Defense Procurement News

Lockheed Martin was awarded a contract from the National Geospatial Intelligence Agency (NGIA) to provide training to its employees and other intelligence analysts across DoD. See a press release here. The contract has a value of $32 M and is an option on an existing contract. Lockheed Martin is responsible for running the in-house training for the agency. NGIA is what used to be called the Defense Mapping Agency (DMA) and provides maps, charts and other information to the US defense services and other agencies.

Lockheed Martin has moved to buy a joint venture it had set up in Australia today. See a press release here. RLM Holdings was a company established by Lockheed Martin and the Tenix Group to manage the Jindalee Operational Radar Network (JORN) and provide other defense services. The JORN is a large array over-the-horizon surveillance system that can detect surface and aerial targets at very long range. RLM also manages other defense radar systems as well as providing services to the Australian defense forces. This acquisition will have to be approved by the Australian Government.

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.

AAR RECEIVES 10-YEAR CONTRACT TO SUPPORT
HONEYWELL TECHNOLOGY SOLUTIONS INC. AT HILL AIR FORCE BASE

WOOD DALE, ILLINOIS (July 31, 2008) - AAR CORP. (NYSE: AIR) announced today that it has
been awarded a 10-year contract to provide logistics support services to Honeywell Technology
Solutions, Inc. (HTSI). HTSI provides logistics services and depot maintenance support for the
B-2 Spirit stealth bomber and C-130 Hercules aircraft at Hill Air Force Base.
“AAR is very proud to support Honeywell Technology Solutions, Inc. and the U.S. Air Force,”
said Timothy J. Romenesko, AAR’s President and Chief Operating Officer. “This adds to the
growing list of strategic Air Force assets supported by AAR and is a testament to the flexibility
and scalability of AAR’s supply chain management capabilities.”
AAR is a leading provider of products and value-added services to the worldwide aerospace and
defense industry. With facilities and sales locations around the world, AAR uses its close-to-thecustomer
business model to serve aviation and defense customers through four operating
segments: Aviation Supply Chain; Maintenance, Repair & Overhaul; Structures & Systems and
Aircraft Sales & Leasing. More information can be found at www.aarcorp.com.
# # #
This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on beliefs of Company management, as well as assumptions and estimates based on information currently available to the Company, and are subject to certain risks and uncertainties
that could cause actual results to differ materially from historical results or those anticipated, including those factors discussed under Item 1A, entitled “Risk Factors”, included in the Company’s May 31, 2008 Form 10-K. Should one or more of these risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those
described. These events and uncertainties are difficult or impossible to predict accurately and many are beyond the Company’s control. The Company assumes no obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. For
additional information, see the comments included in AAR’s filings with the Securities and Exchange Commission.

According to reports the Iraqi government is planning on buying six C-130J aircraft and associated support equipment. See an article here. The total contract could be worth around $1.5 B. The sale would be handled through the Pentagon’s Defense Security Assistance organization.

General Dynamics was one 23 companies awarded a possible right to get work under a large ID/IQ contract for planning and support. See a press release here. The contract if all options are exercised could be worth up to $5 B. Like all of these contracts, though, there is no guarantee that any company will get work, or that any will actually be exercised. This contract again demonstrates that DoD is paying a great deal of money to support its soldiers, retirees and dependents.

B.L. Harbert International won the contract to build two new building complexes at Redstone Arsenal (RSA) as part of the last round of BRAC moves. See a press release here. BRAC was good to RSA as it moved the headquarters of the US Army Material Command (AMC) and the US Army Security Assistance Command (USACA) to the base. AMC is responsible for buying, fielding and supporting most of the Army’s material. USACA helps transfer US weapons to foreign countries. The $100 M plus contract will build the necessary buildings to house the commands.

The USMC purchased 773 MRAP from General Dynamics. See a press release here. The contract is worth over $500 M. These are RG-31 MRAP designed in South Africa and will be sent to Afghanistan. The RG-31 was selected as it is smaller and lighter then other MRAP in the inventory and according to this article the US military is now concerned with rollovers and the size of the MRAP vehicles already purchased. Although wheeled they are very heavy and have issues with the roads and bridges in Iraq and Afghanistan. MRAPs are very all as well and can roll over more easily then other tactical vehicles.

The USMC awarded a contract to Hawker Beechcraft for 6 new transport aircraft. See a story here. These will replace older UC-12 aircraft also made by Hawker Beechcraft that have been in service for a few decades. These will most likely be used for personnel transport in more benign environments. The Army has been working to buy larger tactical transports through the Joint Cargo Aircraft (JCA) program but are struggling with the USAF on requirements and quantities.

The Defense Logistics Agency (DLA) signed a contract with SAFT for batteries. See the press release here. While SAFT is a French company the batteries will be made in NC at their plant. The contract is for up to 5 years and could be worth $170 M. With the amount of electronics proliferating on the battlefield, battery technology is very important as the US and other countries strive for lighter batteries that provide more power.

The US Air Force awarded an omnibus maintenance contract. Northrop Grumman was one of the twelve companies that qualified for the contract. See the press release here. If all parts of the contract are executed the value could be as much as $10 B. Normally how these contracts work the government, here the Air Force’s depots, will issue task orders which the qualified companies may bid on. There is no guarantee that any work will be awarded or any company will get work.

Armstrong Tools announced that they were awarded a contract to provide standardized tool sets to the US Army and Marine Corps. See the press release here. One of the key components of the contract is that it is Berry Amendment friendly. The contract is for over 90,000 kits and is worth over a $100 M.   Read the rest of this entry »

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.

Fresh off all of the problems with the contract let to AEY, the US has moved to a more traditional source for ammo for Afghanistan’s military and police. See the press release here. Allied Defense Group has been awarded a FMS contract to provide ammo. Allied has grown significantly over the last 7 years as the demand by the US for ammunition of all types, but especially small arms, has increased.

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.

Force Protection was awarded a contract by the USMC to support MRAP vehicles. See the press release here. The contract is worth over $40 M and will last over a year. Force Protection had recently had some issues winning MRAP contracts, and this win will be welcome. For more see this and this.

Lockheed Martin was awarded a contract by the Department of Homeland Security to provide human resources support to the Transportation Security Administration (TSA). See an article here. The contract could last eight years and have a value of over $1 B dollars. The company will provide support to all aspects of the TSA’s personnel 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.

The Department of Defense has provided financing to Brush Wellman, a division of Cleveland-based Brush Engineered Materials, for expansion of their beryllium processing facility near Toledo. See an article here. Beryllium is a strategic metal that DoD stockpiles in support of their systems production. Brush Wellman is the nation’s largest beryllium producer. DoD and the company will jointly finance the new expansion.

The Australian Ministry of Defence is reviewing ways to save money through improvements to its liscensing agreement with Microsoft. See a short article here. Like many large organizations, government and private, the MoD has invested in MS products - windows, office and project - to run things. They probably buy thousands of licenses and any efficiency there will save money in the long run.

Australia has awarded a contract to Chandler Macleod for support of recruiting efforts. See an article here. While overall recruiting for the Australian Armed Forces is going well they are having a hard time attracting the highly sought after technical recruits they need. This 5 year, $400 Australian, contract will help in that effort. Interestingly since the Australians have been fighting since 2001 they have actuall

The Defense Finance and Accounting Service (DFAS) is the organization within DoD that actually pays the bills. Eventually every contract action will lead to DFAS sending money to the company doing the work. SAIC has won a contract to build software to train the DFAS employees on policies and regulations. See a story here.

Express Scripts corporation was awarded a one year contract with four option years to provide prescriptions to DoD members, retirees and dependents. See an article here. If the full value of the contract is executed it will be worth about $2.8 B. DoD has been moving steadily to outsource a great deal of its medical care over the last thirty years and this is a continued part of that. This is continuation of work that Express Scripts has been doing since 2004.

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.