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Despite End of C-17 Production Boeing Still Generating Revenue

The C-17 has been the standard strategic transport for the U.S. Air Force for the last two days. Flying alongside the much smaller C-5 fleet it has flown thousands of missions carrying cargo and passengers in support of Iraq and Afghanistan. Congress and the Air Force decided to end production for the Air Force a few years ago although there are still some open Foreign Military Sales (FMS) cases and hopefully a few more remaining. Even so the C-17 will remain in U.S. service for several more years.

Despite the lack of production orders Boeing (BA) is still able to generate revenue from the platform through maintenance, retrofit and service contracts with the American defense department. They were just awarded a ten year contract for software, hardware and weapon system upgrades worth almost $900 million.

In most cases these days the military rarely buys full data rights to a weapon system due to the prohibitive costs involved. This means that many times the OEM receives the bulk of the support and sustainment contracts. In the end these can easily dwarf the value of the production contract.

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Congress, Defense Budget and Contractors — Seeking Alpha

Here is an exclusive article I wrote for Seeking Alpha on Congressional changes to the defense budget and how they will aid contractors.

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More American Clothing for the U.S. Army from American Apparel

The U.S. Department of Defense desires to buy things as efficiently and effectively as possible. At the same time it operates under rules by Congress to favor certain business and types of companies. One of these rules is to buy their uniforms and clothing from American companies. This helps that industry as well as maintains quality products for the military. The negative is that the prices may not be the best that can be received without foriegn competition.

The U.S. Army placed an order with American Apparel (APP) to buy uniform coats. This contract is worth over $55 million if all options are exercised. The work will be done at various American Apparel facilities in the South and Northeast.

Certainly the U.S. taxpayer can expect that parts of the defense budget will be used to help and support home based industries and any cost differential which normally is slight is a small price to pay for that.

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Colleges and Universities Reap an Earmark Bonanza, Thanks to Congress

May 20, 2010 by · Comment
Filed under: BNET, Syndicated Industry News 

Congress has long done earmarks where money is added to the budget for a specific company or task. Universities often receive these as well. A proposed earmark reform to ban for-profit entities…

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Colleges and Universities Reap an Earmark Bonanza, Thanks to Congress

May 20, 2010 by · Comment
Filed under: BNET, Syndicated Industry News 

Congress has long done earmarks where money is added to the budget for a specific company or task. Universities often receive these as well. A…

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The Road To Hell In Defense Procurement Reform Is Paved With Good Intentions

May 1, 2010 by · Comment
Filed under: BNET, Syndicated Industry News 

Congress continues to make attempts to try and “reform” defense acquisition with the goal of doing things cheaper. Part of this…

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The Road To Hell In Defense Procurement Reform Is Paved With Good Intentions

April 30, 2010 by · Comment
Filed under: BNET, Syndicated Industry News 

Congress continues to make attempts to try and “reform” defense acquisition with the goal of doing things cheaper. Part of this latest bill rest on the assumption that the U.S. is under budgetary…

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Latest Air Force Air Refueling Studies Shows Gap

The U.S. Air Force and Transportation Command briefed Congress on their recent study of aerial refueling requirements. For the worst scenario it is estimated that the U.S. lacks twenty percent of the required capacity.

One of the reasons is that the KC-135R fleet is getting old. They require substantial depot time which limits the size of the fleet. The study states that at any one time nineteen percent of the aircraft are not available at any one time. This puts pressure on the KC-10 and KC-130 aircraft.

The study reinforces the need for a rapid start and completion of the KC-X program.

Food Fight: Sodexo Contract Becomes Catnip for Congress

April 14, 2010 by · Comment
Filed under: BNET, Syndicated Industry News 

Sodexo (SDX) is the French based food service company that won a contract to operate U.S. Marine Corps mess halls. They are involved in a fight with the SEIU over which union represents them….

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Time for Congress to Face Defense Acquisition Problems

April 7, 2010 by · Comment
Filed under: BNET 

Each year the Defense Department submits reports to Congress on how well the major defense acquisition programs are doing. This year several have…

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Long Term Aircraft Plan Includes 109 KC-X Tankers

The Air Force, Navy and Marine Corps released to Congress their “Aircraft Investment Plan”. This lays out how many fixed wing aircraft they intend to buy and maintain through 2020. The U.S.A.F. intends to buy 109 tankers by that year at an estimated cost of over $30 billion.

The Air Force also plans to maintain a force of 223 C-17 and 91 C-5 heavy lift aircraft. The core of the services aircraft though will be the F-35 JSF with about 600 planned for purchase at the current schedule.

Congress Earmarks Defense Budget for Padding

March 1, 2010 by · Comment
Filed under: BNET, Syndicated Industry News 

Congress has the final word on budgets. They add funds for projects they like or want despite the wishes of the Defense Department and the…

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New RFP Released Today

The Air Force and Department of Defense acquisition officials briefed Congress and the press today on the new RFP for the KC-X. It had some slight changes from the draft release a few months ago. The key question is will Northrop bid this time around?

They won the last contract to have that thrown out on Boeing’s protest. Much more to come on this in the days ahead.

Congress Piling On The Defense Budget

December 14, 2009 by · Comment
Filed under: BNET 

Congress passed over the weekend an omnibus spending bill of over one trillion dollars. This week they hope to pass the last spending bill –…

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Stimulus Funds Spur Investment In Alaska’s Internet Connectivity

December 11, 2009 by · Comment
Filed under: BNET 

There has been a great deal of criticism of the waste or weird projects involved with the “Stimulus” bill passed in March by Congress….

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Good News For Boeing In 2010 As More C-17 Transports Will Be Ordered

November 4, 2009 by · 1 Comment
Filed under: BNET 

In a piece of good news for Boeing it looks like Congress will continue to buy C-17 transport aircraft in the 2010 budget despite requests from the…

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Russian Rather Than U.S. Helicopters For Iraq and Afghanistan Raising Eyebrows

October 27, 2009 by · Comment
Filed under: BNET 

A contract by Iraq to buy Russian Mil Mi-7 transport helicopters has raised concerns in Congress that it did not go to an American supplier.

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Logistical Costs Burden Operations In Afghanistan

Wars are expensive there is no doubt. As part of the planning for adding troops to Afghanistan the U.S. Department of Defense was asked why it costs about a $1 billion a year for a 1,000 soldiers to operate there. One of the main expenses it turns out is fuel. To get one gallon of JP8 to a soldier or airman who needs it costs about $400 if all related costs are taken into account. This figure alone is giving Congress second thoughts.

That is because the gas is shipped to Pakistan and then trucked to Afghanistan. To get it to the various outposts and bases sometimes requires aircraft and helicopters. For a helicopter to carry a gallon of gas probably takes a few gallons of gas and at a high maintenance rate. There is also the cost of all the personnel and contractors to handle the gas and supplies.

This should not really surprise anyone. In John Ellis’ book about World War II soldiers, On The Front Lines, he estimated it took about eleven personnel to support one front line soldier in the Pacific and almost ten in the European. That counted everyone who touched a ton of supplies as it moved from the U.S. to the actual soldier. That cost alone was fairly high. Take into account the gas used to move it and the maintenance of the ships, trucks and aircraft and the costs go up even more. Afghanistan is remote and costs even more.

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Continuing Resolution Coming?

September 22, 2009 by · Comment
Filed under: BNET 

The Congress will not get the required funding bills passed by 1 October. This will require the use of a Continuing Resolution which has an effect…

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Congress Moves To Shore Up Social Security And Increase Deficit

September 15, 2009 by · Comment
Filed under: BNET 

Due to low inflation there are no COLA’s planned for Social Security the next two years. Congress thinks this needs to be fixed with added…

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Old Habits Die Hard With Earmarks

August 28, 2009 by · Comment
Filed under: BNET 

Despite pressure from Obama’s new administration Congress keeps funding programs with earmarks that are not necessarily wanted.

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IRS Loses Law Suit Over Phone Taxes Badly

August 17, 2009 by · Comment
Filed under: BNET, Syndicated Industry News 

August 10, 2009 — In 1896 Congress passed an excise tax on long distance phone calls at a rate of 3% based on transmission time and the distance between the two…

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Government Burden To Run Program Increases Cash For Clunkers Cost

August 12, 2009 by · Comment
Filed under: BNET 

We wrote last week that the U.S. Government’s “Cash for Clunkers” was so popular that it burned through its initial one billion dollars in a few days. Congress allocated a further two billion by transferring some of the “Stimulus” funds to this program to keep it going. The program has led to anecdotal […]

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IRS Loses Law Suit Over Phone Taxes Badly

August 10, 2009 by · Comment
Filed under: BNET 

In 1896 Congress passed an excise tax on long distance phone calls at a rate of 3% based on transmission time and the distance between the two connected points. In 2006 after five different U.S. Circuit Courts agreed that this tax was no longer applicable in response to a variety of different lawsuits the […]

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IRS Loses Law Suit Over Phone Taxes Badly

August 10, 2009 by · Comment
Filed under: BNET, Syndicated Industry News 

August 10, 2009 — In 1896 Congress passed an excise tax on long distance phone calls at a rate of 3% based on transmission time and the distance between the two…

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