, the Pentagon authorized targeted BAH increases starting in 2021, but the formula for calculating BAH rates does not always match the needs of a military housing area, the QRMC report concluded. Indeed, 79.8 percent of respondents to a 2023 survey by the Military Family Advisory Network said they pay more than they can comfortably afford for housing, and 70.1 percent said bumps to BAH rates were negated due to inflation and high regional costs.

The report said BAH for service members with dependents is between 17 and 60 percent higher than average civilian housing expenditures, but many families say it is not enough, according to Eileen Huck, government relations senior deputy director at the National Military Family Association.

“We often hear from families who are paying quite a bit out of pocket for housing,” she said. “Their BAH is not enough to cover the cost of housing, and that’s especially an issue in high cost-of-living areas like southern California and Hawaii. But it’s not limited to those areas.”

The compensation review recommended that the Pentagon revise its BAH methodology to be more stable and accurate, in part by pulling in census data and basing rates on the number of bedrooms in a dwelling rather than the type of dwelling. That recommendation lines up with a letter MFAN, NMFA, and 15 other military service organizations wrote to the Pentagon last February which specifically called for modernizing the housing allowance formula.

“The current system is not working for a lot of families,” Huck said. “BAH is a big part of military compensation, so it’s important that they get it right.”

Spouse Employment

Experts also praised the 14th QRMC for its focus on military spouses. This report was the first in the series to examine the impact of dual-income households. Most military spouses want to work, the report found, but frequent moves and changes in child care access reduce their ability to do so, which can in turn affect retention decisions.

About 22 percent of Active-Duty spouses are unemployed and looking for work, Huck pointed out, and the QRMC found that spouse earnings fall by an average of 14 percent in any PCS year.

“That has a pretty significant cumulative effect on the spouse’s earning potential, and then obviously has an impact on the family’s financial stability as well,” she said.

The QRMC recommended non-cash compensation options, such as decreasing PCS frequency, expanding access to child care, and reducing barriers to spouse retirement savings. Huck said there’s still more to be done, such as expanding tax credits for employers that hire military spouses. But the report is a big step for military officials.

“Now that the department and the services have this data about the impact of military service on spouse employment and income, they can make policy changes to hopefully make it easier for military spouses to stay in jobs and build their careers,” she said.

More Than Pay

A key point of the 14th QRMC is that the military compensation package is “strongly competitive” with the civilian labor market. On average, enlisted troops make more money than 82 percent of their civilian counterparts with similar education and experience, while officers make more than 75 percent, the report found.

An upcoming pay raise will raise that bar even higher, but the QRMC figures may not be as impressive as they sound amid stagnant civilian wages and high living costs, Kuzminski said.

“Civilian wages have largely stagnated since the early 1990s,” she said. “So if you take an E-2 with two years of experience and compare them to the standard 20-year-old, just because you’re doing better than that does not mean that you objectively feel like you’re well off.”

Indeed, the report’s conclusions seem to run contrary to moves by Congress, which recently passed a 14.5 percent pay raise for junior enlisted troops and a 4.5 percent pay raise for the rest of the military. But Kuzminski said the two parties approach the subject with different goals.

“The QRMC is looking at it in pure economic terms, like, could you get the same force for less dollars?” she said. “Whereas what Congress is looking at has a lot more to do with signaling morality and values.”

The review made eight recommendations to improve the military compensation picture, and Kuzminski said they have a good chance of being acted on even as a new administration under President-elect Donald Trump takes over next week.

“I don’t think any of [the recommendations] are controversial,” she said, since raising military compensation is a rare area of agreement in Congress. “I think that we’ll see quite a bit of bipartisan support.”

Lockheed Certifies F-35 to Use Sustainable Fuels. Will USAF Take Advantage?

Jan. 16, 2025 | By John A. Tirpak

Lockheed Martin has approved Synthetic Aviation Turbine Fuels (SATFs) as safe to fly in the F-35 fighter, a potential boon for the Air Force’s energy and climate goals.

The announcement coincides with Norway demonstrating the first use of SATFs in its F-35s.

After “comprehensive technical and strategic analysis to ensure SATF meets the strict performance and reliability standards required for the F-35’s complex, high-demand missions,” Lockheed decided there was no technical risk, a spokesperson said, as long as SATFs comprise no more than 50 percent of the fuel load mix with standard fuel. The 50 percent limit is dependent on “the type of raw materials and production pathway.”

SATFs derive from both fossil-based sources such as coal and gas as well as renewables or recyclables like agricultural products and waste oil.

“The new fuel sources will improve readiness by reducing reliance on the extended supply chain,” Lockheed said.

With the approval, U.S. F-35s could fly using SATFs during deployments to Norway, when the host country provides fuel for joint exercises.

“The integration of SATF supports the Department of Defense’s objectives for energy substitution and diversification while enhancing energy resilience and operational flexibility,” the company added.

Norway made the first F-35 flights with SATF on Jan. 14; the fuel load included a 60/40 mix of standard jet fuel and what the Norwegian defense ministry described as “biofuels.”

Defense Minister Bjorn Arild Gram said that Norway’s air force accounts for a third of the defense ministry’s carbon emissions. Switching to a more sustainable blend will “reduce emissions and strengthen supply security,” he said in a press release. “The aim is to achieve climate targets while enhancing preparedness.”

Gram also said Norway has a new defense plan that calls for “significantly increased” activity of its armed forces. SATF could help accomplish that while curbing the military’s climate impact. Norway has about 40 of the 52 F-35s it plans to field by the late 2020s.

In the mid-2000s, the U.S. Air Force invested in a synthetic jet fuel capability using the Fischer-Tropsch method and tested the resultant fuels on a C-17 and on a B-52. Then-Air Force Secretary Mike Wynne pursued the technology because of the excessive cost of aviation fuel at the time and concern that the Air Force—the Defense Department’s largest user of fuel—might run short during a national crisis. The method explored converting coal and other materials into aviation-grade fuel.

A B-52 flown in September 2006 ran two engines on a synthetic fuel blend and the other six engines on JP-8. Two months later, the B-52 ran all eight engines on the synthetic fuel blend.

The Air Force was not immediately able to describe its current capability to produce synthetic fuel. As recently as 2021, it partnered with private companies to produce aviation fuels from carbon using the Fischer-Tropsch method. And in its 2022 Climate Action Plan, the service laid out a goal of creating a pilot program to ensure that by 2026, 10 percent of the aviation fuel at two Air Force operational locations is sustainable and costs the same or less than traditional fuel.

With an annual consumption of about two billion gallons of aviation fuel, any reduction in the unit cost per gallon of fuel could be significant for the Air Force budget.

SDA Director Suspended Pending Investigation

Jan. 16, 2025 | By Greg Hadley

Derek M. Tournear, director of the Space Development Agency, has been placed on administrative leave pending the results of an investigation, the Department of the Air Force announced late Jan. 16.

The department provided no other details on the nature of the investigation or a timeline for when it may be completed. Lt. Gen. Philip A. Garrant, head of Space Systems Command, will serve as SDA’s acting director in the interim.

Tournear became SDA’s first permanent director in 2019, shortly after the agency was established under the office of Undersecretary of Defense for Research and Engineering to accelerate the acquisition of commercial tech for space, particularly for low-Earth orbit.

Under Tournear, SDA developed plans for what is now called the Proliferated Warfighter Space Architecture: a massive constellation of hundreds of satellites in low-Earth orbit with new spacecraft going up in two-year cycles to keep refreshing the technology on orbit. The PWSA will consist of “layers”—one for missile warning and tracking, and one for transporting data—with each layer being updated by new “tranches.”

Already, SDA has awarded contracts for more than 450 satellites across three tranches—unheard-of speed in military space, where programs can take a decade or more to launch a few large, bespoke satellites.

Along the way, Tournear has become one of the more recognizable figures in the Pentagon’s space enterprise, providing frequent updates on the agency’s progress and even taking to social media to call out internal Pentagon criticism of his style. In October 2022, SDA officially transitioned into the Space Force, becoming one of three acquisition organizations in the service.

It is unclear if Tournear’s suspension threatens to derail or slow SDA’s ambitious plans. The agency is targeting March or April for its next launch of satellites.

US, Korea, Japan Fly Together as Chinese Delegation Visits Japan

Jan. 16, 2025 | By Greg Hadley

American B-1 bombers flew alongside Japanese and South Korean fighters on Jan. 15 as Japan hosted a visiting Chinese military delegation.

The moves come just days before U.S. President Donald Trump is inaugurated, highlighting a delicate moment in the strategic environment of the Indo-Pacific.

Pacific Air Forces announced the trilateral flight, which included two Japanese Air Self-Defense Force F-2s and two Republic of Korea Air Force F-15Ks each. PACAF did not specify what base the B-1s came from or if they landed in either country.

“This first trilateral flight of 2025 builds upon a history of strong trilateral cooperation, enabling an immediate coordinated response to regional security challenges,” PACAF said in a release. “This increasingly steady and sophisticated trilateral interoperability of our aerial and maritime forces strengthens our collective deterrence and defense posture.”

Two U.S. B-1B Lancers are escorted by two Republic of Korea Air Force F-15Ks Slam Eagles and two Japan Air Self-Defense Force Mitsubishi F-2s in airspace between South Korea and Japan, Jan. 15, 2025. The increasingly steady and sophisticated trilateral interoperability of the three nations’ aerial and maritime forces strengthens their collective deterrence and defense postures. U.S. Air Force photo by Tech. Sgt. Stephanie Serrano

The U.S., Japan, and South Korea held their first ever trilateral air exercise in October 2023 and have since flown together three more times, each time with American bombers escorted by Japanese, American, and South Korean fighters.

Bilateral bomber-fighter flights between the U.S. and either Japan or South Korea have been commonplace over the years, but tensions with China and North Korea have led to closer ties between Japan and South Korea, overcoming a historically strained relationship.

The growing ties between the three countries were highlighted by a trilateral summit between the nations’ political leaders in August 2023, when they agreed to conduct more annual exercises.

Since then, however, all three countries have experienced political turmoil and change. Japanese Prime Minister Fumio Kishida left office in October amid poor approval ratings, U.S. President Joe Biden is set to leave office, and South Korean President Yoon Suk Yeol has been impeached over a declaration of martial law.

Amidst all this change, analysts have noted that China has sought to ease tensions with outreach to U.S. allies like the European Union and Japan. In particular, the Japanese government announced Jan. 14 that it was hosting a delegation from the People’s Liberation Army for the first time in years. The visit began Jan. 13 and will last until Jan. 17, with the Chinese delegation meeting their Japanese counterparts and visiting military units, according to a statement from China’s Defense Ministry.

Officials did not say what military units the Chinese delegation would visit.

The U.S. has dozens of facilities in Japan, including Yokota Air Base, Misawa Air Base, and Kadena Air Base, which also host Japanese units. Kadena in particular is located on the island of Okinawa and is the closest USAF base to Taiwan. F-35 fighters recently arrived at Kadena as part of a rotation of fighters to the base, and the 18th Wing there just concluded an Agile Combat Employment exercise with F-16 fighters.

Trump Picks NRO’s Meink as Next Air Force Secretary

Jan. 16, 2025 | By Chris Gordon

President-elect Donald Trump has picked Dr. Troy E. Meink to become the next Secretary of the Air Force, he announced Jan. 16.

Meink is currently the principal deputy director of the National Reconnaissance Office, a Department of Defense intelligence agency that works closely with the Space Force.

If confirmed, Meink would be the first Air Force Secretary to come to the job from the NRO in decades—Hans Mark served concurrently as Undersecretary of the Air Force and head of the NRO before becoming Air Force Secretary in 1979 and John L. McLucas served as the fourth director of the NRO before becoming Air Force Secretary in 1973.

Since then, other Air Force secretaries have had some background in space—Barbara Barrett and Edward Aldridge were both trained for space flight, Michael Wynne and John J. Welch Jr. both oversaw space divisions within defense industry, and Robert Seamans and Mark were both deputy NASA administrators.

But Meink would be unique given how deep his experience is at the intersection of defense and space. While he served in the Air Force as a KC-135 tanker navigator from 1988-1993, he spent much of his career as a civilian working for the Air Force in various space roles, including as the deputy undersecretary of the Air Force for space. He has been at the NRO for years, having been appointed to his current role under the previous Trump administration.

Before becoming the NRO’s current No. 2 in 2020, Meink was the director of Geospatial Intelligence Systems Acquisition (GEOINT) at the agency and responsible for a $15 billion budget overseeing acquiring satellite systems.

Meink’s selection may be a significant boost for the Space Force—USSF leaders have said their service needs more resources and manpower to keep up with a growing mission set, as they face their first ever budget cut in 2025. Trump is seen as friendly to the Space Force, having championed its creation in his first term, and Meink would be perhaps the most space-knowledgeable senior leader in the Pentagon.

If confirmed, Meink will step on the other side of an ongoing debate between the Space Force and the NRO and other Intelligence Community agencies over roles and responsibilities for intelligence, surveillance, and reconnaissance from space.

Beyond that, however, Meink will face major questions during the confirmation process and early in his tenure about how to handle the Air Force’s Next-Generation Air Dominance program, Collaborative Combat Aircraft drones, and the over-budget and behind-schedule Sentinel intercontinental ballistic missile.

Dr. Troy E. Meink, Deputy Under Secretary of the Air Force for Space, answers questions during a space budget briefing on March 5, 2014, at the Pentagon. U.S. Air Force photo by Scott M. Ash

The Department of the Air Force pick had been a notable hole in Trump’s planned national security team.

Pete Hegseth, a former Fox News host and Army National Guard officer, is Trump’s pick to be the 29th Secretary of Defense. Hegseth had a confirmation hearing in front of the Senate on Jan. 14 and appears likely to be confirmed despite allegations of personal misconduct and intense criticism from Democrats.

“Troy will work with our incredible Secretary of Defense Nominee, Pete Hegseth, to ensure that our Nation’s Air Force is the most effective and deadly force in the World, as we secure PEACE THROUGH STRENGTH,” Trump wrote in a post on his social media network Truth Social.

Meink would round out Trump’s picks for service secretaries. Trump named John Phelan, a businessman donor with an MBA from Harvard, to be Secretary of the Navy and Daniel P. Driscoll, an Army veteran and Yale Law School graduate, to lead the Army. Driscoll has been a senior advisor to fellow Yale Law grad Vice President-elect J.D. Vance.

Stephen Feinberg, financier, is Trump’s pick for Deputy Secretary of Defense, and Elbridge “Bridge” Colby has been named to lead the Pentagon’s policy shop.

News Editor Greg Hadley contributed to this report.

Anduril Picks Ohio Site for ‘Arsenal’ Plant to Build CCAs and More

Jan. 16, 2025 | By John A. Tirpak

Anduril Industries, the Silicon Valley startup that has made splashy moves in the world of defense, has selected a site adjacent to Rickenbacker International Airport, about ten miles south of Columbus, Ohio, as the site of its flagship “Arsenal” factory, where it plans to manufacture advanced, low-cost systems such as its “Fury” Collaborative Combat Aircraft for the Air Force.

The timeline to get the factory up and running is ambitious, as Anduril plans to have the first products rolling out the door by mid-2026, according to Chris Brose, the firm’s chief strategy officer. He said that this timeline is not optional, as Anduril is obligated to begin series production of certain contract items by that point.

In a Jan. 15 press conference, Brose said Anduril will eventually invest “hundreds of millions” of dollars and possibly more than $1 billion at the site, which initially comprises some 700,000 square feet of an existing facility which Anduril will modernize. The entire site can accommodate five million square feet of production space, he added.

Anduril has said the “Arsenal” factory is aimed at producing military items at “hyper scale,” necessary to achieve credible deterrence against China and other potential U.S. adversaries. Its concept for the factory calls for producing large numbers of “non-exquisite” autonomous systems for the U.S. military by workers who do not need intensive training or education in a facility that can be quickly reconfigured for different items. The name is a nod to the “Arsenal of Democracy” moniker coined by president Franklin Roosevelt on the eve of World War II.

The Barracuda-500 cruise missile, one of a variety of advanced products Anduril will likely produce at its new facility near Columbus, Ohio.

“A lot of what we’re doing here is designing autonomous systems and weapons that can be mass-produced, where the broadest workforce possible can build and assemble those systems,” Brose said. “People with commercial automotive experience, for example, can immediately snap in and start contributing to defense production.” He said the company aims at “changing the way defense manufacturing happens at the level of design, at the level of supply chain, at the level of software, and we’re very confident that we’ll be realizing that vision here this year or next in the state of Ohio.”

Among the benefits of the location are its adjacency to the airport—which is an air cargo hub for the area and which is used by the Air National Guard’s 121st Air Refueling Wing—as well as nearby rail lines and highways, other manufacturers setting up in the area, and proximity to Wright-Patterson Air Force Base, some 85 miles to the west in Dayton, Brose said. He also said there is ample room for growth beyond the initial facility at the location.

Ohio Lt. Governor Jon Husted, participating in the press conference, said an announcement will made in the coming days explaining the incentives Ohio offered Anduril to bring the facility to the Columbus area. The plant should bring about 4,000 jobs to the area.

Anduril announced plans for the Arsenal factory last August, but Brose said the hunt for a location was underway for the better part of a year, and the selection was made in the last few weeks. Company officials had previously downplayed the possibility of an Ohio location.

“The site itself could not be better,” Brose said. “We’re talking 5 million square feet of production space at scale; a 700,000 square foot facility that exists now that we will be aggressively working to renovate, and build out the space for the immediate defense programs that we are delivering right now.” Expansion is possible on a further 500 acres at the site, he said.

Within 45 minutes, Anduril will “have access to a talented labor market of upwards of a million people …many of which are already working in the automotive and aerospace industries,” he said. That expertise is “incredibly relevant to our vision of defense production.”

Rickenbacker boasts two 12,000-foot runways and a 75-acre private apron but test activities may be conducted farther afield, near Wright-Patt, which hosts Air Force Materiel Command.

“The initial products that we’re really focused on building at Arsenal … are flying things,” Brose said. The specifics of testing “is a conversation that we’re going to have in the months to come with our partners in Ohio.”

Husted said there is a designated flight test area near Springfield Airport near Wright-Patt. Joby Aviation, which builds electric aircraft, “is building their manufacturing facility in Dayton” and will use that testing area as well. He also noted the expansion of GE Aerospace in Cincinnati.

“And there’s a partnership with the National Advanced Air Mobility Center of Excellence, which is connected to some of the Agility Prime efforts, connected to Wright-Patterson,” he said. “So we have this sort of consortium that exists between Dayton, Springfield and Columbus and … this is another reason it’s such an attractive place,” Husted said.

“We’ve really worked in Ohio at building an economic development strategy around the assets we have in the aerospace and defense sector,” he added. “I’m most familiar with what we’ve done at Wright-Patterson,” around which he said employment “has grown 19,000 employees inside defense, to 38,000 in that whole sector of the workforce” The Air Force is “a huge customer.”

Though it’s only been in the defense business for eight years, Brose said Anduril is “winning programs. We are in a position to deliver. Arsenal 1 is going to be an operational facility incredibly quickly because of the timeline. We have to deliver for the customers and the warfighters, who are counting on the systems that Anduril is producing right now.”

In addition to various unmanned aerial systems like the Roadrunner vertical takeoff and landing aircraft and counter-UAS gear, Anduril’s products include Lattice software and command-and-control systems, solid rocket motors, and it has also announced plans for low-cost cruise missiles.

Brose said there are no plans to produce “energetics” at the Ohio site, and work on SRMs will continue at its Alabama facility. He also there are currently no plans to move any existing manufacturing work to Ohio, as the plan is to add production capacity, not consolidate it.

Success With CCA Points Way to Greater Innovation, Board Says

Jan. 15, 2025 | By Greg Hadley and Tobias Naegele

The Defense Innovation Board adopted a series of new recommendations and praised the Air Force for its big bets on emerging technology in recent years that seem primed to help new entrants to the defense market bridge the so-called valley of death between initial investment and actual production contracts.

The Board, including former New York City Mayor Mike Bloomberg, former assistant secretary of the Air Force Will Roper, and former chairman of the House Armed Services Committee Mac Thornberry, adopted eight recommendations for how the Pentagon can improve innovation by focusing investments, streamlining management of innovation offices, and changing the culture.

Citing the Air Force Research Laboratory’s approach, the report said DOD should more frequently place “routine large bets using programs resembling Air Force Research Lab (AFRL) Vanguard initiatives.” The Board wants DOD to to commit “to procuring and fielding five to 10 game-changing capabilities inside 2027.”

AFRL launched its Vanguard concept in 2020, selecting three of its highest-value research projects for intense, dedicated funding—some $157 million combined in the first year alone. Among them:

Skyborg, an artificial intelligence-enabled system to control unmanned aircraft in a future manned/unmanned aircraft teaming concept

Navigation Technology Satellite-3, an experimental satellite meant to complement GPS and increase the resilience of satellite navigation.

Golden Horde, munitions that can set up their own network, change their targets in flight, and synchronize their strikes.

Skyborg has since transitioned to a program of record, becoming the major Collaborative Combat Aircraft program to which Air Force leaders are pinning much of their hopes for future combat mass.

According to Air Force budget documents, Golden Horde also transitioned from a research effort to an acquisition one under the service’s Weapons Program Executive Officer.

Other programs have since been added to the Vanguard initiative, with funding exceeding $100 million every year and reaching as high as high as $255 million in fiscal 2024.

“As private investments get larger, they necessarily get fewer. With so much capital on the line, investors go all-in to ensure companies succeed. While having the equivalent of Seed and Series A investors that build portfolios of small investments is critical and needed in DOD, having Series D-like investors that place big bets for crossing the valley to the [program of record] is needed to finish the process,” the board wrote in its report.

Small Business Research

The DIB also said the Air Force offers a better model for managing Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.

The SBIR/STTR programs award small contracts to smaller businesses to research, develop, and hopefully commercialize promising technologies. Companies can receive anywhere from a few hundred thousand dollars for a “Phase 1” contract to a few million for a “Phase 2” contract, while “Phase 3” deals are bigger and meant to commercialize the tech. But many companies get stuck in Phase 1 and 2, coming back year after year for more awards without ever progressing to Phase 3.

To overcome that, the board recommends establishing “Oasis Funds,” essentially a pool from which service acquisition executives can pull larger sums to help companies make the transition from prototyping to production. These funds would be based on “the AFWERX Strategic Funding Increase (STRATFI) and Tactical Funding Increase (TACFI) programs,” the board noted.

AFWERX, the Air Force’s innovation arm, developed those two programs to attack the same problems the board noted. Both rely on a combination of SBIR/STTR, government, and private capital funds, with tactical funding increases going up to $2 million and strategic funding increases topping out at $15 million.

In 2024, the programs combined to award funding increases to 158 companies, using $583 million in SBIR funds, $702 million in matching government funds, and $619 million in matching private funds: $1.9 billion total.

By pairing public and private funding sources, the board wrote, AFWERX entices program managers to invest their own dollars while also providing “a better measure of product-market fit” by seeing what the commercial market will back.

Yet the board also found fault with the Air Force for not giving AFWERX even more latitude to invest in nontraditional companies.

“Formalizing AFWERX as the investment acquisition authority provided top cover to push boundaries. But AFWERX lacked sufficient staffing, equipping, and administration from the Air Force to sustainably scale it,” the board wrote. “This paradigm still exists today.”

Indeed, while AFWERX and AFRL are two of several pockets within DOD trying to invest in new tech and innovation, coordination and scale are persistent issues across the Pentagon, the board wrote.

“Methods for both investing and transitioning R&D into programs of record were demonstrated. … However, these methods were never formalized, shared, and integrated into a repeatable, transparent process capable of transitioning new DOD R&D entrants to recurring revenue at scale,” the board wrote.

Organizationally and culturally, the report states, the Pentagon is still not set up to consistently scale new technology or tap into new innovation.

Experts recommended the Defense Innovation Unit, a relatively new department-wide organization, be expanded to serve as the guide for small or nontraditional defense companies across all the various innovation arms and organizations set up across the Pentagon, such as the Air Force Research Library and AFWERX. They also called for the DOD to cut back on “burdensome, confusing, or lengthy contracting” and speed up the security clearance process for innovative companies.

New Pentagon Report: Troop Pay Is Competitive, but Allowance Formulas Need Updates

Jan. 15, 2025 | By David Roza

Service members are for the most part paid more than their civilian counterparts, but there are still ways the Pentagon can better compensate troops and their families, according to a new Department of Defense report—including changes to how it calculates allowances for housing and cost of living.

The 14th Quadrennial Review of Military Compensation (QRMC) is a sweeping look at the military compensation system, including basic pay, housing allowance, cost of living allowance, child care incentives, bonuses, and other benefits.

Those benefits have come under scrutiny in recent years, as troops reported unaffordable housing near their station assignments, food insecurity, and difficulty for spouses trying to find work. Federal lawmakers flagged several of those challenges in a Quality of Life report released last April. Those concerns “lent a sense of urgency” to work on this QRMC, which started back in 2023, according to the report.

“We know through long-standing research and lived experience that when the department prioritizes the basic needs of its service members and families to include fundamental quality of life factors, our members are better able to focus on their mission to defend the nation,” a senior defense official told reporters Jan. 15. “This requires a competitive compensation package to incentivize both the next generation to serve, as well as recognizing and retaining military skill sets that we have today.”

Overall, the report made eight recommendations to improve the system, grouped under three findings:

A. Military compensation is strongly competitive with the civilian labor market, but it needs to remain that way.

Keep military compensation above that of most civilian counterparts

Better inform troops about their compensation and benefits by improving communication

Make military service more appealing to recruits with highly-sought after skills and experiences

B. Reduce pay volatility by improving data collection and processing

Update Basic Allowance for Housing methodology

Improve methodology for the cost of living allowance

Regularly review deployment entitlements

C. Target non-cash compensation to better retain service members and their families

Expand retirement savings options, child care support, and spouse employment initiatives

Institute a regular quality of life review

Pay Raise

The first of the QRMC’s three core findings is that the overall military compensation package is “strongly competitive” with the civilian labor market. On average, enlisted troops make more money than 82 percent of their civilian counterparts with similar education and experience, while officers make more than 75 percent, the report found.

But competition with the civilian market remains fierce, and recent recruiting challenges showed officials that the military has to keep its troops in the 75th to 80th percentile for enlisted troops and around the 75th percentile for officers. Maintaining that edge will require keeping a close eye on civilian pay, the report said.

The edge should grow this year as the 2025 National Defense Authorization Act will raise basic pay 14.5 percent for junior enlisted troops through the E-4 paygrade, in addition to a 4.5 percent pay raise for the rest of the military. The raise means enlisted troops will make more money than 87 percent of their equivalent civilian counterparts, while junior enlisted troops in particular will make more than 95 percent, the defense official said.

But the department needs to sweeten the pot for “lateral entrants,” the term for recruits who join up with prior skills and qualifications such as in medicine and cybersecurity. Today, lateral entrants can come in at a higher rank, but not with more years of service, which limits their pay compared to troops at the same level who rose up through the ranks. The 14th QRMC called for expanding “constructive credits” to include both higher rank and years of service.

The military pay and compensation structure is complex, particularly when service members have to move or when there are changes in allowances. The report recommended that the military improve communication with troops so that they better understand their pay and benefits.

“While the QRMC found overall strength in the total compensation package, this does not seem to translate to service member satisfaction with military pay,” said the report, which called for clarifying key concepts and comparing pay to civilian options in the communications campaign.

Reduce Volatility

The other challenge with military pay and compensation, the report found, is how quickly it can respond to changing circumstances, and whether the data for informing those changes is adequate.

A key example is the basic allowance for housing (BAH). Overall, the review found that BAH for service members with dependents is between 17 and 60 percent higher than average civilian housing expenditures. But BAH varies based on military housing area (MHA), and accurately setting the BAH for each pay grade in each MHA has been hit or miss.

BAH rates are far more generous in some areas and for some pay grades than others, which can lead to confusion and frustration when troops change stations and find themselves with less spending power. Nationwide housing trends can also lead to discrepancies, such as when three-bedroom townhouses are more expensive on average than three-bedroom single-family homes.

To fix the issue, the report recommended replacing BAH calculations with a better model that will lead to more reliable, accurate, and stable BAH rates over time. It also called for ditching the current housing profile system—which breaks up housing into apartments, townhouses, and single-family homes with a set of number of bedrooms each—in favor of one that just focuses on the number of bedrooms, which will better keep pace with housing trends.

“BAH profiles based on ‘number of bedrooms’ adds flexibility to more accurately estimate housing costs in remote or challenging markets with unique housing distributions,” the report said.

Former Chief Master Sergeant of the Air Force JoAnne S. Bass advocated for revamping how BAH is calculated back in 2022.

Similar discrepancies crop up for the cost of living allowance (COLA), which helps offset non-housing expenses in pricey areas. COLA for overseas locations can fluctuate frequently, and even COLAs in the U.S. are sometimes thrown off by inaccurate triennial Living Pattern Surveys. The report called for conducting the Living Pattern Survey every year and including more data to make them more accurate.

Service members receive combat zone tax exclusion and imminent danger pay for serving in regions that are hostile or dangerous, but these benefits can stay in place for decades. That means troops in some zones that are no longer hostile receive deployment entitlements while troops in more hostile areas do not. Entitlements need to be regularly reviewed every five years to ensure consistency, the report said.

Retain the Family

The 14th QRMC was the first to focus on “the realities of dual-income military households,” the report said. Most military spouses want to work, the report found, but frequent moves and changes in child care access reduce their ability to do so, which can in turn affect retention decisions.

Non-cash compensation could help, the report said. For example, Congress could pass laws that would remove vesting requirements from pension plans so that military spouses are less affected by the loss of income induced by frequent moves. Other non-cash compensation options include continued support for child care and employment initiatives.

Some of those non-cash initiatives can be grouped under what the report called “quality of life,” factors such as housing, dining, base facilities, health care access, spouse employment, child care, and recreation. The report called for the Defense Department to conduct a periodic quality of life review to inform decisions in those areas, similar to the report Congress released last year.

The senior defense official told reporters that there has been some discussion about cycling between QRMCs and quality of life reviews so that the two inform each other.

“Is there value in investing that dollar in additional, you know, cash compensation changes, RMC changes?” the official said. “Or will we get a better return on investment for both recruiting and retention purposes if we put that next dollar into, say, quality of service programs as was mentioned before, barracks, dining, child care, military spouse employment efforts, things like that.”