Navy Issues Order to Babcock & Wilcox Company for Nuclear Power Components

Babcock & Wilcox (B&W) announced that the U.S. Navy executed an option on a contract they were awarded in 2010 for nuclear reactors and fuel for Navy aircraft carriers and submarines. The order was from the FY12 budget and has a value of $600 million. The contract if all options are exercised is worth about $2 billion.

The Nuclear Operations Group of B&W supports not only propulsion plants for the Navy’s ships and submarines but also R&D and component production. It also sells to the civilian nuclear power industry as well as conventional power plants.

B&W has been designing, manufacturing and installing boilers and steam plants for use in power generation and ship propulsion since the middle of the 1800’s. In 2008 it acquired Nuclear Fuel Services, Inc. as a subsidiary to expand its products into nuclear fuel.

The U.S. Navy now operates only aircraft carriers powered by reactors as well as a large submarine fleet. These require periodic refueling. The U.S. is also planning to continue to construct several new aircraft carriers and submarines over the next ten years which will also require power plants.

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Navy Awards Northrop First Shipboard Network Contract

.The U.S. Navy awarded Northrop Grumman (NOC) a contract to install their proposed solution to the Consolidated Afloat Networks Enterprise Services (CANES) requirement on a unit. Lockheed Martin (LMT) had submitted a proposal as well to meet this requirement. The goal of cANES is to be a standardized network on U.S. Navy ships and submarines replacing the current mix of systems.

The initial contract is worth about $36 million but will all options executed it could be worth over $600. The Navy is planning on outfitting 54 ships to begin but the CANES could support over 300 systems in the end.

The goal is to have the first installation complete by the end of FY12. This will follow completion of necessary testing and certification to support a Milestone C Low Rate Initial Production (LRIP) Decision. The first contract will cover 2 destroyers and an amphibious warfare ship.

The Navy plans ot have limited production in 2012-2013 with a larger contract competed again at the end of FY13 to support Full Rate Production. Then there will be a further contract for engineering support.

Northrop will use as a sub-contractor their former ship building division now separated as a new company, Huntington Ingalls Industries (HII) to do the actual installation and integration on ships.

The CANES contract has been in work for several months with development contracts awarded to Northrop and Lockheed in March of 2010. These led to delivering systems of which Northrop’s was chosen for the first production deliveries.

Photo from Official U.S. Navy Imagery’s flickr photostream

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General Dynamics to Support Future Submarine Design

Due to the amount of new warships being built every year the number of suppliers is fairly limited. The U.S. Navy relies on two companies to build large warships, General Dynamics’ (GD) Bath Iron Works, and Huntington Ingalls Industries (HII), which formerly was part of Northop Grumman (NOC). GD is the only builder of submarines at their Electric Boat Division. The requirements are not enough to support any more companies.

The smaller ships like the Littoral Combat Ship (LCS) are being built by smaller contractors as they need less intensive facilities but for any ships bigger the Navy must rely on these defense contractors.

This is not only for future production but also for the design and development of new ships and submarines. That is why GD’s Electric Boat Division received a contract to continue work on developing the new “Common Missile Compartment” for potentially both the U.S. and the United Kingdom’s future ballistic missile submarines. The contract is worth about $190 million but has the potential to be over $700 million if all options are exercised.

Even though the U.S. defense budget is supposed to decline in the next few years the services must maintain some investment in future systems. That means that work like this must be done even if the new submarine is not ordered anytime soon. The U.S. needs to built a certain number of new ships and submarines each year to maintain their fleet and keep it reasonably modern.

While ships may be upgraded and have service lives of 25 or more years new technological developments mean that there has to be some new construction. GD and HII will be relying on this to keep their facilities and workforce employed.

Photo from Official Navy Imagery’s Flickr photostream.

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Lockheed Martin to Support Guam Amidst Expansion

Many of the U.S. military facilities and bases sign omnibus support contracts which have one or a team of companies manage all of the infrastructure and support for the operation. For some places like territories or important bases geographically isolated such as Kwajalein Atoll these contracts extend to the whole island. In Guam the base operating service contract is managed by Lockheed Martin (LMT) with the support of local and other contractors.

Lockheed’s team just received a new contract DZSP 21 worth almost $500 million to provide support to the U.S. Naval Base, Air Force Operations as well as various infrastructure such as food services, utilities, emergency services and so on. This one year contract now makes Lockheed and its support contractors the fourth largest employer on Guam with over 1,000 employees.

Guam has seen heavy use in Afghanistan as it provides a base for long range Air Force bombers and tankers. It also provides support to forward deployed Navy ships and submarines. The requirements of the fighting since 2001 have required expansion of its facilities and capabilities.

More importantly Guam is receiving a massive transfer of troops, dependents and equipment from the U.S. Marine Corps and Navy who are currently based on Okinawa. As part of a long negotiated agreement with Japan the U.S. is reducing its footprint on that island captured at the end of World War II. Because of this transfer Guam will have to see new facilities such as hospitals, utilities and housing built along with a bigger port. Some of this is being paid for by the U.S. and some by Japan as part of the agreement.

The size of the one year contract awarded to Lockheed shows indicates how much more potential growth there is in DZSP 21 once the transfer of all of the Marines and other personnel is complete. Unless the U.S. backtracks on its plans or reduces the forces deployed overseas then this contract or its follow-on ones should see significant growth.

Photo from janineomg’s flickr photostream.

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Cardinal Health Receives Contract from DoD

The U.S. Department of Defense and its services and agencies buy many things from thousands of vendor. These range from advanced combat aircraft that cost over $100 million each such as the F-35 Lightning II to boots and IT support. Some of these contracts are huge but they happen and nobody really notices or remarks because they purchase mundane items. Such is the contract just announced with Cardinal Health (CAH).

The military runs several healthcare systems. They have clinics and hospitals at their bases to treat active duty members, their dependents and retirees. They have a complex system of field and evacuation hospitals to treat combat casualties and they have medics and corpsman in the field directly with Soldiers and Marines as well as on ships and submarines. Military medical personnel also treat refugees and people across the world as part of building goodwill. They employ thousands of medical personnel and use all sorts of supplies and equipment to carry out this part of their mission.

Cardinal Health is one of the major suppliers of pharmaceuticals and medical products in the United States. They sell not only basic medical supplies and drugs but also surgical equipment, apparel, as well as services to manage care and supply chain management.

They provide these products to companies like Walgreen Co. which they have a major distribution agreement with that was just renewed. Walgreen and CVS Caremark are two of the companies biggest customers.

Its subsidiary, Cardinal Health 200 Inc., won a two year contract worth over $1 billion to provide medical surgical supplies to the Defense Department. Even in a day and age of $700 billion annual defense budgets that is a contract not to overlook and demonstrates that the U.S. must invest in more then weapons.

The other thing that must be considered for companies like Cardinal is that once the fighting ends in Iraq and Afghanistan the demand for products like theirs should decline. Future defense budgets may see reductions and this is one area that may be cut. The company like many others must be prepared for the loss of this business and adjust.

Photo from exfordy’s flickr photostream.

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Northrop Grumman Goes Ahead with Plan to Exit Shipbuilding

Last year Northrop Grumman (NOC) one of the last two major companies building ships and submarines for the U.S. Navy announced that it would explore separating that part of their corporation. Based on their analysis of future Navy plans for building ships they decided that it would not make sense for them to stay in that business. Management had said that they might sell the whole unit to another company and some other bidders did emerge.

It was felt by some analysts that if Northrop did divide their corporation this way it would set the remaining core company on a path of potential merger with another large contractor such as Boeing (BA). This began to spark concerns that another major round of consolidation was about to happen leading to further shrinkage of the U.S. industrial base. This in turn led to the Department of Defense to state that they would prefer this kind of move not to happen and that the big defense contractors who provide most of the hardware to the U.S. military remain.

Northrop has decided in a way to partly to mollify these concerns to spin off their shipyards into a new company owned by its shareholders. The establishment of Huntington Ingalls Industries would mean that twenty percent or so of Northrop would now reside in the new company. This follows the letting go of TASC two years ago due to Conflict of Interest concerns which had represented another $1.8 billion of business for Northrop and had been a growth area for the company.

The decision to set up the new company rather then sell it to a rival was coordinated with the Navy and is considered by them one way of maintaining both competition and the industrial base in their supporting builders.

Right now the Navy is limited in what they are buying with the largest program in number of ships being the Littoral Combat Ship (LCS) program which is built in smaller yards managed by Mariette Marine and Austal America. The new Huntington will compete for destroyers, submarines and aircraft carriers the number of which ordered will be very small for the foreseeable future.

If the U.S. defense spending does decline in the next few years there will be some consolidation in the defense industry. There has already been a great deal of smaller companies involved in M&A and it would not surprise anyone if one of the larger ones did combine with another. There are only so many programs out there and competition will be fierce for them. The budgetary pressures that the U.S. faces with the current deficits means some sort of cuts will be made especially once the troops return from Afghanistan and Iraq.

Photo from Kevin Burkett’s flickr photostream.

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Curtiss-Wright to Support New Submarine Construction

March 8, 2011 by · Comment
Filed under: Business Line, logistics, production program 

The U.S. Navy relies on General Dynamics (GD) to manufacture their nuclear submarine force. That company though then sub-contracts out for thousands of different systems and parts which rely on a network of different contractors and companies to build and supply. One of the largest sub-assemblies of the boats are their nuclear propulsion systems which for the next two Virginia class attack submarines will be made by Bechtel Plant Machinery which is part of Bechtel Corporation.

Nuclear plants for ships and submarines like all steam based systems require large amounts of pipes and valves which Bechtel is then ordering from Curtis-Wright Corp (CW). They recently signed a sub-contract with Bechtel that could be worth up to $66 million if all options are exercised and the Navy buys four more submarines. The initial order is for two of the class.

Each major system that the U.S. military and other countries buy has a massive trickle down and multiplier effect. Many different companies and contractors are involved in providing the parts, analysis and support that lead to the delivery of an actual aircraft, ship or armored vehicle. Due to the unique and specialized nature of some of these items such as the valves Curtis-Wright will supply there are only limited sources for some items.

The U.S. defense industrial base’s size and capabilities have been diminishing since the end of the Cold War in 1991. This is why the European defense contractors have penetrated the market since the build up for post-9/11 fighting in Iraq and Afghanistan as they provided needed capability and competition. While there is an expected decrease in U.S. defense spending the nation must maintain some level of capacity in case there will be a need for a ramp up again which requires a certain level of investment in new systems and research and development.

Photo from U.S. Navy’s flickr photostream.

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Latest CRA Allows Navy to Use Multiple Sources for LCS

In the on again off again tale of the Navy’s new small combatant Congress approved the revised acquisition strategy of using multiple sources for the next twenty ships. In the latest Continuing Resolution Authority (CRA) passed by Congress Tuesday and signed by President Obama the Navy is given permission to buy ten Littoral Combat Ships (LCS) from Lockheed Martin (LMT) and Austal America (ASB:AU).

Lockheed will team with Marinette Marine Corp. of Michigan while Austal originally worked with General Dynamics (GD) for the first four LCS but for this round of bidding submitted their own. General Dynamics had decided that for future contracts they might bid by themselves.

Ten days ago the Navy had asked the two bidders to extend their prices while asking Congress for this change in strategy from the plan to buy the next batch of LCS from a sole source. The prices offered were so good that the Navy had decided to try and return to the original LCS acquisition strategy of multiple sources.

Because the plan is to buy fifty or more of the ships the idea of having two or more builders of the small ship would maximize the number being delivered. While the two hull designs are very dissimilar the overall combat load out is the same. The LCS will be optimized for fighting close to shore and be able to carry different equipment so that it may carry out missions such as mine sweeping, anti-piracy as well as fighting other ships and submarines.

The decision is a boon to the U.S. ship building industry as it guarantees work at least for the next few years to two yards rather then one.

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Alion Awarded $6.3M NAVSEA Contract to Provide Shock and Environmental Test Support for Navy Ships and Subs

December 6, 2010 by · Comment
Filed under: Syndicated Industry News 

MCLEAN, Va.–(BUSINESS WIRE)–U.S. Navy ships and submarines are often subject to extreme environmental conditions and stresses, so effective testing of equipment is essential to the operation of those vessels. To support this need, Alion Science and Technology, an employee-owned technology solutions company, was awarded a three-year, $6.3 million contract from the Naval Sea Systems Command (NAVSEA) to identify potential improvements to shock and environmental test procedures for all Navy surfac

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General Dynamics Awarded U.S. Navy Common Afloat Local Area Network Infrastructure (CALI) Contract

General Dynamics Awarded U.S. Navy Common Afloat Local Area Network Infrastructure (CALI) Contract
June 3, 2010

Experienced team will sustain ship and submarine computers and data networking infrastructure with COTS-based equipment and systems.

TAUNTON, Mass., -General Dynamics has been selected by the U.S. Navy's Space and Naval Warfare Systems Command (SPAWAR) to compete for future orders under the Common Afloat Local Area Network Infrastructure (CALI) indefinite delivery/indefinite quantity (IDIQ) multiple award contracts.

Under the CALI IDIQ contracts, contractors will provide ships and submarines with Common Computing Environment (CCE) Components, Integrated Logistics Support (ILS), Configuration Management (CM), Test and Evaluation (T&E), Quality Assurance (QA), and Installation Support. Specific requirements will be defined in individual orders. As one of three awardees under the CALI initiative, General Dynamics (NYSE: GD) will lead an experienced team in delivering secure, commercial-off-the-shelf (COTS) hardware, software and networking equipment. Each CALI contract has a total potential value of $502 million if all options are exercised.

The CALI contract enables the delivery of equipment and systems to provide a bridge between currently deployed systems and the Navy's future Consolidated Afloat Networks and Enterprise Services (CANES) program.

Mike DiBiase, vice president and general manager of Computing Technologies for General Dynamics C4 Systems, said, "General Dynamics is an established Navy contractor with relevant programs such as the Automated Digital Network System, Increment III (ADNS), the Acoustics Rapid COTS Insertion (ARCI) program and the Common Submarine Radio Room (CSRR) program. The General Dynamics CALI team is structured to deliver cost-effective shipboard systems that best support the Navy's emerging mission critical computing and infrastructure needs."

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Lockheed Martin Selected to Compete for Support of the U.S. Navy’s Common Computing Environment

Lockheed Martin Selected to Compete for Support of the U.S. Navy's Common Computing Environment
June 1, 2010

SAN DIEGO, -Lockheed Martin (NYSE: LMT) is one of the companies selected by the Space and Naval Warfare Systems Command (SPAWAR) to compete for future orders under the Common Afloat Local Area Network Infrastructure (CALI) indefinite delivery, indefinite quantity (IDIQ) multiple award contracts.

Lockheed Martin will compete for orders within the contract ceiling of $502 million from 2010 through 2017, inclusive of a four year option period.

Under the CALI IDIQ, contractors will sustain Navy computing network systems for the next seven years until the Navy's new Consolidated Afloat Network Enterprise Services (CANES) program is operational. CALI provides command, control, computing, communication and intelligence support for U.S. Navy ships and submarines. The contract covers the procurement of common computing environment components, integrated logistics support, configuration management, test and evaluation, quality assurance and installation support.

"We have a demonstrated track record of providing the low risk, best value computing and network solutions to SPAWAR, while our experience partnering with small businesses helps us offer the Navy solutions that are flexible and affordable," said John Nikolai, director of Communications and Workstations for Lockheed Martin Undersea Systems. "This allows us to leverage our extensive experience on the Q-70 program, which included the delivery of more than 7,600 ruggedized shipboard computing units to the Navy."

In March 2010, Lockheed Martin was one of two companies awarded a contract for the next phase of the Navy's CANES common computing environment competition. Under terms of the CANES contract, Lockheed Martin will design, develop and deliver a CANES engineering development model consisting of hardware and associated operating systems, virtualization and commercial software needed in a functional network.

For the CALI program, Lockheed Martin has partnered with small businesses in San Diego, including Epsilon Systems, System Technology Institute, and BlueTech, Inc.

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Greece Loses Submarine Contracts

Normally it is the government customer who ends a contract for non-performance or because they cannot afford it anymore. Today it was announced by ThyssenKrupp that the shipbuilder was ending a contract with Greece for new construction as well as upgrading existing ships and submarines. The company claims that the Greece Ministry of Defense has failed to pay them for the work done.

The original contract was for the construction of four advanced diesel electric submarines as well as modifying and upgrading three older ones already in use by Greece. In 2007 the first new submarine was ready but Greece didn’t take delivery and refused payment. ThyssenKrupp has been trying to go into arbitration over the deal but has now decided to go ahead and cancel the contract. The company has seen major contraction and loss of business due to the global economic downturn.

The Greek government is blamed for failing to negotiate or move out on the contract. There is an election upcoming and the opposition is expected win and has used this issue as part of their campaigning.

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