White Paper

w w w. m r c y. c o m WHITE PAPER "Donald Trump has followed up on campaign promises…. Trump has emerged, somewhat incongruously, as both a defense hawk and a budget hawk, calling for vast increases in the military budget while criticizing waste, fraud, and abuse… " The Hill piece goes on to say…"Trump's increases….could turn out to be very real. And he'll have some powerful allies on his side come April when his first budget request is expected to be released. "Sen. John McCain (R-Ariz), chairman of the Senate Armed Services Committee, has put forth his own Trump-esque blueprint for a buildup. The paper, released in January, calls for $640Bil- lion in defense spending in fiscal year 2018…." Finally in that same piece, The Hill notes that nothing is guaranteed… "Republicans- who have, in the past, favored greater defense spending may bristle at the prospect of a buildup the likes of which has not been seen since Ronald Reagan." What is certain is that the assumptions, projections and expectations of recent years are mostly being questioned and in some cases dismissed altogether. Progress is being made Thesis: Defense acquisition reforms of the last few years have resulted in some real progress and cost savings. However, the underlying issues around how we develop, procure and deploy technology within the DoD have yet to be adequately addressed. In our August, 2016 Next Generation Business Model whitepaper, we talk in detail about defense procurement reform. These reforms are, among other things, driving the need for the open systems architectures and pre-integrated subsystems demanded by the DoD in support of multiple platforms, programs and missions. The upshot is that there has been material progress in this area, although much work remains. On October 24, 2016 the DoD issued its annual report on "Performance of the Defense Acquisition System." The report is over 200 pages long and far too detailed to summarize here, but some key points are worth noting: Executive Summary In a white paper published August 2016 we took a comprehensive look at how a Next Generation Business Model can be purpose-built to meet the challenges we and our allies face. Challenges requiring technologically robust defenses that are developed and deployed rapidly, and cost-effectively, to meet an ever evolving threat environ- ment. In that paper (Meeting Today's Defense Challenges: Evolving Our Next Generation Business Model) we discuss emerging threats ranging from the Islamic State (ISIS), China, an unpredictable relationship with Russia, the on-going North Korean threat, Iran, and instability in the Middle East and Northern Africa. We then speak in some detail about the changing US defense procurement landscape as it relates to the Department of Defense and how a Next Generation Business Model approach can and indeed already is helping in that regard. That paper remains an excellent reference piece. You can view and/download a pdf of that paper by visiting www.mrcy.com/nextgen. However, since the publication of that paper, much has changed. • Geopolitical instability and uncer- tainty remain and in some instances have even increased; • Long-standing institutions such as NATO, the European Union (EU), World Trade Organization, the UN, and others are struggling to deal with new challenges and in some circles their role in the world is being questioned; • New political leadership in the United States brings new priori- ties and possible shifts in global politics; • The new US President and Cabinet mean potentially different priorities and policies within the DoD. A changing world order Thesis: For all players in the defense industrial base to succeed they need to have a clear eyed view of world events, geopolitical trends and domestic challenges. There is no way to say for sure how geopolitical events, government policymaking initiatives, and the overall complexion of the DoD will play out. However, we can say for sure that the landscape is shifting. As stated in a thoughtful piece in The Hill, a non-partisan inside the beltway publication reaching thousands of influencers and policymakers: 2

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