Army To Stop Buying AM General’s HUMVEE Vehicles
Filed under: AM General, Business Line, Companies, Events, Federal Budget Process, Services, U.S. Army, logistics, production program
In their 2011 budget request the Army reports that 2011 will be the last year of procurement for the ubiquitous AM General HUMVEE light truck. This four wheeled vehicle replace the venerable Jeep in U.S. military service in 1984. The HUMVEE will still be available for purchase by other U.S. services and for sales overseas but the Army states it has met its Acquisition Objective. There will also be contracts to maintain the existing fleet of vehicles.
The Army though does provide about half the market for the vehicle so the loss will be a blow to AM General. There is a new program in development called the Joint Light Tactical Vehicle (JLTV) that will when complete start replacing the HUMVEE. The U.S. is also investing in thousands of new trucks. Losses in Iraq and Afghanistan have been substantial but one of the reasons HUMVEE production is ending is recently there have been less damaged or destroyed then estimated.
Founder of the Fairness in Procurement Alliance (FPA) Publishes OP-ED on Small Business Forum
Mr. Raul Espinosa the Founder and Chief Visionary Officer of the Fairness in Procurement Alliance (FPA) had an OP-ED published at OhMyGov.com on twelve specific recommendations by the FPA Think Tank at UNF highlighting the work of The Umbrella Initiative whose goal is “to double the number of small business doing business with the government by the year 2020.”
You may find the OP-ED here.
Northrop Threatening No Participation Over Cost Data
Filed under: Alabama, Boeing, Department of Defense, EADS, KC-X, KC-X Tanker News, Northrop Grumman Corp., Proposal, Protest, Syndicated Industry News
Yesterday Northrop announced that it is considering not participating in thew new KC-X competition. They are concerned that the the way the price requirement is structured may not be fair to them. They are also pursuing the complaint that their cost data was provided to Boeing during the protest of the last award and want access to the same information.
If Northrop and EADS don’t submit a bid it will be hard to get actual competition on the contract. That would leave just one submission, Boeing, or perhaps two from them if they go the route of having a 777 as well as a 767 proposal. This situation would make it hard for the Air Force to proceed.
The chances of Northrop doing this is low and the Department of Defense realizes it. This is the largest procurement coming down the road and both EADS and Boeing need the work. Of course if there is really a belief that their bid cannot win no matter what then Northrop should just save the money and not prepare one. This is only the draft RFP so the next year or so should be interesting.
Earmark Proposed For Elbit To Upgrade CH-53D Aircraft
Filed under: Business Line, Companies, Congress, Editorial, Elbit, Events, Federal Budget Process, Military Aviation, Services, States, Texas, U.S. Marine Corps, production program
The U.S. Marines like the Army have been heavily stressing their helicopter fleet in Iraq and Afghanistan. That service has begun to upgrade their lift capability with the procurement of CH-53K and V-22 aircraft. At the same time they have refurbished their older CH-53D aircraft to maximize their use.
Elbit makes a display that has been fitted into many Army and Marine helicopters already called the ANVIS-HUD. The Marine Corps did not have the money available in their budget to add this to the CH-53D as part of their refurbishment. Now the local Congressional Representative, Kay Granger (R-TX), has proposed a $22 million earmark to do this.
This illustrates one of the issues with earmarks. Sometimes they can be used for good things that the services may not have available funds for. Not all earmarks are for blatant waste or fraud like those that make the headlines. There are also cases where the company or the Service have lobbied Congress to include these kind of marks.
Ideally the budget would be planned by the Services, OSD and the President and Congress would do little to change it. That is not possible as the Constitution gives the House the authority to start all funding bills. What is in the bill is what is given to the Executive Branch at the end. Earmarks are a part of this process. As this example shows though not all earmarks are bad and they can buy useful capability for the military that might not be able to fit in the regular budget.
CH-53 photo by Flickr user Obskurantist.
Fixed Price for DDG-1000
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.
U.S. Department of Defense Still Not Sold on Split Tanker Buy
Filed under: Boeing, Business Line, Companies, Congress, Contract Awards, Department of Defense, EADS, Events, Federal Budget Process, GAO, Proposal, Protest, Services, U.S. Air Force, development program, logistics, production program
Responding to growing pressure from Congress and some in industry to the idea of splitting the KC-X tanker procurement between Boeing and EADS Secretary of Defense Gates said that the idea would be bad policy. The Hill reports that any cost savings from more rapid production would be offset by the increased logistical tail of having two separate systems. In this day and age when the quantities of equipment purchased is minimal the U.S. cannot afford a dual source for one mission. While some have said that this proposal would more rapidly field capability a split fleet would require two supply chains, training networks and support networks. More will be found out when the Obama administration releases its FY10 budget proposal in the near future.
Norweigian Left Supports JSF
Filed under: Contract Awards, Lockheed Martin, Military Aviation, Norway, development program, production program
Aftenposten writes that the far left party, Socialist Left Party, will not stop the procurement of the JSF fighter by the government. Norway is considering the JSF to replace its F-16 fleet, although Sweden has also made an unsolicited offer with the Gripen aircraft. The decision as to which aircraft will be purchased will be made by the end of the year. There was some concern that the Socialist Left would not support buying the US aircraft, preferring the Gripen. They accept though that with Norway being part of NATO it may influence the decision.
English government procurement rules too inflexible for most businesses
The English government has been trying to expand the participation of small businesses in its procurements. Now a survey of 500 small and medium businesses finds that most are not willing to make the effort to bid on government work due to the complexity and formality of the procurement process. This has also been a criticism in the US. The government RFP, proposal and evaluation process is too complicated most businesses to make the effort. One advantage that the US does have over the UK is that they do not charge companies for access to their listings of available contracts. Most of that is now done via the web for free.
See this article in printweek.com for more.
Gates gives up
Filed under: Boeing, Contract Awards, Department of Defense, EADS, Federal Budget Process, GAO, Military Aviation, Northrop Grumman Corp., Proposal, Protest, U.S. Air Force, commercial aviation, development program, logistics, production program
The Secretary of Defense today canceled the KC-45 re-proposal. He decided that there was not enough time to do this before the end of President Bush’s second term. The announcement was made via a press release this afternoon. Secretary Gates stated that ““It has now become clear that the solicitation and award process cannot be accomplished by January,” he said. “Thus, I believe that rather than hand the next administration an incomplete and possibly contested process, we should cleanly defer this procurement to the next team.”
This decision ends temporarily a seven year saga that started with Boeing being given a lease for 767 tankers, through a proper competition that was thrown out by the GAO, and what was expected to be a quick recompete starting this month.
See the actual release at DefenseLink.mil.
ARH in jeopardy
Filed under: Bell, Congress, Department of Defense, Federal Budget Process, Military Aviation, Restructuring, U.S. Army, development program
The soaring costs of the ARH program have caused a Nunn-McCurdy Cost Breach. See a story here. The 40% increase in unit cost has caused the Army and DoD to rethink, again, proceeding with the contract. Nunn-McCurdy cost breaches were established in the 80’s as part of the overall reform of Congressional monitoring of programs. Read more
UAVs ordered by Special Operations
Filed under: Contract Awards, Heckler Koch, Military Aviation, US SOC, production program
The US Special Operations Command awarded a contract to buy small UAVs. See an article here. AeroVironment will provide their small Puma AE to the command. This illustrates that the USSOCOM is a separate entity within the DoD and can do its own acquisition. In the past they would have to rely on the main services to procure their equipment, but they now have their own development and procurement funds. The most recent key split between USSOCOM and the Army was the decision to go with a different rifle then the M4/M16. The Special Ops guys bout HK’s SCAR. For more on that see this.
Air Force orders HC/MC-130 aircraft
Filed under: Contract Awards, Lockheed Martin, Military Aviation, U.S. Air Force, production program
The US Air Force placed a contract wit Lockheed Martin for six HC/MC-130J aircraft. This $470 M award was using the FY08 Advanced Procurement with the rest of the order being paid for in FY09. See a press release here. These aircraft will most likely support operations by US Special Forces Command, and are a variant of the C-130J that has been purchased by the USAF, Marines and foreign companies for the last few years.
Stryker is fully funded
Filed under: Federal Budget Process, U.S. Army, production program
This article says that the FY09 Defense Budget includes $1 B for the Stryker system. I am assuming that this means all types of funding, not just procurement. $1 B would buy a lot of Strykers, but this amount probably includes the Operations & Maintenance and any R&D funding for the program. As a good example of an article that highlights how important contracts are to an area it brags about the jobs “saved” by the budget. The local Congressman takes credit for the funding. One hopes that the DoD budgets based on need and requirements, not as a job program.
Lockheed gets long lead contract for JSF
Filed under: Contract Awards, England, Lockheed Martin, Military Aviation, development program
Lockheed Martin was awarded a $197 M contract for long lead items for 10 JSF aircraft. See the story here. These will be procured for the US Navy and the UK. These are the version capable of Vertical Take Off and Landing (VTOL) operations. Ultimately they will replace the Harrier in service. Like many programs there are certain items that need to be purchased far in advance of delivery and these long lead items are usually funded incrementally from year to year. Aviation programs will receive Advanced Procurement in the budget to support these activities.
V-22 money spread around
Filed under: Bell, Boeing, Contract Awards, Eaton, Military Aviation, U.S. Air Force, U.S. Marine Corps, production program
As part of the recent procurement of 167 V-22 Osprey’s by the USAF and USMC the Boeing led team will buy parts from Eaton. The expected revenue for this company from the contract could be over $300 M. See a story here. Eaton makes parts for the tilt rotor aircraft. This again illustrates the spillover effect from these large procurement contracts. Companies all over the world participate in the production of parts and services for the total systems. Gone are the days where one company does all of the work.
JSF costs levelling
Filed under: Federal Budget Process, Lockheed Martin, Military Aviation, U.S. Air Force, U.S. Navy, development program
On Monday the Pentagon released the annual Selected Acquisition Reports (SAR) this is a formalized report that goes to Congress that details the performance of Acquisition Category (ACAT) ID and IC programs. Congress and OSD can also add programs to the list that don’t meet the ACAT I categories. See the press release here. In a related move the USAF and Lockheed Martin released an audit of the JSF program that shows that cost growth is leveling off. See that story here. Read more
FMS Position posted on DefenseProcurementNews.com
Rakotis.llc posted an opening on our Job Board for a research position looking at weapon system historical pricing. This will support an entity in their negotiations for weapons procurement. For more information see the announcement here.
Jesse Jackson editorilizes in favor of Boeing for KC-X
Filed under: Boeing, Commentary, Contract Awards, EADS, U.S. Air Force, commercial aviation, logistics
In another demonstration of why moving the headquarters of their company to Chicago was a good idea, Boeing gets Jesse Jackson to publish an editorial in The Washington Times in favor of them winning the KC-X contract. See the essay here. The Air Force is supposed to announce the winner by the end of the month. Read more
Pentagon May Begin to Budget Appropriately
Filed under: Department of Defense, Editorial, Federal Budget Process
Since the current war is a “Long War”, it would make sense for the Pentagon to move its wartime expenses into its regular budget appropriation. Currently, the annual appropriation funds the core of the military such as training, bases in America, regular procurement and support. The cost of the war is paid through supplemental appropriations. These are mainly the war’s Operations and Maintenance (O&M) costs and combat loss replacement of hardware. Occasionally the Pentagon will add some R&D and regular procurement into the supplemental requests, but these do not always make it through the process. According to this article at Defensenews.com, there is a proposal to include the costs of the war in the regular budget process. This would start with the FY10 Budget, which would be submitted to Congress in February, 2009. No idea if the next President would support this.
Il procurement per la difesa al primo punto dell’ordine del giorno all’International Armoured Vehicles – secondo Defence IQ
Filed under: Syndicated Industry News
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