F-35 Joint Strike Fighter (JSF) Foreign Intrigues Continue

The F-35 “Lightning II” Joint Strike Fighter (JSF) will be used not only by the U.S. military to replace its aging F-16, A/V-8, F/A-18 and A-10 aircraft but also by many other NATO countries and allies. It is being purchased as a F-16 replacement by many of these and like the successful F-16 program will have manufacturing and parts co-share agreements with different international partners.

The delays and cost increases to the program have been well documented and these have caused some early planned users to question the financial sense of continuing the program. Many of these countries, though, have already contributed through development funds as well as already had their aerospace contractors sign contracts and agreements with Lockheed Martin (LMT) to produce parts for the aircraft which continues in its Low Rate Initial Production (LRIP).

Canada, the Netherlands and Australia have had and continue to have debates about their purchase of the advanced aircraft rather then existing systems like the F/A-18, Eurofighter, Rafael, SAAB Gripens and Russian alternatives. In Canada they are reviewing the whole cost analysis that had led to the decision to continue the purchase which could technically end it and look at other aircraft. That leads to editorials and articles like this one, “The Case for the Super Hornet As The RCAF’s New Fighter” from Canada or analysis in Australia such as this: “Politics first as white paper fails on big issues”.

At the same time the U.S. has been successful in adding Foreign Military Sales (FMS) of the aircraft most notably to Israel and Japan. There has also been interested expressed by other U.S. allies like the U.A.E.

The commitment of the foreign partners is somewhat critical to the whole program as a reduction in buy quantity will have a ripple effect on the whole program. Less purchased in total and annually will cause a cost increase for each aircraft and the whole program. The F-35 PEO, Lt Gen Bogdan, identified this risk in Congressional testimony in April. If somebody drops out the price the others pay will go up putting more pressure on their budgets and perhaps cause them to drop out too. This would then become a spiral causing issues for the U.S. and all of the other nations involved in the program.

Despite the issues with the aircraft over the last decade the U.S. remains committed to the program. Over 100 are on order and there is discussion to award a new 2 year production contract this summer for a further 60-70. Training is underway for both aircrew and maintainers of the U.S.A.F., Navy, Marines and allies. The big questions remain though about completing development, how many will be built, and who ultimately will operate the aircraft.

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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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More Apache Block III Contracts Awarded

Boeing (BA) has received two contracts for continued work on the AH-64D Apache Block III for the U.S. Army. These include a production option as well as one for Foreign Military Sales (FMS) support. The two contracts combined are worth over $600 million.

The Apache is the U.S.’s most advanced attack helicopter. Boeing will not only manufacture new ones but upgrade existing older models. Apaches have seen heavy use in Iraq and Afghanistan where with there 30mm cannon and Hellfire missiles they have often provided fire support and precision strike. The Apache was originally designed to replace the AH-1 Cobra to kill Soviet tanks in Western Europe.

Boeing was also recently announced as the winner of a large FMS contract to provide Apaches to India. The Apache has been used by many U.S. allies such as the U.K., Netherlands, U.A.E., Israel and Egypt.

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F-35 Money Keeps Rolling In for Lockheed Martin

The F-35 Joint Strike Fighter (JSF) is the largest acquisition program in history headed up by prime, Lockheed Martin (LMT). The program has suffered delays due to testing and technical issues but now is in steady low rate production with the U.S. buying 30 or more a year for itself and allies. The F-35 will be used by the U.S. Air Force, Navy and Marine Corps. It also has countries like the u.K., Australia, the Netherlands, Norway and Canada as partners as well as already having Foreign Military Sales (FMS) to Japan and Israel.

Lockheed is not only getting contracts for the production but also for items such as training, simulators and of course spare parts. They were just awarded a contract for spares for the U.S. Navy and international aircraft worth about $200 million. As the aircraft are fielded they will also require the establishment of stocks of parts at bases and depots to support them.

The current production of F-35 is pretty much all going to the different training sites to support pilot conversion. They are also being used to continue testing and development of the system.

If the F-35 in its current plan survives potential budget cuts and restructuring between 3 and 4,000 aircraft will be made. They will fly for 30 plus years and be the main equipment of Western tactical air forces for most of that time.

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BAE to Upgrade South Korean F-16 Fighters

The defense industry is becoming more competitive internationally. As the U.S. and European governments begin to spend less on their domestic military the large defense contractors will compete more for deals with foreign customers. The recent award to BAE Systems (BAE:LSE) of a contract by South Korea for fighter upgrades illustrates this.

South Korea operates over 130 Lockheed Martin (LMT) F-16 fighters. The F-16 was sold to many U.S. allies and like the current F-35 program was designed to share production among those buying it. Parts were made across the globe and the aircraft was assembled in different places such as South Korea and the Netherlands. This not only increased the investment by those involved but also lowered risk and allowed greater production in a shorter time.

This also meant that those countries assembling the aircraft did not necessarily have to rely on the U.S. or Lockheed for components or support once the F-16 were delivered.

The contract which could be worth over a $1 billion will have BAE install new electronics into the aircraft. Most of the work will be done in America even though it is a U.K. company.

Interestingly this contract is not a direct sale to South Korea but was done through the U.S. Foreign Military Sales (FMS) program. This allows foreign customers to utilize U.S. contracts to purchase hardware and support rather then negotiating their own contract.

BAE is already working on existing U.S. and Turkish F-16.

Normally one would have expected this type of contract to go to the OEM for the aircraft but the fact that BAE is doing the work shows the U.S. owns some of the necessary technical data and one hopes competition is lowering the cost of the effort.

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Australia to Stretch Out F-35 Deliveries

One of the key components of the F-35 Joint Strike Fighter (JSF) program was the early participation by U.S. allied countries. Unlike traditional Foreign Military Sales (FMS) these countries provided some of the development costs and committed early to buy the the aircraft rather then wait for the establishment of production and get it after the aircraft entered U.S. service. These included Great Britain, Australia, Canada and The Netherlands.

These countries planned to buy different amounts of the three types of the F-35. Britain to operate from their new carriers and replace the Harrier Jump Jet, Canada to retire their CF-18 fleet and the other two to upgrade from the aging F-16. In fact the F-35 would be similar to the F-16 program with parts and components made by the buying countries. Norway, Japan and Israel have also decided to buy the F-35 over other potential aircraft.

The F-35 has seen serious delays and cost growth due to testing and development issues. It is currently in Low Rate Initial Production (LRIP) as well as continuing testing. The U.S. in their latest budget proposal have decided to stretch production out to save money in the near term. Australia has now decided to do the same thing.

That country’s budget plans now call for delays of accepting the majority of their aircraft to mirror current U.S. plans. The goal is to save over $1.6 billion in the next few eyars. The first two Australian aircraft are in production and should be delivered in 2014-15 to start training but their first squadron will not stand up now for a few years after that.

The problem with stretching out production buys is that while it does save money in the near term the same number of systems will have to be bought over a longer time. Due to inflation alone as well as the loss of production efficiencies the average price per aircraft will increase causing the whole program to get more expensive. One potential problem that may arise is that the total number to be bought will be reduced.

Canada is also re-considering their F-35 buy due to issues with how the contract was awarded last year. These decisions will be a blow to Lockheed Martin (LMT) as they reduce near term revenue and earnings.

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AeroVironment Wins More Raven Production

update – Edited the post to make clear that the contract is just for logistics support and not new systems.

The U.S. Army awarded AeroVironment (AVAV) a contract for further production of the hand-launched Raven small Unmanned Aerial Vehicle (UAV). The Ravens are used by small units for local area reconnaissance and surveillance.

The contract is worth a little over $11 million and will provide logistic support for deployed Raven systems not only for the Army but also the Marine Corps and any Foreign Military Sales (FMS).

AeroVironment makes a series of different UAV’s for use by military, law enforcement and other government agencies. The company is also investing in electric vehicles and power management solutions. They manufacture a home charging station for electric vehicles as well as supporting electric car design and development.

As with all OEM companies they also provide training and engineering support for their products.

The UAV market has done well over the last decade as the U.S. military especially has invested in thousands of systems to support operations in Afghanistan and Iraq. This investment should continue even as the U.S. withdraws its troops and fighting ends. There will be focus on improving UAV payload, range and capabilities.

AeroVironment is working to develop the ultra long range, persistent Global Observer UAV which is powered by hydrogen fuel rather then a conventional engine. Boeing (BA) is also working on a similar system utilizing solar and other renewable fuels.

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FY12 Defense Contracts Flow and Lockheed Martin Benefits

The Pentagon may be planning to reduce or hold spending flat in the upcoming years but with the final passage of the 2012 defense budget major contracts are now flowing to different contractors as Project and Program Offices place production orders. Lockheed Martin (LMT) benefited from this yesterday as they received the latest production contract for the PATRIOT PAC-3 missile.

The PATRIOT air and missile defense system is made up of two major parts: the radar and the interceptor. Currently Raytheon (RTN) is the prime contractor for the radar and command and control systems while Lockheed manufactures the current standard missile, the PAC-3. The PAC-3 version of the system in use since the late Eighties incorporates modifications to maximize missile defense capabilities while the missile is smaller, relies on hit-to-kill technology and is a significant upgrade to the earlier PAC-2 missile as it allows more rounds to be used by each launch unit.

The FY12 order is for both U.S. Army use as well as a follow on delivery for Taiwan. It has a value of just over $900 million and represents a rather significant contract. The work includes not only the missiles but also kits, spares, support equipment and engineering services.

The PATRIOT represents the shorter ranged part of the Army’s missile defense capability with the Theater High Altitude Area Defense (THAAD) system made by Lockheed providing longer range and larger area defense.

The PATRIOT has seen significant foreign military sales to countries like Germany, the Netherlands, Israel, Saudi Arabia, U.A.E. and Taiwan. It is especially valuable to those countries facing a ballistic missile threat like Israel, Taiwan and the Gulf States.

The PAC-3 missile has been in production for several years from Lockheed’s facility in Camden, AR.

Photo from Tumbleweed:-)’s flickr photostream.

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VSE Corp. to Support U.S. Navy FMS Program

VSE Corporation (VSEC) is a large engineering company that provides support services to a variety of government and commercial customers although the Federal government remains their largest client. They perform a great deal of maintenance for aviation, ground vehicles and ships as well as technical analysis and support for IT, logistics planning and Research & Development efforts.

A program that they have executed for several years is to aid the U.S. Navy in preparing for turnover Foreign Military Sales (FMS) of former U.S. ships to their new owners. The U.S. will sell older ships that they no longer want to use as well as ones deliberately built for the overseas customer in U.S. yards. VSE works with the International Fleet Support Program managed by the Navy’s Sea Systems Command (NAVSEA).

The company was recently awarded a five year contract with a base value of about $277 million. If the four other option years are executed the contract will have a value of almost $1.5 billion. This contract will continue their engineering, maintenance and support for ships sold to overseas governments.

VSE will provide design, configuration management, field engineering, training and depot level repair among other services for the foreign customers. One key part of the contract is to make sure the ships are ready to be transferred something that VSE has done for over forty ships since 1995.

Contracts like this often do not make the headlines despite their large values as they are primarily service oriented rather then actually buying a system or manufacturing a product. The U.S. military awards large amounts of specific service contracts like this every year and their total value is in the tens of billions.

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Boeing Gains More C-17 Work from India

The United States government and its defense contractors have been cultivating the Indian market for several years. The biggest payoff so far has been contracts for military transports and maritime patrol aircraft. The most important of current opportunities though, the new advanced fighter contract, has for now chosen to go with European competitors in the form of Dassault’s Rafael and Eurofighter’s Typhoon.

Boeing (BA) has been able to sell its C-17 strategic transport and P-8 patrol aircraft to India. Both of these are large contracts and as with all military aircraft ones offer the advantage of requiring decades of parts, modifications and support. India will receive 10 C-17 aircraft to begin with with the potential for more depending on that country’s requirements.

As part of this effort Boeing this week received a contract modification from India via the Foreign Military Sales (FMS) system where technically the customer is the U.S. Defense Department. This $469 million action is to provide engineering, maintenance and modernization support for India’s C-17 aircraft. It illustrates the potential of this part of the market.

India also purchased 6 C-130J transport aircraft from Lockheed Martin (LMT). These aircraft have already started to be delivered. That contract was worth over $500 million.

The hope is that sales to India may offset some of the potential declines in U.S. and European defense spending. India and Brazil are considered two of the largest future markets available for defense items although Brazil’s plans to modernize and expand its military have slowed down in recent months.

India is still buying large amounts of Russian equipment as it historically has but is adding injections of Western systems like the P-8I based on Boeing’s 737 derivation for the U.S. Navy. The new fighter contract will be for over 100 aircraft and would represent the most modern and technically advanced systems in use by India. India has also invested heavily in domestic industry for the development and production of advanced weapon systems.

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More Defense Related Layoffs Announced

As the big defense contractors continue to restructure themselves and their workforces for what is expected to be a period of decline in spending more layoffs were announced this week. The pressure too from the U.S. and other governments to be more price conscious is also affecting decisions related to the size of overhead and support employees.

Many of the major U.S. corporations have already announced plans to reduce their overall number of employees including General Dynamics (GD), Boeing (BA) and Lockheed Martin (LMT). Despite all three having strong sales and many major programs they feel that it is best to begin creating a leaner overall structure.

Lockheed followed up its earlier announcement of eliminating 1,500 jobs in its Aeronautics unit which builds the F-35 Joint Strike Fighter and the C-130 transport with word that it has already cut 540 of them. This includes over 200 at its Georgia plant making the C-130 and F-22 fighter. This is about 2.5 percent of the workforce at that facility.

In a bigger move British defense giant, BAE Systems (BAE:LSE), said that it would plan on reducing its workforce by about 3,000 positions. Most of these would be related to aircraft production where the Eurofighter Typhoon is near the end of its production run. Most of the original European customers have ordered all of that aircraft that they plan to buy leaving it needing Foreign Military Sales (FMS) customers to keep the line going beyond the next decade.

The Typhoon is being considered by India and potentially Japan for their new fighter but it is one of many that is being bid and price pressure is very strong for these deals making it hard to predict a winner.

BAE Systems has enjoyed a strong decade as it has grown in the U.S. market as well as supplying a British military involved in Iraq and Afghanistan. Now the U.K. is trying to reduce its overall spending which will seriously affect its defense spending while the U.K. has left Iraq and will leave Afghanistan with the U.S. in the next few years. The U.S. defense budget will also be reduced limiting further growth in that market.

BAE is one of the largest employers in the U.K. and these job losses will be a blow to that country’s economy and well being. The announced cuts represent almost 10 percent of their workers in that country. Earlier this year BAE had already began to make smaller cuts related to specific programs. This large one seems to be an adjustment to what is perceived as plans for the British Government’s future spending proposals.

As defense budgets decline it won’t only be contractor positions eliminated but also civil service and military as well. A large amount of money goes to these types of jobs and the quickest way to save is to cut back there. At a time when the U.S. and European economies are still struggling with higher then normal unemployment these types of moves will not help but must occur if budgets are to be balanced.

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Raytheon Receives AMRAAM Production Contract Despite Next Year’s Controversy

September 5, 2011 by · Comment
Filed under: Editorial 

Despite the current dispute with Congress over future production of the AIM-120 AMRAAM air-to-air missile the U.S. Air Force went ahead and ordered the FY11 production batch from Raytheon (RTN). This contract is worth over $500 million and will provide about 430 missiles for domestic use by the Air Force, Navy and Marines as well as for Foreign Military Sales (FMS) customers.

Congress in their mark up of the 2012 budget has de-funded the program for its next year’s production citing delays in producing the missiles. They feel that this would allow a year to catch up with deliveries. It also is one of the few cuts to the defense budget that Congress has made so far. Funding was reduced to less then $70 million from the almost $500 million requested. The funding Congress left will keep the project office open and pay for engineering and the ability to keep the line ready when production catches up.

Both Raytheon and the Defense Department have fought back against the cut. If the production line does get sorted out then the money may be needed next year to make sure there is no break in the production line which would cost money to re-establish and re-certify. There also may be sufficient FMS sales that require a 2012 order. The fact that the FY11 buy was placed in the last month of the Fiscal Year indicates that if the FY12 contract is executed it too would be in late FY12.

Interestingly the Army is proposing to do the same thing with their M1 tank production and Congress is the one fighting back on that proposal. The Army feels that it has met its objectives for now and can take a two year break from modernization and production of the Abrams tank. This would save several hundred million dollars even with the costs of re-starting the line taken into account.

Congress members from Michigan and other affected states are trying to stop this citing the negative economic impact of closing the line. Ultimately there will be more money in the budget then the Army requested and some M1 production will occur.

These issues show that reducing the defense budget will not be easy. The military have their requirements and so does Congress. Congress is the ultimate decider of the budget and it is not clear how much will they will have to make cuts that could reduce economic activity in their districts. At the same time the cuts Congress does make may not be to programs that the Defense Department and the Services want. Compromise may be hard to reach.

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Troubles Ahead for JLTV?

As the Pentagon re-evaluates its budget priorities in the coming months and years as it faces the potential for major reductions some new programs may be scaled back or cut. New systems that were a priority a few years ago in order to replace existing hardware that is now considered too old or not right for current operations may suddenly be seen as not necessarily being worth the amount of investment required. There are rumblings that the Joint Light Tactical Vehicle (JLTV) program to replace the ubiquitous HUMVEE made by AM General might be one of those being considered.

The HUMVEE began replacing the M151 Jeep in the Eighties and has seen steady production for almost thirty years. Tens of thousands have been made for use by all parts of the U.S. military as well as many allies across the globe. Faced with the mine and Improvised Explosive Device (IED) threat in Iraq and Afghanistan its level of protection and armament was found wanting. Different up-armored variants were made but a new program, JLTV, was started to replace it.

Last year the Army decided not to buy anymore for itself as it had reached the number it required. It looked like the HUMVEE line would close out. It remains open as there are still Foreign Military Sales (FMS) and the other Services are buying some as well as the Army deciding to keep some production. The JLTV program, though, was continuing with planned production starting in 2013.

The JLTV used competitive prototyping and is currently testing three different vehicles in the Technology Development phase of the acquisition cycle. Teams of companies including BAE Systems (BAE:LSE), General Dynamics (GD) with AM General, and Lockheed Martin (LMT) have built prototypes two of which will be chosen for the next phase; Engineering, Manufacturing and Development (EMD); which will then be the basis for the production decision. The JLTV due to the requirement for so many vehicles has the potential for billions of dollars in business over the next thirty years.

It is now being reported that the JLTV budget is being reduced which may cause schedule delays deferring when the JLTV enters service. The Army is also looking at starting a program to upgrade HUMVEE vehicles for itself and the Marine Corps. This would be cheaper then buying a whole new system and also delay the need for the JLTV.

If things get as bad financially as they have in the past then there may be a chance that the military is told to make do with what they have which would lead to elimination of the JLTV and the HUMVEE recapitalization program. No matter what happens the U.S. military is entering a period of a challenging budget climate and there may be more new programs in the same situation.

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Boeing Sells More Chinooks to the U.K.

The fighting in Afghanistan by the U.S. and its NATO allies has required large amounts of helicopters and vertical lift. Men and supplies need to be moved around and this is the easiest way in a country that has limited roads and facilities. The conditions which are very stressing on aircraft due to the altitude and temperature placing a premium on performance. This has led to the use of very large helicopters such as Boeing’s (BA) CH-47 Chinook twin rotor heavy lift aircraft.

The U.S. Army especially has relied on the Chinook as it has little if no internal fixed wing cargo assets for a variety of reasons that have existed over the last sixty years since the U.S. Air Force came into being. The demands of the mission have also seen major allies such as Canada and the United Kingdom invest in the Chinook which has seen major upgrades over the last decade of fighting as have all of the U.S. rotary wing platforms due to the demands of the war against terror versus a fight with a conventional enemy.

As part of this the United Kingdom’s Ministry of Defence just announced a further order for Chinooks. They have issued a contract to Boeing worth over $1.6 billion for 14 more of the helicopters. This will increase the British fleet to 60 of the versatile systems.

Boeing is obviously happy about the deal as they need them to offset any future declines in U.S. defense spending although the large aerospace and defense contractor has several programs that should continue over the next few years. These include the KC-46A aerial tanker, the V-22 aircraft as well as the Chinook and AH-64 Apache attack helicopter. There is the distinct possibility though of cuts to the number that the U.S. military will buy as well as reductions in annual buy quantities.

Foreign Military Sales (FMS) either through the U.S. government or directly to allied nations will help keep Boeing’s production lines going and maintaining revenue and earnings. Competition for available deals will be great but Boeing has the advantage with something like the Chinook in that there is limited competition from European providers.

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Turkey Buys Sikorsky

Foreign countries wanting to acquire United States weapon systems or technology have different avenues available to them. They may do a strait Foreign Military Sales (FMS) case where they contract through the U.S. Department of Defense with suppliers to provide the same or similar equipment that the U.S. is buying. Another option is to directly contract with a company to get a unique piece of equipment that in some cases has never been used by the U.S. military. Turkey has chosen this route with the announcement that they will buy over one hundred S-70 Black Hawk aircraft from Sikorsky Aircraft Corporation (SAC). SAC is a subsidiary of United Technologies (UTX) and is based in Connecticut.

The S-70 is the commercial market version of the UH-60 Black Hawk aircraft which is the core medium lift system for the U.S. Army while also being used by the Navy, Air Force and other U.S. government agencies. The Black Hawk has also seen robust FMS sales across the globe including users like Australia, various Gulf States and most recently Sweden.

Turkey’s contract is initially valued at about $3.5 billion. Like many Turkish defense programs the aircraft will have substantial portions of it built in Turkey in this case by Tusas Aerospace Industries. This will allow rapid expansion of the contract if Turkey decides as well as an option for them to make the aircraft for foreign sales themselves. SAC will provide parts, assemblies and technical assistance to help the Turkish production and assembly facility.

The S-70 has seen some sales to other countries as well as U.S. agencies. The T-70 will be equipped with specific Turkish equipment and modifications most likely to include the radio suite, armament and other equipment. By doing it this way Turkey does not necessarily limit itself to equipment that has been used on the UH-60 and qualified by the American government. At the same time, though, they lose some of the efficiencies of the large U.S. production contract with SAC.

Italy’s Augusta Westland, part of Finnemechanica (FNC:MI) , was also bidding on this contract.

Photo form David Jackmason’s flickr photostream.

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Alion Awarded $6.6M NAVAIR Contract to Enhance Seahawk Helicopter Mission Capabilities and Improve Readiness

April 7, 2011 by · Comment
Filed under: Syndicated Industry News 

MCLEAN, Va.–(BUSINESS WIRE)–Alion Science and Technology, an employee-owned technology solutions company, was awarded a two-year, $6.6 million task order from the Naval Air Systems Command (NAVAIR) to support its Multi-Mission Helicopter (MMH) Program Management Activity (PMA-299). Alion will deliver technical, financial management, administrative and engineering expertise to support current and future Foreign Military Sales (FMS) of the Seahawk Helicopters. “The Seahawk helicopter platform is

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Bribes, Corruption Suspected in Greek Submarine Order

Procurement fraud and outright crimes have afflicted government spending and contracting since the dawn of history. There have been many recent cases of bribery used to affect contract awards or purchasing decisions. This has included elected officials, civil servants as well as company representatives. There are cases large and small from accusations against BAE Systems (BAE:LSE) in a multi-billion deal with Saudi Arabia to a U.S. Army Major who took $200,000 in bribes from foreign companies to give them work in Iraq, Kuwait and Afghanistan.

Foreign military sales has always been one area that in the past has seen rampant bribery and corruption. In the last few decades governments have been cracking down on such practices especially the United States. They have made it illegal to use such methods to help win contracts overseas even if those practices were considered part of the cost of doing business. In 2008 for example Siemens (SI) settled with the U.S. government on charges they used such methods to win contracts.

Now there are allegations that Greek defense and elected officials were bribed to influence the award of a contract for four submarines to a German company. The contract was one of the largest in Greek history and would see one boat built in Germany and the other three in Greek yards.

The Greek government and the manufacturer, ThyssenKrupp, ended up having long running dispute about the quality of the submarine leading to the builder to threaten to cancel the deal outright. Greece then came up with the idea of taking delivery of only the first one and perhaps selling it directly themselves to recover some of the costs.

Greece’s government is suffering from financial and debt issues and the idea that the contract was inflated in cost due to corruption has only added fuel to the fire of disputes between the government and political rivals.

Corruption distorts contracts so that the buyer may not get the best value for what could be limited funds. It also affects the contracting market as it may not allow a company with better products the ability to sell those and they cannot or will not pay the necessary bribes to get the work. As more countries follow the U.S. lead in investigating and ending this type of fraud the overall defense market will benefit. Unfortunately stories like this remain much too common.

Photo from sky#walker’s flickr photostream.

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Cubic Receives ID/IQ Contract, $14.5 Million Task Order to Support Training Simulators in U.S., Overseas — Press Release

February 1, 2011 by · Comment
Filed under: Business Line, Companies, Cubic, Events, IT, Press Releases, training 

Cubic Receives ID/IQ Contract, $14.5 Million Task Order to Support Training Simulators in U.S., Overseas

SAN DIEGO, CA–(Marketwire – January 31, 2011) – Cubic Worldwide Technical Services, Inc., a subsidiary of Cubic Corporation (NYSE: CUB), has been awarded one of eight indefinite-delivery/ indefinite-quantity (ID/IQ) multiple award contracts for Fielded Training Systems Support Services (FTSS). The Naval Air Warfare Center Training Systems Division in Orlando, Florida, awarded the contracts to support over 900 training simulators for the U.S. Navy and Marine Corps, and for other governments under potential Foreign Military Sales.

As part of the FTSS III award, CWTS also received the initial FTSS III Task Order (0001) for operations, maintenance and instructional support for the E-2C training devices at Navy facilities located in Norfolk, Virginia, and Point Mugu, California. Valued at approximately $14.5 million, this task order began in January with a two-month mobilization/phase-in, to be followed with a 55-month period of performance.

Services covered under the ID/IQ include operations and maintenance support, instruction, limited training device modifications, training device relocations, training system management, in-service engineering office support (backup resource to SeaPort-e), spares/product support, and other related trainer support services. The aggregate, not-to-exceed amount for these contemplated multiple award contracts combined is $900 million, and each contractor will be provided a fair opportunity to compete for individual task orders. Work will be performed in various locations inside and outside the continental United States and is expected to be completed in September 2018.

Cubic Corporation is the parent company of three major business segments: Defense Systems, Mission Support Services and Transportation Systems. Cubic Defense Systems is a leading provider of realistic combat training systems, cyber technologies, asset tracking solutions, and defense electronics. Mission Support Services is a leading provider of training, operations, maintenance, technical and other support services. Cubic Transportation Systems is the world’s leading provider of automated fare collection systems and services for public transit authorities. For more information about Cubic, see the company’s Web site at www.cubic.com.

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Raytheon Awarded $145 Million for Patriot GEM-T Missiles for State of Kuwait — Press Release

Raytheon Awarded $145 Million for Patriot GEM-T Missiles for State of Kuwait

TEWKSBURY, Mass., Jan. 24, 2011 /PRNewswire/ — Raytheon Company (NYSE: RTN) has received a $145 million Foreign Military Sales production contract for Patriot Guidance Enhanced Missiles – Tactical (GEM-T) to augment Kuwait’s air and missile defense.

The U.S. Army Aviation and Missile Command, Redstone Arsenal, Ala., issued the contract to complement Kuwait’s Configuration-3 radar system upgrade work already underway at Raytheon.

“This new GEM-T missile production contract highlights the efforts by Kuwait Air Defense to maintain readiness and effectiveness of the Patriot Air and Missile System to counter evolving regional threats,” said Sanjay Kapoor, vice president of Patriot Programs at Raytheon Integrated Defense Systems (IDS). “We continue to modernize the Patriot system and are committed to providing Kuwait and our 11 other partner nations globally with increased system reliability and reduced life-cycle costs.”

Work under this contract will be performed by Raytheon IDS at the Integrated Air Defense Center in Andover, Mass.

Raytheon IDS is the prime contractor for both domestic and international Patriot Air and Missile Defense Systems and is the system integrator for Patriot Advanced Capability-3 missiles.

Raytheon Company, with 2009 sales of $25 billion, is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. With a history of innovation spanning 88 years, Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services. With headquarters in Waltham, Mass., Raytheon employs 75,000 people worldwide.

SOURCE Raytheon Company

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U.S. Navy Renews Successful Helicopter Logistics Program With $1.4B Follow-On Contract — Press Release

U.S. Navy Renews Successful Helicopter Logistics Program With $1.4B Follow-On Contract

Washington, Jan. 20, 2011 /PRNewswire/ — The Maritime Helicopter Support Company, a joint venture of Lockheed Martin (NYSE: LMT) and Sikorsky Aircraft Corporation, a subsidiary of United Technologies Corp. (NYSE: UTX), has received a $1.4 billion firm fixed price contract from the U.S. Navy to continue providing performance-based logistics support for more than 490 in-service H-60 SEAHAWK® helicopters.

The contract requires the Maritime Helicopter Support Company (MHSCo) to manage the supply chain and provide as-needed repair of more than 1,250 aircraft components and subsystems for the Navy’s H-60 Tip-to-Tail performance-based logistics (PBL) program. Supported aircraft include Navy SH-60B, SH-60F, HH-60H, MH-60R and MH-60S helicopters, Coast Guard HH-60J helicopters and other H-60 aircraft operated by customers of the Navy’s Foreign Military Sales program.

Sikorsky’s aftermarket support company Sikorsky Aerospace Services, Shelton, Conn., and Lockheed Martin Mission Systems and Sensors, Owego, NY, will fulfill the contract through January 31, 2015. The H-60 Tip-to-Tail PBL program will enable the Navy/MHSCo team to continue the accomplishments achieved under the initial five-year contract awarded in January 2004. Today, the program is among the largest of its kind for a fully functional aircraft fleet.

“H-60 Tip-to-Tail is recognized as one of the U.S. Navy’s most successful PBL programs,” said RADM Raymond Berube, commander, Naval Inventory Control Point in Philadelphia, which procures, manages, and supplies spare parts for naval aircraft, submarines and ships worldwide. “By meeting the Navy’s rigorous on-time parts delivery requirements, MHSCo has set a high standard of support that has had a very positive effect on H-60 flight operations.”

Performance-based logistics programs incentivize the contractor to meet measurable performance goals as the criteria for payment. In 2004, by applying commercial best practices across the supply chain, MHSCo quickly boosted delivery of replacement parts and assemblies to the fleet by 25 percent.

“Over the past seven years, MHSCo has consistently exceeded contract requirements, and enhanced the customer’s fleet readiness, by improving the availability and reliability of H-60 materiel and providing effective inventory control and materiel obsolescence management,” said David Adler, president of Sikorsky Aerospace Services. “This follow-on contract will enable MHSCo to continue to provide the maximum value and the highest service levels to the U.S. Government, the taxpayer and the warfighter.”

“Last September, Defense Secretary Robert Gates asked industry to reduce lifecycle costs and improve performance,” said Dan Schultz, vice president and general manager, Lockheed Martin Ship & Aviation Systems. “Through MHSCo, our two companies have shown that performance based logistics, properly implemented, can achieve those goals.”

Headquartered in Bethesda, Md., Lockheed Martin is a global security company that employs about 133,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation reported 2009 sales of $44.0 billion.

Sikorsky Aircraft Corp., based in Stratford, Conn., is a world leader in helicopter design, manufacture and service. Its Sikorsky Aerospace Services business designs and applies advanced logistics and supply chain solutions for commercial rotary, military rotary and fixed wing operators. United Technologies Corp., based in Hartford, Conn., provides a broad range of high technology products and support services to the aerospace and building systems industries worldwide.

For additional information, visit our web site:



SOURCE Sikorsky Aircraft Corporation

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Harris Wins Large FMS Contract

One of the advantages that defense contractors have if they make a core piece of equipment for the United States military is that they stand to gain millions in Foreign Military Sales (FMS) contracts. For reasons of interoperability and consistency the U.S. supports its allies buying similar systems as used by it. This extends to not only large items like fighter aircraft but also more mundane things like weapons and radios.

Harris Corporation (HRS) makes radios and components used heavily by the U.S. These includes the very poplar Falcon series of tactical systems. Over the last few years Harris has been growing its revenue and earnings as it gains more and more market share of this critical market for military forces across the globe. More importantly Net Income has grown even more rapidly then revenue. In 2006 Net Income was about $300 million and in 2010 over $600.

Now the U.S. has given Harris a contract worth almost $500 million if all options are exercised to provide FMS radios. The Indefinite Delivery/Indefinite Quantity (ID/IQ) contract allows customers to order the radios they need at specific prices. As with all ID/IQ contracts there is no guarantee that any sales will be made but it indicates that the U.S. is making a push to sell these radios to its allies overseas.

Radios are important and as the U.S. switches from its SINCGARS to JTRS standard radios there may be a large market as other countries move to replace their older systems. Harris is able to produce JTRS compliant radios and this includes the Falcon series in the ID/IQ contract.

The company may be well positioned for even further growth as the market continues to evolve.

Photo from The U.S. Army’s flickr photostream.

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More C-RAM Work for Northrop Grumman

The U.S. and its Allies faced attacks from mortars and rockets on their fixed installations in Iraq and Afghanistan. This threat has been commonplace since World War II as the Soviet Union and its allies provided “liberation” movements across the world with these cheap, simple offensive systems. Different countermeasures have been developed against this threat but the U.S. need a rapid reaction short ranged system. This led to the development of the Counter-Rocket, Artillery and Mortar (C-RAM) system.

This is an adaption of the Navy’s Close In Weapon System (CIWS) which uses a 20mm gatling gun and on mount radar systems to counter act anti-ship missiles. The CWIS is made by Raytheon (RTN) but C-RAM is managed by Northrop Grumman (NOC) who make the radar and fire control software. The system was developed quickly and deployed in Iraq and Afghanistan where it has been used to protect bases from indirect fire.

Northrop now continues to receive contracts to support C-RAM as it remains deployed at U.S. and Allied bases across the combat zone.

Yesterday they were awarded two. One worth $30 million is to support systems sold to Australia as part of Foreign Military Sales. The other to support U.S. systems worth about $17 million.

These contracts demonstrate once again that companies are able to make money not just on the development and production of weapon systems but also in their support once fielded. The C-RAM is an important weapon that has proved capable in protecting U.S. troops, their allies and contractors.

A video of C-RAM in action is below.

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Looking for a Mission and a Buyer: The A400M in America

The European defense conglomerate EADS (EADS:P) has been working for several years to develop the A400M “Grizzly” transport aircraft. This advanced turboprop transport falls in between the two Western standard aerial transports Lockheed Martin’s (LMT) C-130J and Boeing’s (BA) C-17 in terms of size and capacity. EADS is also advertising its ability to fly from short, unimproved airfields when compared to the two U.S. Air Force basic aircraft. In this way the A400M is more like traditional Soviet transports where this capability was emphasized over other characteristics. EADS would like to sell the A400M to the U.S. military as well as other foriegn customers to help with the total cost of the program and perhaps even make a profit.

The problem they face is that the United States has invested over the last twenty years in a fleet of C-17 and C-130 to augment their heavy lift C-5 which is about to be upgraded. There is little requirement for a new transport even if it is offers advantages over the current aircraft. In fact the U.S. believes it has too many C-17 due to Congress’ adding buys over the Air Force’s acquisition objective for the last several years. It looks like the 2011 budget will not contain any more C-17 aircraft when it is finally completed. This means that EADS is looking for an uphill climb to sell the aircraft in the U.S. just from a requirement stand point.

The A400M has had a troubled development history ending up being two years late and much more expensive then planned. EADS has renegotiated the contract it had with its European customers to try and adjust for these issues. The problem they face is that to try and make the money up they will need to sell much more then originally planned. This means they must look for overseas customers in a crowded market. Only two countries had planned to place Foreign Military Sales (FMS) orders for the aircraft: Malaysia and South Africa. South Africa canceled theirs due to the cost increases. While the domestic customers state commitment to the program they also could readjust their quantities putting even more cost pressure on the aircraft program.

Unfortunately the delays in the A400M means it missed some potential orders that it might have been able to bid on if the original schedule had been met. The demands of fighting in Afghanistan have increased the need for tactical transports like the A400M but the C-130J has been able to win a great deal of contracts that the A400M might have. Lockheed has a hot production line in steady state that provides availability and cost stability. The A400M was several years in the future with some unknowns when it came to cost.

Another problem that EADS must face is the U.S. political opposition to buying non-domestic aircraft. While they are bidding on the KC-X against Boeing there is a lot of criticism of the Air Force for even allowing their bid. Partly this is due to concerns about “U.S. jobs” and just the normal chauvinism present in any large arms deal. Due to declining industrial base issues the U.S. has to consider an EADS bid if they want any competition on the KC-X. The transport market is a little more diverse and EADS could face competition from more then one U.S. manufacturer making it hard to make the KC-X argument for any new airlift mission.

Another cautionary tale for the A400M is the U.S Army’s planned Joint Cargo Aircraft (JCA) program. The Army originally wanted to purchase an aircraft smaller then a C-130 to provide lift in Iraq and Afghanistan between bases. As the name implies it became a shared program with the Air Force partly because they buy fixed wing aircraft and the Army has a very limited fleet of tactical transports and ISR assets. The program ended up purchasing the C-27 Spartan an Italian made aircraft through a contract with L-3 Communications (LLL). In the 2010 budget reforms the program was transferred to Air Force management and the plans to buy aircraft significantly scaled back. The JCA faced issues as it didn’t fit with the Air Force plans even if the Army wanted it. The A400M will face the same issues.

Once the A400M enters service it may prove to be a very capable, effective aircraft. Unfortunately to break into the U.S. market it may be too late as the defense budget declines and the C-5, C-17 and C-130 fleet soldiers on.

Photo from Ronnie Macdonald’s Flickr photostream.

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ViaSat Receives Award With $5.75 Million Ceiling (IDIQ) for Technical Services and Equipment From SPAWAR Atlantic — Press Release

ViaSat Receives Award With $5.75 Million Ceiling (IDIQ) for Technical Services and Equipment From SPAWAR Atlantic

Includes data link and satcom systems

CARLSBAD, Calif., July 9 /PRNewswire-FirstCall/ — ViaSat (NASDAQ:VSAT) has been awarded a $5.75 million Indefinite-Delivery/Indefinite-Quantity (IDIQ), firm-fixed-price contract for tactical data link and satellite communications equipment and engineering support services from the Space and Naval Warfare Systems Center Atlantic, Charleston, S.C. The contract combines purchases for the U.S. Navy (75 percent), and the government of the Republic of Turkey (25 percent) under the Foreign Military Sales program. The contract has an initial ceiling of $5.75 million through June 30, 2011, and all work will be funded and authorized by separate delivery orders.

This award includes contract options that, if exercised, would bring the cumulative ceiling of this contract to an estimated $29,999,500. If all options are exercised, work could continue until June 2015.

About ViaSat (www.viasat.com)

ViaSat produces innovative satellite and other digital communication products that enable fast, secure, and efficient communications to virtually any location. The company provides networking products and managed network services for enterprise IP applications; is a key supplier of network-centric military communications and encryption technologies and products to the U.S. government; is the primary technology partner for gateway and customer-premises equipment for consumer and mobile satellite broadband services; and owns WildBlue, the premier Ka-band satellite broadband service provider. ViaSat also offers design capabilities and a number of complementary products including monolithic microwave integrated circuits and modules, DVB-S2 satellite communication components, video data link systems, data acceleration and compression, and mobile satellite antenna systems. ViaSat is based in Carlsbad, CA, has major locations in Duluth, GA, Germantown, MD (Comsat Laboratories), and Greenwood Village, CO (WildBlue), along with additional field offices and service centers worldwide.
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Fourth C-130J Heads Home To Norway

Fourth C-130J Heads Home To Norway
July 1, 2010

MARIETTA, Ga., - Norway's fourth C-130J leaves the Lockheed Martin [NYSE: LMT] facility in Marietta. Norway placed a contract in November 2007 for four C-130J Super Hercules through the Foreign Military Sales (FMS) program. The first was delivered in November 2008. The new fleet enables Norway to meet its national airlift mission requirements and missions in support of international organizations like the U.N. and NATO.

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