KC-X Tanker RFP Out In February

January 21, 2010 by Matthew Potter · 1 Comment
Filed under: Boeing, Congress, EADS, KC-X, KC-X Tanker News, Northrop Grumman Corp.

At a recent press availability the U.S. Air Force Chief of Staff, General Schwartz, said that he expects the final RFP for the KC-X contest to be released next month. He also stated that it will be little changed from the draft RFP. Both Northrop (NOC) and Boeing (BA) have been submitting questions and comments on the draft RFP and some of these will be addressed in the final one. The RFP will be released a few weeks after the 2011 Defense Budget goes to Congress which is planned for 2 February.

Schwarz did say that the final RFP may have changes based on recent comments by Northrop and its partner EADS (EADS:P) that they might not participate as they felt the RFP favored Boeing too much. Both groups had also commented on the use of a fixed price development contract and how it transferred too much risk to the contractor from the Government.

Tags: air force chief, air force chief of staff, defense budget, development contract, draft rfp, EADS, KC-X, KC-X Tanker News, noc, Northrop Grumman Corp., Northrop Grumman Corp., u s air, u s air force

Framework Seems To Have Been Reached To Allow A400M Resolution

January 19, 2010 by Matthew Potter · Comment
Filed under: Business Line, Companies, Countries, EADS, Events, France, Germany, Military Aviation, Restructuring, Services, development program, logistics

Late last week it was announced that EADS and the customers for the A400M transport seemed to have reached a framework to allow talks to proceed that may resolve the funding issues with the program. Due to about two years of development and integration problems the aircraft only achieved first flight in December, 2009 and now will not deliver the first aircraft until 2012. These have caused EADS and its subsidiary Airbus to spend billions beyond the money planned.

The company is trying to work a deal where the customers pay a large portion of the overruns as the initial contract was a Fixed Price one that did not provide enough funding to cover the delays. EADS has spent over five billion Euros of its own money on the program and is hoping that either through price increases or direct investment the seven major European buyers will cover these costs. Recently EADS had threatened to just go ahead and end work on the program and eat the losses rather then continuing it and losing more money.

After a recent meeting it became clear that most of the countries involved are willing to work out some financial deal with EADS and that company will agree to continue talking. There will be a meeting in early February to begin these discussions. The compromise being discussed would see increased production prices and lower quantities for a few years with EADS absorbing some of the cost overruns internally. Then there would have to be a decision point in the future whether to complete the program’s planned total quantity. One of the two FMS customers, South Africa, already canceled their order due to the price increases proposed by EADS.

The A400M is the premier military aerospace program in Europe and it suffered from the optimistic plan to use a fixed price development contract. Not completing it would be seen as a blow to EADS and European defense integration. At the same time all of the customers are facing financial pressure due to the global downturn and increased social spending. At the same time building only a few of the aircraft solves nobody’s problems.

A400M first flight video from signatoryvideos. http://www.youtube.com/watch?v=oX-kIUYRyDk

Tags: aerospace program, decision point, defense integration, development contract, EADS, five billion, fms customers, global downturn, initial contract, integration problems, military aerospace

FCS Cancellation Fallout

July 6, 2009 by Matthew Potter · Comment
Filed under: Boeing, Business Line, Companies, Congress, Events, Federal Budget Process, IT, Restructuring, SAIC, Services, U.S. Army, development program, logistics, production program

The cancellation of the current Future Combat Systems (FCS) development contract was one of the cornerstones of the Obama Administrations 2010 defense budget. The program of new vehicles, unmanned aerial and ground systems, and the data links connecting them was estimated at over $160 billion. The Army still has a requirement for a upgrade to their combat brigades currently using the Eighties produced M1/M2 vehicles and the Styker Interim system. As such a new program was set up to replace FCS almost immediately after the contract with Boeing and SAIC was canceled.

Now the Army is concerned that the money planned for in the budget may not be available for this new program. At a minimum some of it will be needed to pay the termination fees related to the various contracts ended prematurely. They were ended at the convenience of the government so the contractors are entitled to payment for whatever work they had done and what it takes to close out the contracts. If the money doesn’t remain in the FCS line then the Army will be forced to fund it from other programs.

Congress in their mark up of the 2010 budget cut most of the money budgeted for this as they felt there were sufficient current funds to cover this. This may be a little too much penny save pound foolish. The Army knows fairly well what is needed and probably budgeted appropriately. The cost to other parts of the Army including the new modernization program may be quite high.

Tags: Boeing, brigades, cancellation, cornerstones, data links, defense budget, development contract, eighties, future combat systems, interim system, m2, new vehicles, obama, SAIC, U.S. Army

Fixed Price for DDG-1000

April 20, 2009 by Matthew Potter · Comment
Filed under: Business Line, Companies, Congress, Contract Awards, Department of Defense, Events, General Dynamics, Maine, Northrop Grumman Corp., Restructuring, Services, States, U.S. Navy, production program

As part of the reforms announced by Secretary Gates’ a few weeks ago one was to end the DDG-1000 program at three ships and restart the DDG-51 production line. General Dynamics will build the last two as the first is under construction by Northrop Grumman. Northrop will get the DDG-51 work to make up for the cancellation. The New York Times is reporting that GD agreed to a fixed price contract for hulls numbers two and three.

Normally fixed price contracts are used for when full rate production gets underway. The first few batches of a product are made as part of the cost plus development contract. This spreads the risk to the Government. Obama has said he wants more fixed price contracts to save money on defense programs that tend to go over schedule and cost. Of course a lot of that is due to issues with requirements or testing or just making the thing that add time and money.

DoD uses two ways to look at unit cost when it comes to managing a program. One is the total of all procurement and R&D funding spread over the quantity of the items being bought. Another just takes the total procurement cost and divides that by the quantity. As you build more of an item the R&D is spread over more units slowly lowering that cost. If things begin to require more procurement then that cost goes up. Slowing down a program and buying the same quantity over a longer time effectively increases total program costs greatly. There is always some fixed cost applied each year if you build one, ten or a hundred of an item. The more years it takes the more those fixed costs add up.

With this program it may be OK to use a FFP contract as the costs are more known and fixed. If there are issues GD will be taking a risk as they might not get back all the money it takes them to build the ships. This is why Cost Plus contracts are used for development and ironing out production. In this case it will be an interesting experiment to see if it works out for the Government and the contractor.

Tags: batches, cancellation, ddg 1000, ddg 51, development contract, dod, gates, General Dynamics, grumman, new york times, northrop grumman, Northrop Grumman Corp., obama, price contract, price contracts, Procurement, risk, three ships, time and money, two ways

Europeon nations developing common UAV

June 10, 2008 by Matthew Potter · Comment
Filed under: EADS, France, Military Aviation, S, development program

This article describes how EADS is moving forward on a development contract for UAV for Germany, Spain, and France. They have finished the study phase and are now working on risk reduction. Ultimately, if all things go well they will move into production of a UAV for all three nations. There is no discussion as to how they will integrate the requirements of the different countries, or perhaps they will all accept the same solution. As in most programs EADS will have to produce a certain number of aircraft to make back some of the money sunk into the development.

Tags: development contract, EADS, germany, money, risk reduction, spain, study phase, UAV

Boeing expands JLTV team

April 18, 2008 by Matthew Potter · Comment
Filed under: Boeing, Ford, Industry Analysis, SAIC

Boeing added SAIC and Ford to the team they have established to bid on the development contract for the JLTV. See an article here. The JLTV will replace the HUMVEE and other light tactical vehicles. Read more

Tags: Boeing, DARPA, development contract, Ford, JLTV, SAIC, tactical vehicles

Alion Awarded $7M Contract to Support Navy’s Improved Live Virtual Constructive Integration Research Program

March 21, 2010 by Business Wire Defense: Contracts News · Comment
Filed under: Syndicated Industry News

MCLEAN, Va.--(BUSINESS WIRE)--Alion Science and Technology, an employee-owned technology solutions provider, has been awarded a $7 million research and development contract to assist the Naval Air Warfare Center Training Systems Division (NAWC TSD) in solving several challenges associated with stimulating airborne Anti-Submarine Warfare (ASW) platforms and training environments. Under the Improved Live Virtual Constructive (LVC) Integration research program, Alion will develop prototype computer

Tags: air warfare center, air warfare center training, development contract, integration research, naval air warfare, naval air warfare center, prototype computer, submarine warfare, technology solutions provider, warfare center training systems

L-3 Awarded Army Technology Contract for Bradley Fighting Vehicles

March 21, 2010 by Business Wire Defense: Contracts News · Comment
Filed under: Syndicated Industry News

NEW YORK--(BUSINESS WIRE)--L-3 Communications (NYSE:LLL) announced today that its Combat Propulsion Systems and Magnet Motors divisions have been awarded a development contract by the U.S. Army to provide high power electrical generation for the Bradley Fighting Vehicle. The first phase for the Integrated Starter Generator (ISG) is underway, and L-3 will provide 10 system prototypes in the next two years. Under this program, L-3 will integrate a permanent magnet starter generator and the associa

Tags: bradley fighting vehicle, development contract, electrical generation, l 3 communications, magnet motors, permanent magnet, propulsion systems, starter generator, system prototypes, u s army

U.S. Army Natick Soldier Systems Center Extends Body Armor Development Contract with Nanocomp Technologies

March 21, 2010 by Business Wire Defense: Contracts News · Comment
Filed under: Syndicated Industry News

CONCORD, N.H.--(BUSINESS WIRE)--Nanocomp Technologies, Inc., a developer of advanced performance materials and component products from carbon nanotubes (CNTs), today announced it has been awarded an extension to its existing development contract with the U.S. Army Natick Soldier Systems Center in Massachusetts. The new contract modifies one signed in August 2008 between the parties to develop carbon nanotube materials for the purpose of improving body armor. Earlier in 2009, Nanocomp successfull