By John Shiffman and Andrea Shalal-Esa | Reuters – 20 hours ago
WASHINGTON (Reuters) - The Pentagon repeatedly waived laws banning Chinese-built components on U.S. weapons in order to keep the $392 billion Lockheed Martin Corp F-35 fighter program on track in 2012 and 2013, even as U.S. officials were voicing concern about China's espionage and military buildup.
According to Pentagon documents reviewed by Reuters, chief U.S. arms buyer Frank Kendall allowed two F-35 suppliers, Northrop Grumman Corp and Honeywell International Inc, to use Chinese magnets for the new warplane's radar system, landing gears and other hardware. Without the waivers, both companies could have faced sanctions for violating federal law and the F-35 program could have faced further delays.
"It was a pretty big deal and an unusual situation because there's a prohibition on doing defense work in China, even if it's inadvertent," said Frank Kenlon, who recently retired as a senior Pentagon procurement official and now teaches at American University. "I'd never seen this happen before."
The Government Accountability Office, the investigative arm of Congress, is examining three such cases involving the F-35, the U.S. military's next generation fighter, the documents show.
The GAO report, due March 1, was ordered by U.S. lawmakers, who say they are concerned that Americans firms are being shut out of the specialty metals market, and that a U.S. weapon system may become dependent on parts made by a potential future adversary.
The waivers apply to inexpensive parts, including $2 magnets, installed on 115 F-35 test, training and production aircraft, the last of which are due to be delivered in May 2014. Lawmakers noted that several U.S. companies make similar magnets.
Kendall said the waivers were needed to keep production, testing and training of the Pentagon's newest warplane on track; avert millions of dollars in retrofit costs; and prevent delays in the Marine Corps' plan to start using the jets in combat from mid-2015, according to the documents. In one case, it would cost $10.8 million and take about 25,000 man-hours to remove the Chinese-made magnets and replace them with American ones, the documents indicate.
Lockheed is developing the F-35, the Pentagon's costliest arms program, for the United States and eight countries that helped fund its development: Britain, Canada, Australia, Italy, Norway, Turkey, Denmark and the Netherlands. Israel and Japan have also placed orders for the jet.
The program is already years behind schedule and 70 percent over initial cost estimates. At the time Kendall was granting the waivers, officials were acutely worried that further delays and cost increases would erode the foreign orders needed to drive down the future cost of each warplane.
In the documents, Kendall underscored the importance of the F-35 program to ensure continued U.S. military superiority and counter potential emerging threats from nations developing their own stealth fighter jets, including Russia and China.
He said additional delays would force the United States and its allies to keep its legacy fighters flying longer, which would result in higher maintenance costs. It would also leave them with older jets, which Kendall said "cannot match the offensive and defensive capabilities provided by F-35."
The Pentagon first disclosed problems with non-U.S. magnets in a little-noticed written statement to Congress in the spring of 2013. But the statement did not name companies involved and did not disclose that some of the parts came from China.
Officials at Northrop, Honeywell and Lockheed declined to comment on the issue, referring queries to the Pentagon.
Joe DellaVedova, spokesman for the F-35 Joint Program Office (JPO) at the Pentagon, said the office was committed to ensuring that federal defense acquisition laws were strictly followed.
"There was never any risk of technology transfer or other security breach associated with these manufacturing compliance issues," he said. "The JPO is working with industry to put in place long-term solutions to avoid the need for future waivers."
In his statement to Congress, Kendall said he took the matter "extremely seriously" and said Lockheed was told to take aggressive steps to identify any further cases, and correct its compliance process.
Bill Greenwalt, a former senior defense official and now an analyst with the American Enterprise Institute think tank, said the risk to national security appeared low since the magnets in question had no programmable hardware.
However, he added: "This is an area that will need considerable due diligence in the future to ensure that components for more high-risk applications are safe from potential tampering and foreign mischief."
SPECIALTY METALS
Since 1973, U.S. laws have banned the procurement of specialty metals produced outside the United States for use on U.S. weapons. A separate 2006 law also bans the purchase of end-use items and components that include such specialty metals.
The documents reviewed by Reuters show that Northrop first discovered the use of non-compliant Japanese magnets on the Active Electronically Scanned Array (AESA) radar it builds for the F-35 in August 2012, alerting the prime contractor, Lockheed, which then told the Pentagon.
A subsequent investigation of all parts on the F-35 turned up two more cases in which non-U.S. specialty metals were used on the F-35's radar, and on target assemblies built by Honeywell that are used for positioning doors and landing gear.
Northrop's radar was also found to contain $2 magnets made by Chengdu Magnetic Material Science & Technology Co, in China's Sichuan region, according to the documents.
The magnets used on the Honeywell target assemblies were acquired through Illinois-based Dexter Magnetic Technologies Inc.
Dexter and Chengdu Magnetic did not immediately respond to requests for comment.
KNOWING AND WILLFUL?
In June, the House Armed Services Committee asked the GAO to determine whether the companies involved "knowingly and willfully" supplied non-compliant magnets, and how the Pentagon investigated that question. The committee also asked GAO for recommendations on potential changes, such as fines or penalties for non-compliance to deter future problems, as well as suggestions for beefing up Pentagon supply chain management procedures.
In a document approving use of Chinese magnets on the batch of 32 F-35 fighter planes now being built, Kendall said neither Lockheed nor Northrop knowingly allowed the parts to be used.
In his waiver, Kendall wrote that Northrop's initial mistake, involving magnets built in Japan, was an "administrative oversight" and noted the firm quickly reported the matter when it was discovered in August 2012. It led to the comprehensive review that found two additional issues involving Chinese-built magnets.
It is not clear from the waiver documents whether Kendall determined that Honeywell's use of Chinese-built magnets involved a similar mistake.
(Editing by Michael Williams, Tiffany Wu and Grant McCool)
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The Pentagon repeatedly waived laws banning Chinese-built components on U.S. weapons in order to keep the $392 billion Lockheed Martin Corp F-35 fighter program on track in 2012 and 2013, even as U.S. officials were voicing concern about China’s espionage and military buildup.
According to Pentagon documents reviewed by Reuters, chief U.S. arms buyer Frank Kendall allowed two F-35 suppliers, Northrop Grumman Corp and Honeywell International Inc, to use Chinese magnets for the new warplane’s radar system, landing gears and other hardware. Without the waivers, both companies could have faced sanctions for violating federal law and the F-35 program could have faced further delays.
“It was a pretty big deal and an unusual situation because there’s a prohibition on doing defense work in China, even if it’s inadvertent,” said Frank Kenlon, who recently retired as a senior Pentagon procurement official and now teaches at American University. “I’d never seen this happen before.”
The Government Accountability Office, the investigative arm of Congress, is examining three such cases involving the F-35, the U.S. military’s next generation fighter, the documents show.
The GAO report, due March 1, was ordered by U.S. lawmakers, who say they are concerned that Americans firms are being shut out of the specialty metals market, and that a U.S. weapon system may become dependent on parts made by a potential future adversary.
The waivers apply to inexpensive parts, including $2 magnets, installed on 115 F-35 test, training and production aircraft, the last of which are due to be delivered in May 2014. Lawmakers noted that several U.S. companies make similar magnets.
U.S. firms being shut out of specialty metals markets aside – two companies got waivers to procure parts for weapons systems from outside the US??????
Please excuse my !@#$%, but WTF!
And not just any foreign country, either. We’re talking about China, the people who have twice as many young men as young women right now (can you say conveniently lopsided and ready for some kind of action) and no problems ripping off any intellectual property that happens to come their way. Doesn’t matter if it’s $2 magnets, if the Chinese figure out what Lockheed is doing with the darn things, they’ll try to copy it.
Despite the truly unusual circumstance of multiple countries investing in the development of strike weapons, as opposed to the US allowing them to be sold when the next generation comes along, this is just weird. And they’re paying trans-Pacific shipping costs for $2 magnets? Green energy hasn’t quite made it to cargo ships at this point, and we’re making these products here. Why go overseas?
If this exception is made, where does it stop. And how can the purchase be inadverdent on the part of the contractors and their vendors when there are waivers involved?
Kendall said the waivers were needed to keep production, testing and training of the Pentagon’s newest warplane on track; avert millions of dollars in retrofit costs; and prevent delays in the Marine Corps’ plan to start using the jets in combat from mid-2015, according to the documents. In one case, it would cost $10.8 million and take about 25,000 man-hours to remove the Chinese-made magnets and replace them with American ones, the documents indicate.
So Lockheed want to finish on time and have no cost-overruns? Good luck now that the cat’s out of the bag.
Of course, we fighter contract people are familiar with Lockheed’s track record on such matters. It’s pretty abysmal. And yet they keep winning contracts.
The program is already years behind schedule and 70 percent over initial cost estimates. At the time Kendall was granting the waivers, officials were acutely worried that further delays and cost increases would erode the foreign orders needed to drive down the future cost of each warplane.
In the documents, Kendall underscored the importance of the F-35 program to ensure continued U.S. military superiority and counter potential emerging threats from nations developing their own stealth fighter jets, including Russia and China.
So, instead, they just order the parts from China.
Great.
So much for this:
Since 1973, U.S. laws have banned the procurement of specialty metals produced outside the United States for use on U.S. weapons. A separate 2006 law also bans the purchase of end-use items and components that include such specialty metals.
Don’t like an American law. Yeah, we’ll just grant a waiver and go around it. Who’s side are these people on? The Pentagon is waiving laws to help out a contractor?
Nothing to see here…move along.
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By Bill Gertz
Published March 13, 2014
Washington Free Beacon
A cyber espionage operation by China seven years ago produced sensitive technology and aircraft secrets that were incorporated into the latest version of China's new J-20 stealth fighter jet, according to U.S. officials and private defense analysts.
The Chinese cyber spying against the Lockheed Martin F-35 Lightning II took place in 2007 under what U.S. intelligence agencies codenamed Operation Byzantine Hades, a large-scale, multi-year cyber program that targeted governments and industry.
Defense officials said the stolen data was obtained by a Chinese military unit called a Technical Reconnaissance Bureau in the Chengdu province. The data was then passed to the state-run Aviation Industry Corp. of China (AVIC).
An AVIC subsidiary, the Chengdu Aircraft Industry Group, used the stolen data in building the J-20, said defense and intelligence officials familiar with reports of the illicit tech transfer.
Pentagon technology security officials in 2011 opposed a joint venture between General Electric and AVIC over concerns that U.S. fighter jet technology would be diverted to AVIC's military aircraft programs. The Obama administration ignored the concerns and instead has since promoted the systematic loosening of technology controls on transfers to China.
The Office of Director of National Intelligence is known to have details of AVIC's past involvement in illicit arms transfers and its role in obtaining sensitive F-35 technology through cyber espionage, the officials said.
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WASHINGTON (Reuters) - After discovering China-made components in the F-35 fighter jet, a Pentagon investigation has uncovered Chinese materials in other major U.S. weaponry, including Boeing Co's B-1B bomber and certain Lockheed Martin Corp F-16 fighters, the U.S. Defense Department said.
Titanium mined in China may also have been used to build part of a new Standard Missile-3 IIA being developed jointly by Raytheon Co and Japan, said a senior U.S. defense official, who said the incidents raised fresh concerns about lax controls by U.S. contractors.
U.S. law bans weapons makers from using raw materials from China and a number of other countries, amid concerns that reliance on foreign suppliers could leave the U.S. military vulnerable in some future conflict.
The Pentagon investigated the incidents in 2012 and 2013, and granted the waivers after concluding the non-compliant materials posed no risk, Defense Department spokeswoman Maureen Schumann told Reuters.
Frank Kendall, the Pentagon's chief arms buyer, issued five such waivers after a change in U.S. law in 2009 expanded the restrictions on specialty metals to include high-performance magnets, Schumann said. The change affected a radar system built by Northrop Grumman Corp for the F-35, which uses a number of such magnets.
Reuters reported in January that the Pentagon permitted Lockheed to use Chinese magnets to keep the $392 billion F-35 program on track, even as U.S. officials were voicing concern about China's espionage and military buildup.
The other, previously undisclosed waivers covered the B-1 bomber, F-16 fighter jets for Egypt equipped with a specific radar system, and the SM-3 IIA missile, Schumann said in response to a query from Reuters.
The U.S. Government Accountability Office is expected to brief Congress in April on its comprehensive audit of the issue of Chinese specialty metals on U.S. weapons systems.
TWO-DOLLAR MAGNETS
China is the largest supplier of specialty metals and materials needed to build magnets that work even at very high temperatures, although congressional aides say progress has been made on developing alternate sources in the United States.
Kendall initiated a broader Pentagon review after the initial F-35 issue was reported in late 2012, but ultimately granted the waivers because there was no risk involved with the parts, said the senior defense official.
In some cases, it would have been expensive to take apart complex equipment to swap out magnets potentially made with Chinese rare earths; in others, the parts will be swapped out during future routine maintenance.
"You don't break a multimillion dollar radar to replace twenty dollars' worth of magnets. There was no technical risk," said the official, who added that the issue involved only raw materials. No weapons systems specifications were sent to China, the official said.
The F-35 waivers included a range of equipment, including $2 magnets used in radars on 115 F-35 jets. The F-16 and B-1B bomber waivers also involved magnets made from Chinese raw stock, the official said.
A separate issue involving thermal sensors built for the F-35 by a Chinese subsidiary of Honeywell International Inc did not require a formal waiver because it involved a unit of a U.S. company, the official said. Honeywell now builds that part in Michigan.
Honeywell acknowledged in January that the U.S. Justice Department was investigating import and export procedures at the company after the incident.
'JUST SLOPPINESS'
Defense officials say the incidents underscore the need for greater vigilance by arms makers about their supply chain to ensure they comply with U.S. laws.
"It's really just sloppiness, frankly, when this happens," said the defense official. "It's not enough to say, 'I'm pretty sure it didn't come from China.' That doesn't work for us. We're looking for documents."
Officials at Lockheed, Northrop, Boeing and Raytheon referred all questions to the U.S. government. Without the waivers, the companies could have faced stiff penalties for violating U.S. laws; instead the Pentagon is likely to seek compensation from the companies.
The defense official said the waivers were granted with the expectation that the companies would tighten up their buying procedures to reflect changes in procurement rules.
"It's not a 'get out of jail' free card. This is something we should be good at. We shouldn't be caught short on these," said the official. "Hundreds of regulations change yearly and there's a whole group of folks whose job it is to make sure that those (changes) are properly implemented in contracts."
Kendall initiated a review of all systems on Lockheed aircraft programs after Northrop Grumman, which builds the active electronically scanned array (AESA) radar for the F-35, found it may have used non-compliant Japanese magnets.
The Pentagon's Contracts Management Agency later widened its review to include high-performance electronics across the industry. "We have looked very hard and systematically to flag these (issues)," said the official.
One industry official declined to estimate the costs involved, but said the department was clearly taking a more aggressive approach on supply chain problems.
The Pentagon had shared the cost of such incidents in the past, but U.S. officials were now insisting that companies paid for the cost of retrofits with their own funds.
The case of the SM-3 missile that Raytheon is developing jointly with Japan involved titanium produced in China, and the incident was self-reported.
But the missiles were produced for testing and the Chinese materials would not be used in any subsequent missiles, the defense official said.
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Concept art for the Shenyang J-31 fighter. (Internet photo)
After the Shenyang J-31 completed its first test flight on Mar. 3, the state-run Global Times announced that China has finally become the second nation in the world after the United States to operate two types of stealth fighter simultaneously.
From the photo revealed on the Chinese military website, the J-31 has a very similar weapons bay to the American Lockheed Martin F-35, capable of carrying two medium-range air-to-air missiles and two 1,000-kilogram precision attack munitions. Global Times said that this gives the J-31 the strength to challenge the F-35 in the overseas market in the future. It also predicted that the second prototype J-31 may be revealed to the public very soon.
The Hong Kong-based Sing Tao Daily reported that various countries including Japan, South Korea, Singapore and Australia are looking for F-35s to replace their fourth-generation fighters to confront this potential Chinese threat. The F-35 is not ready to be commissioned, however, due to a malfunction demonstrated during its test flights. Another reason that the F-35 has lost support among allies of the United States in East Asia is because of its expensive price tag, according to the Sydney Morning Herald.
With both the Chengdu J-20 and the J-31 — though neither has (officially) entered service yet — China will soon prove itself to be the only nation in the world to challenge US air supremacy in the region, the Global Times report said, gloating that since air power plays an extremely important role under US military doctrine, American soldiers and sailors will no longer have the confidence to defeat China once the latter has the capability to defeat the United States in a regional air war.
The J-31 could potentially be deployed to attack US carrier strike groups, as well as posing a threat to the F-35 in terms of arms sales. If the J-31 eventually turns out to be as advanced as the F-35 with a cheaper price tag, most developing nations will choose the Chinese fighter instead of its American counterpart, a situation that would fundamentally change the global fighter market, the paper said.
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Obama Administration waived laws to keep F-35 on track with China-made parts
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