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Kalyani Group Expands Defense Activities, into ARtillery, Systems Modernization and Upgrading

February 7, 2014 by · Comment
Filed under: Elbit Systems, India, Israel, Syndicated Industry News 

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U.K. Awards Contract to Raytheon to Replenish Libyan Action Ordnance

The recent NATO led air campaign against Muammaf Gaddafi’s Libya was very successful. Using their advanced aircraft such as Eurofighter Typhoons, Dassault Rafales and others the European nations were able to support ground action by the rebels and support the removal of the North African dictator.

Of course this required the expenditure of quite a bit of air delivered ordnance and now the users are looking at purchasing new equipment to replenish their stocks. One of the contracts awarded to do this was to Raytheon (RTN) by the U.K. Ministry of Defence. This almost $100 million contract is for Paveway IV GPS guided bomb kits.

The Paveway adds a guidance section and fins to a normal bomb usually of around 2,000 lbs. The original Paveway used laser guidance homing in on a reflection of a beam but later ones like the IV utilize GPS guidance where the bomb flies to a coordinate utilizing satellite navigation.

Much of the kit will be made by British companies and Raytheon expects to fulfill the bulk of the order in 7 months.

The U.S. used prodigious amounts of small arms ammunition, 30mm cannon rounds and missiles like the Hellfire in Iraq and Afghanistan. This required substantial contract orders for these which allowed companies like Alliant Techsystems (ATK), who make ammunition and pyrotechnics, a good business. Unfortunately for the industry now that fighting is ending there will be some final orders to replenish stocks as Britain is doing and then there will be much less annual production requirement to support training and the expected minimal use in reduced operations.

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U.S. Army Explosives Production Contract Protested by Alliant Techsystems

Since the Nineties and the downsizing of the U.S. defense establishment due to the end of the Cold War the Department of Defense has leased its ammo production facilities to a variety of defense companies. Then they have awarded contracts for the delivery of small arms, artillery and other ammunition. With the fighting since 9/11 in Iraq and Afghanistan there has been substantial investment in these types of products as the U.S. military has consumed large amounts of small arm ammo and those for supporting weapons such as the 30mm cannon on the AH-64 Apache attack helicopter.

Alliant Techsystems (ATK) has been one of the major suppliers of ammunition and pyrotechnics for the U.S. military over the last decade. The company is a leading manufacturer of small arms rounds as well as larger artillery rounds, missiles and rocket engines. They have been able to operate two of the major production plants owned by the Government for several years. These are the ones in Radford, VA and Independence, MO.

Now the Army has awarded the contract to run the Radford plant to BAE Systems (BAE:LSE). It is estimated the contract will have a value of over $800 million during its ten year duration. Alliant has filed a protest with the Government over the award. Normally the Government Accountability Office (GAO) will resolve the protest within 100 days. The contract does not start until September so Alliant will continue running the plant until then pending the review of the protest.

If the GAO finds that there were irregularities in the award to BAE they may order a new competition, ask the Army to review how their source selection was conducted or even give the contract to Alliant. Most protests are denied and Alliant will have to hope that the Army did not carry out their source selection properly in order to get a ruling in their favor.

As the U.S. defense budget begins to decline and troops return from Iraq and Afghanistan demands for certain products like ammo and explosives will also be reduced. This means that locking in contracts now at the beginning of this process is very important. Alliant relies on this work for a large portion of their revenue and earnings. Losing the contracts will have an impact on their long term prospects and force them to try to expand their other product lines or look for new markets.

Photo from Yarden Sach’s flickr photostream.

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