Defense Procurement News

The House Appropriations Committee marked the FY09 budget before taking their August recess.  See a story here. The Army’s struggling Armed Reconnaissance Helicopter (ARH) program was marked to delete 13 aircraft, and the Navy’s Presidential Helo was also decremented. The House also ordered that consideration of jobs would be a criteria for the source selection of the KC-45 tanker. Boeing won its protest of the award to Northrop-Grumman and EADS and forced DoD to reconsider the contract. The Senate needs to also mark the bill and then there will be a Conference mark up as well.

Boeing won a contract to develop the bankrupt Iridium communication satellites for DoD. See an article here. Iridium is a network of low earth orbit satellites that were to be used to provide telephonic communication. Motorola had led the original consortium that put the satellites in orbit, but they company went bankrupt. The Navy Research Lab awarded Boeing a contract to exploit the Iridium satellites to support the GPS network already deployed. DoD has been using the satellites for communications purposes, along with commercial customers.

India has decided to put out an RFP for light helicopters after all the back-and-forth. See an article here. As previously discussed the planned acquisition was canceled, then planned again, and now it will be for a reduced number than the last attempt. Now rather then going with a 100% foreign buy the contract will be split between a non-Indian company and HAL. One positive of this is that they plan to limit the tech transfer, requirements that recently have been seen as onerous, to only those for the support of the aircraft.

Recently the US Navy announced that it was not going to continue the DDG-100 program. Two ships are under construction by Northrop-Grumman and General Dynamics. Not unexpectedly the Senators from the affected states, mainly Massachusetts and Maine, have protested. See an article here. The major recent the Navy cites is the continued cost growth of the program. The first two were projected at under $4 B each, but now the estimates are over $5.5 B. Other than the shipbuilders, Raytheon is the most affected company as it was building the combat system of sensors for the ship. The Navy intends to continue production of the DDG-51 class instead.   Read the rest of this entry »

The Scottish company, WFS, has won a development deal from GD. See an article here. WFS works on advanced radio waves propagation techniques. Like many Europeon companies they have looked to the US and the expanded defense budgets of the last 7 years to gain work. It also again demonstrates that in the long run it is cheaper and more efficient for US companies to look overseas for existing capabilities, rather than develop them internally.

Boeing had been working with Insitu, a Washington state company, on unmanned aircraft. Now it just bought the company. See an article here. Based on reports, Boeing payed quite a premium for the company. Insitu had an estimated earnings last year of $80 M and Boeing reportedly payed five times that for the company. Of course all this is based on anonymous reports as the details have not been made public yet. So if you were able to invest money in Insitu you made it back.

Picture by pfala

This article describes the economic effect of the Army decision to begin pushing components of the multi-system Future Combat System (FCS) out-the-door faster. Due to this decision several hundred million dollars are flowing to Arizona companies earlier then originally planned by the Army. The two systems with the most effect are the non-line of sight missile system that uses a box launcher with integrated fire control and several unmanned systems. The Army benefits two ways by this type of decision; first, they get needed technology upgrades into the field earlier; and secondly they get testing under real world conditions.

Picture by Derek Farr

General Dynamics as part of the Mobile User Objective System (MUOS) satellite base communication network installed the antennas for the first of four groundstations. See a press release here. MUOS will provide a cell phone like communication system through satellites. It will eventually have four ground stations with the first being in Hawaii. This system continues the US focus on upgrading communications through more use of satellites.

Raytheon was awarded a contract today to continue work on Cooperative Engagement Capability (CEC).  See a press release here.  CEC is a natural development of the work the Navy has done with datalinks for the last 50 plus years.  By the Nineties the Navy was able to share the sensor picture from one ship with others over a tactical data link.  Even during the Gulf War this was not good enough for targeting.  CEC’s goal is to develope a netted sensor grid that will support providing a fire control solution good enough that one ship can guide a missile launched from another.  The Navy was installing CEC on selected ships by the end of the Twentieth Century. For more on CEC see this.

Raytheon subcontracted with the small business Sonju Industrial to build missile components. See an article here. Sonju Industrial is a small business and will partner with Raytheon through the Missile Defense Agency (MDA) mentor-protege program. The contract will allow significant growth of Sonju Industrial. This is another example of how defense dollars flow to every part of the US and their significance to the nation’s economy.

The UK government is currently planning on buying Eurofighters and F-35 JSF aircraft to modernize their fixed wing aviation force. There are rumors that the Eurofighter buy may be canceled as a cost savings. See an article here. Eurofighter is built by a multi-nation consortium in Europe with BAE being the most important UK participant. If the contract is canceled, with the Government paying termination fees, that means no major aircraft will be built by BAE. They build parts of the JSF but do not assemble the final aircraft. This would be the end of fighter production in England if it happens until a more advanced aircraft then the F-22 or F-35 comes along.

CombiMatrix received a contract from DoD to continue development of hand-held diagnostic equipment for use in the field. See the press release here. The contract is worth over $900 K. DoD as well as other government agencies are evaluating products based on CombiMatrix’s systems to detect bacteriological and chemical systems. This contract builds upon those earlier efforts.

CNNMoney has a preview of the upcoming earnings report for a variety of US defense contractors. See this for more. Not surprisingly the outlook is good. The US defense budget remains large and will probably not see any downturn until 2010 at the earliest depending on the US election. Rockwell Collins reported yesterday and they came in with 24% improvement over last quarter. See the press release here.

DARPA invested with Northrop-Grumman to develop smart binoculars. See this short note here. The advanced ones will increase the Field of View (FOV), allowing soldiers and sailors to see more of the area. This should provide quicker detection of possible threats. One would think with the fact that these types of optical systems being in use for centuries there would have been earlier attempts to fix this.

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 the rest of this entry »

In light of the GAO report the USAF and DoD decided to recompete the new tanker contract. See an article here. This, like the CSAR-X, means that a whole new competition will be held. The Air Force will rewrite the RFP and Boeing and Northrop Grumman will resubmit proposals. Much of the work preparing these will be already done which will speed up the process for the bidders.

The USMC awarded Lockheed Martin a contract to build advanced, new sights for the AH-1 Cobra helicopter. See a story here. The $50 M contract will begin producing the sights in 2010. The AN/AAQ-30 Target Sight System is a multi-sensor system that will also provide targeting data and guidance for the Hellfire missile system. The US has used attack helicopters with great effect in Iraq and Afghanistan as they can provide a great deal of firepower at short notice. The new sight will extend the engagement range of the aircraft.

Lockheed Martin, who won the next increment of the JTRS AMF, awarded a subcontract to Northrop Grumman to provide technology to support production. See an article here. Earlier this year Lockheed Martin was named the winner of the JTRS AMF radio contract. They now have given Northrop Grumman a subcontract to lead the small airborne radio part of the system.

Lockheed Martin awarded a Norwegian company, Kongsberg, a contract to make parts for the F-35 JSF. See an article here. In an unrelated matter Norway is looking at buying either JSF or Swedish Gripen aircraft to replace their F-16 fleet. Kongsberg will get the contract worth up to $1 B or more even if Norway does not buy the JSF.

India has decided to not continue their indigenous main battle tank program. See an article here. India had developed and put into production their own Arjun system, but have now decided that it is not what they need for the long term. No more production contracts will be placed and they will instead build out the 120 or so on order. They will look to foreign firms for a more advanced system.   Read the rest of this entry »

The UK government, fresh off of awarding the construction contract for the two new aircraft carriers, has now awarded a second major one related to the effort. BAE has been awarded a contract to develop the IT backbone for the ships. See this article for more. This over $500 M contract will develop the system that integrates everything on the ship. Sure to be key as one of the goals of the new design must be to minimize crew size.

This article discusses the effect BAE has had on Phoenix, AZ. It also illustrates how the non-US company has grown through the acquisitions of US companies and has gained more and more US defene business. In Phoenix alone the number of BAE employees has tripled in the last five years or so, and the company has been buying facilities and companies. The article also shows how some in Congress feel a British company is better than a joint German and French, making it easier for BAE to continue to gain work in the US.

The GAO released a summary of why they upheld the protest by Boeing over the KC-45 award. See an article here. The chief reason was due to the Air Force’s failure to properly apply the criteria for source selection. Of the several reasons listed two ones that stand out is that they gave EADS credit for exceeding a requirement when they should not have, and rather than just noting the risk associated with the Boeing bid the Air Force calculated a dollar figure to overcome that risk. This alone drove up the cost proposal of the Boeing K-767 aircraft. The Air Force technically still does not have to withdraw the award to Northrop Grumman and EADS, but they would be best off reopening the competition.

The DARPA and US Army awarded a follow-on contract to UltraCell for continued work on hydrogen fuel cell systems to power military hardware. See an article here. The UltraCell process utilizes methanol and converts it into hydrogen to provide electricity. The current system is used to provide power for laptops, but UltraCell is working on scaling it for use with larger fixed installations. The advantage this offers is that for comparable power the fuel cell is smaller and lighter then existing batteries. There is also no requirement for a separate electrical system to charge the batteries as is currently done.

As we have previously mentioned here and here Michigan has set up various entities to promote the state’s companies for defense contracts. According to this article though the head of the state organization is upset with one of the regional ones for not doing enough. The state hired a retired USMC general to run their organization and now he is raising a dispute over the efforts of one setup for the Western part of the state to the point where he wants to establish his own organization to do the work of the existing one. I guess when you are going out for Federal dollars no effort is wasted.