Defense Department Willing To Do KC-X With Only Boeing Bid
Secretary of Defense Gates made the rather astonishing statement that only one bid would be acceptable for the KC-X contract. This will make it...DDG-51 Construction To Continue By Northrop Grumman
Filed under: Business Line, Companies, Contract Awards, Department of Defense, Events, General Dynamics, Northrop Grumman Corp., Services, U.S. Navy, production program
Due to the restructuring of the plans for the new U.S. Navy destroyer program the U.S. Department of Defense decided to continue building the DDG-51 Arliegh Burke Class ships. Originally this ship was to end its production as more DDG-1000 were ordered and delivered. The Obama Administration and Secretary of Defense Gates decided to cut back on the plans as the program was running late and over budget. To make up for these changes it was decided to keep building DDG-51 class ships.
These ships are made by either Northrop Grumman or General Dynamics at their respective yards. Northrop Grumman received recently a contract to provide long lead materials for the next ship they will build, DDG-113. The contract has a value of over $100 million. The Arliegh Burke’s have been in service now for almost two decades and the DDG-1000 would have been larger, more stealthy and with newer systems. The DDG-51 are certainly capable and have been upgraded as time has passed.
Orbital Earnings Take A Hit
Filed under: Boeing, Business Line, Companies, Department of Defense, Earnings, Events, Federal Budget Process, IT, Military Aviation, Orbital Systems, S&T, SAIC, Satellites, Services, development program, logistics, missile defense, production program, space
Due to some restructuring of its work due to the Obama Administration’s efforts to reorient defense spending Orbital Sciences Corporation reported a downturn in revenue and operating income in its most recent quarterly results. The company saw a missile defense contract ended and some delays in satellite work leading it to reduce its estimates for the full year.
Of the major defense companies reporting so far results have been mixed. Some have seen better quarters then others. The effects of the major changes planned by Obama and Secretary of Defense Gates may take some months to have effect. The large programs they have ended will still be paying termination costs to the companies as they figure out what fees are needed and what work will be paid for. There are also chances that new contracts will be awarded in the next year or so.
Several programs will be continued in another form it may take two or three years for the next iteration to start. The Army’s Future Combat System (FCS) contract with Boeing and SAIC ended but the technology and work has been inserted into a new program. The contracts for the new program have not been fully awarded, so Boeing and SAIC may end of with revenue from that effort. In the end despite the cancellation the companies may not end up losing much revenue.
Lockheed Plans Further Job Cuts Due To VH-71 Ending
Filed under: Business Line, Companies, Congress, Countries, Department of Defense, Events, Federal Budget Process, Finemeccanica, Italy, Lockheed Martin, Military Aviation, New York, Restructuring, Services, States, Suspensions, U.S. Marine Corps, U.S. Navy, development program, production program
Lockheed Martin had already cut over one hundred jobs at their Upstate New York facility in Owego. This was mainly due to the decision by Obama and Secretary of Defense Gates to end the VH-71 New Presidential Transport helicopter program. Even though the aircraft was made in Italy Lockheed did all the modifications and integration in Owego.
Despite a great deal of argument and pressure to keep the program going in some form or another the contract was recently terminated. Lockheed is now saying that another seven hundred and fifty people may lose their jobs. Right now they are looking for people to voluntarily leave or retire with a promise of severance. The plan is to begin the layoffs in July based on how many people agree to leave voluntarily.
One of the arguments against ending this and other production programs is that they will just add to the joblessness during the current recession. Of course the defense budget is not really a jobs program and that is fairly poor reasoning to continue spending billions of dollars on a system that does not meet requirements. It is still possible that Congress will pass some form of spending that will keep pieces of the program alive in the 2010 defense budget but that will not be finished until the Fall.
Navy Continues Laser Investment
Filed under: Boeing, Business Line, Companies, Contract Awards, Department of Defense, Events, Raytheon, S&T, Services, U.S. Navy, development program, missile defense
The U.S. Navy continues its investments into free electron lasers by awarding Raytheon a $150 million contract to develop a system for them. This follows a similar contract given to Boeing in April. While lasers seem science fiction when it comes to using them as weapons there has been significant research done on several applications.
The most advanced in the U.S. was the Airborne Laser (ABL) system for missile defense made by Boeing. This program was recently canceled by Secretary of Defense Gates. All of the U.S. services have made efforts to build weaponized systems. The Navy makes the most sense as a ship is able to carry the large amount of chemicals needed for that type of laser as well as provide plenty of power.
There should be many more contracts like these in the future.
TSAT Contract Latest To Be Ended
Filed under: Booz Allen Hamilton, Business Line, Companies, Congress, Department of Defense, Events, Federal Budget Process, Lockheed Martin, S&T, Satellites, Services, U.S. Air Force, development program, space
Secretary of Defense Gates announced that in the FY10 budget plenty of different programs would be ended. Unlike previous administrations who decide to de-fund a contract in next year’s budget but let the current year play out Gates has aggressively ended the contracts. The latest one announced was the U.S. Air Force’s Transformational Satellite Communications System (TSAT).
When the budget plans were announced in April the plan was to end this system and begin development of two new separate systems for the same mission. The TSAT like most military satellite and space programs had suffered delays and cost problems. They were not insurmountable but as time goes by the Pentagon often looks at different or new requirements that the older planned systems may not meet.
So following in the footsteps of the VH-71, Future Combat Systems (FCS) and the Kinetic Energy Interceptor (KEI) programs the TSAT contracts were terminated for convenience today. There were two separate contracts — one with Lockheed Martin for mission operations systems and one with Booz Allen Hamilton for systems engineering.
One idea of doing this so fast is to prevent Congress from keeping the program alive through continuing funding despite the Pentagon’s request. Without an active contract it will be hard to do this in the next year. More to come on all of these various moves as the budget makes its progress.
JSF Second Engine Fighting For Its Life
Filed under: Business Line, Companies, Congress, Contract Awards, Department of Defense, Events, Federal Budget Process, GE, Military Aviation, Pratt & Whitney, Restructuring, Rolls-Royce, Services, U.S. Air Force, U.S. Marine Corps, U.S. Navy, UTC, development program
One of the programs cut by Secretary of Defense Gates’ in his proposed budget is the second source for the F-35 engine. This has been a controversial program since its inception. Now with the plan to end the program Rolls Royce and General Electric are arguing it is cheaper and more sensible to continue the program.
The Air Force and Navy have always been ambivalent about the program but Congress has kept it funded. The fact that Congress cuts aircraft production to find the funding has raised the hackles of some people. Now that the Defense Department has decided to end the program the contractors, and their allies in Congress, are arguing that most of the planned money has been spent and the program should at least complete development.
Of course if the engine did go into production and was used to power some of the JSF aircraft to be used by America and its allies the amount of revenue available to GE and Rolls Royce as well as Pratt & Whitney who make the primary engine would be quite substantial. The second source providers say that the bulk of the $3.5 billion allocated to the program has been spent so rather then terminating the program at some cost just complete it.
As with all of these programs recommended for termination it will be Congress who will have the last say in the budget. But since Gates moved quickly to halt the contracts for FCS and VH-71 it wouldn’t surprise me to see a stop work order on this one as well.
Obama’s Budget Hits Orbital Hard
Filed under: Boeing, Business Line, Companies, Congress, Department of Defense, EADS, Events, Federal Budget Process, MDA, Northrop Grumman Corp., Orbital Systems, Restructuring, Services, development program, missile defense, space
Orbital Sciences stock took a pounding last week as one of its major programs was proposed to be canceled by Obama and Secretary of Defense Gates. Missile defense programs along with the F-22 and FCS wheeled vehicles took the biggest in the budget. If the budget moves forward with the planned ending of major programs other companies may see their stock affected.
The upside though is that if the restructuring of the budget goes forward it will provide opportunities for other companies. There will also be new programs eventually as the need for some of these — like the VH-71 — are still there. The next big contract that seems will be awarded is the KC-X tanker replacement some time next year. A new competition will be held between EADS and Boeing. Currently it looks like the award won’t be split as some had hoped for.
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.
KC-X Competition to Restart Soon
Filed under: Boeing, Business Line, Congress, Contract Awards, Department of Defense, EADS, Events, Federal Budget Process, GAO, Military Aviation, Northrop Grumman Corp., Proposal, Protest, U.S. Air Force, commercial aviation, development program, logistics, production program
Secretary of Defense Gates testified today to Congress as he continues his role with the new Obama administration. Reuters reports that Gates said the KC-X tanker competition would restart this spring with an expected award date in the first or second quarter of Fiscal Year 2010. If you remember the original contract was awarded to a team of Northrop Grumman and EADS but Boeing protested and the GAO upheld it. The original plan to conduct a recompete in late 2008 was postponed with a decision to wait for a new administration. One key change is that DoD will handle the proposal and source selection instead of the U.S. Air Force.
We’re still in, says EADS
Filed under: Boeing, Contract Awards, Department of Defense, EADS, GAO, Military Aviation, Proposal, Protest, U.S. Air Force, commercial aviation, logistics, production program
Denying a report in a German magazine, reported here, EADS restates that they will remain competitors for the KC-45 contract. Secretary of Defense Gates recommended postponing the reopening of the KC-45 bid process until next year when a new administration will be in power. EADS was reported as not wanting to participate in future contract proposals if the current one was delayed. The company is now saying that that is not the case.
See CNNMoney.com for that story.
SecDef says KC-45 meddling by Congress may provoke retaliation
Filed under: Boeing, Contract Awards, EADS, GAO, Military Aviation, Northrop Grumman Corp., Protest, U.S. Air Force, logistics
According to this story during testimony about the FY09 Defense budget Secretary of Defense Gates warned that adding a requirement to contract awards for US jobs would only provoke retaliation by US allies in Europe and Asia. Currently Federal procurement law does not have increasing or protecting US jobs as a consideration for evaluating and awarding contracts. Congress can certainly add that to the law, and some have mooted they will, but it would come at a price. The US defense industry is now dependent on non-US companies for many parts and products. US allies are also dependent on US companies for a large amount of their systems as they do not have the capability to produce them. Any attempt by the US government to prevent foreign companies from competing could backfire and reduce the market for US companies. As we have stated here many times with the consilidation in the US industry in the Nineties it is hard to get decent competition for these kind of procurements. Only Boeing, EADS and Russian companies could have bid on it; McDonald Douglas is long gone, so Congress needed to expect this kind of situation.
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