Contracts for September 02, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
U.S. Department of Defense to Pay for Management of Water Purification Systems
Filed under: Business Line, Companies, Contract Awards, DLA, Events, Services, logistics, production program
The Defense Logistics Agency (DLA) awarded a contract worth over $300 million to Aqua-Chem, Inc. as part of the H2O Water Purification Initiative (WPS). If all options on the five year contract are executed the total value will be $386 million.
Aqua-Chem of Tennessee is a world leader in the manufacture of water purification and treatment systems. These include those not only for military applications but also for ships, offshore marine applications, and the power and bio-tech industries. The U.S. Department of Defense with personnel deployed all across the globe in varied climates has great demands for water. Aqua-Chem systems supports these operations with different systems to purify or provide water.
The contract is for logistical support of existing systems by providing storage and management of parts and materials to support existing Aqua-Chem systems in use today.
Contracts for September 01, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
Canada Debates F-35 Purchase
Filed under: Business Line, Canada, Companies, Contract Awards, Countries, Department of Defense, Events, Lockheed Martin, Military Aviation, Proposal, Restructuring, Services, development program, production program
The Canadian government announced in July that it would commit to purchasing sixty-five F-35 Joint Strike Fighters (JSF) to begin replacing their CF-18 fighter aircraft. At at time when the country like many across the globe is facing budget pressures and economic growth issues the size of the contract has brought criticism from political opponents and others in the country. The up to $16 billion (CA) price tag would make this the most expensive defense program Canada has committed to.
The government has recently begun a public relations campaign to stress the benefits of the program not only in terms of value and capability but also through the offsets that it will bring to the Canadian economy. Canada has always aggressively demanded offsets with many of their purchases of foreign equipment which mainly comes from the U.S. At the same time Canada’s defense industry has had great success selling their products to the American military services.
The JSF from the beginning was a joint program between the United States and several allies. This means that some countries such as the United Kingdom, the Netherlands and Canada invested their own R&D funds to support development. As part of the plan similar to what was done with the F-16 the JSF is intended to replace it was always planned for these countries to provide components for the aircraft. Canadian company Avcorp Industries Inc. (AVP) for example was just awarded a contract to provide wingtips for one version of the F-35 worth up to $500 million (CA).
Whenever a large contract like this is awarded especially for something as controversial as the JSF which has suffered from cost and schedule problems there will be this kind of debate. Canada, though, through its early participation most likely would stay committed to the program despite the cost increases. If a partner does drop out or restructure their buys it would affect all of the other customers for the aircraft as the loss of quantity would raise the price of the remaining aircraft and cause schedule perturbations.
Canada like the United States and the other nations planning on buying the JSF are boxed in. They have already invested substantial funds in the program and there are few alternatives available to meet the varied mission requirements of the aircraft. This means that they must at least go through with a portion of their planned purchases no matter what the budgetary situation. This is why Canada ordered the aircraft in July to begin with.
Contracts for August 31, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
Contracts for August 30, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
Despite Gate’s Proposals SETA Contracts Still Being Awarded
Filed under: Business Line, Companies, Congress, Contract Additions, Contract Awards, Department of Defense, Events, Federal Budget Process, General Dynamics, IT, Industry Analysis, MDA, Proposal, S&T, SETA, Services, U.S. Army, logistics
Over the last two years the U.S. Defense Department has been reviewing how it handles its support contractors. These Scientific, Engineering, Technical and Analytical (SETA) contractors work side-by-side with government employees and military in acquisition and management offices to aid them in carrying out their work. These contractors have grown in size as part of the workforce and in the amount of money they receive often on time and material contracts where they are paid for the work they do by the hour rather then fixed price.
In 2009 the Department began to “insource” these contract jobs where they were converted to civil service positions. This was driven by the need to increase the size of the government’s acquisition workforce and also to counteract claims that these contractors were doing “inherently government” work that should be done by an official. Insourcing has seen the elimination of several thousand contractor jobs. There have been complaints that insourcing has not necessarily been done fairly with the government choosing positions based on cost estimates rather then their real role. The loss of a contractor position means a company loses revenue and often an employee. Sometimes whole contracts have been insourced leading to serious problems for smaller companies.
Two weeks ago Secretary Gates’ announced a new initiative that rather then just insourcing jobs he plans to cut thirty percent of the contracts over the next three years. He has realized that converting the slots to government may not be saving money in the long run which is his goal and has decided to minimize future conversions. This has roused the ire of the Unions who represent Federal workers who fell that there should be more insourcing.
Despite these moves the government still relies on SETA contracts and continues to announce contracts for them.
In the middle of this month the Missile Defense Agency (MDA) awarded Tetra Tech (TTEK) a support contract through their Missile Defense Agency Engineering and Support Services (MiDAESS) vehicle. This contract if all options are exercised is worth $270 million. Like many large commands that award these kind of contracts MDA set up an omnibus contract in this case MiDAESS that allows qualified companies to bid on tasks that minimize the source selection process.
Last week General Dynamics (GD) won an IT support contract from the U.S. Army Intelligence and Security Command. This is an over $60 million contract to provide help-desk and network support for the organization. IT services are one of the areas that were being considered to insource as they are often contract provided mainly due to the flexibility and pay structure of contractors compared to government. The government has always had a hard time fitting IT into the GS pay scale due to the compensation for these skilled and in-demand personnel.
Until the Defense Department can decide on what its workforce balance should be and what tasks are needed then these kind of contract awards will continue. Gates’ plans to reduce may see smaller contracts but at the same time a smaller contract will provide less support to the government. It may be that a return to the Nineties of “doing more with less” may be happening again as the defense budget restructures to reflect the ending of operations in Afghanistan and Iraq.
Contracts for August 27, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
MDA to Launch Contest for New AEGIS Missile
Filed under: Business Line, Companies, Contract Awards, Events, Lockheed Martin, MDA, Proposal, Raytheon, Services, U.S. Navy, development program, missile defense, production program
The U.S. Navy and the Missile Defense Agency (MDA) have been developing a ship based anti-missile system for almost twenty years. The current system now in use is based on the Navy’s AEGIS system originally designed to counter aircraft, anti-ship missiles and helicopters. AEGIS is a system of systems that includes radars, command and control systems and variants of the STANDARD Missile now made by Raytheon (RTN). The SM-3 is the version designed to counter the ballistic missile threat equipped with a kinetic warhead.
MDA has announced that it will release three separate contracts to develop proposals for a new missile for this role to be based on Navy ships and integrated with the AEGIS system. Lockheed Martin (LMT) has said that they intend to bid with the goal of winning one of the contracts. The initial value of the contracts will be $45 million. Eventually the MDA will choose one or more of the proposals for further development ultimately leading to a new missile for this mission.
Several Navy cruisers and destroyers have had the system installed and Raytheon has produced quite a few of the SM-3 missiles for use by these ships.
Raytheon and Lockheed Martin the prime contractors for the current missile and radar have been making incremental improvements to the AEGIS based missile defense system over the last several years. It has had several successful tests and in early 2008 the system was used to destroy a U.S. satellite that was falling to earth.
The new missile will presumably have improved performance and the ability to engage more stressing targets then the current one. The MDA is also exploring making a land based version of the AEGIS BMD system and the new missile may be optimized to support that role as well as the ship board one.
The path that MDA is taking with the multiple first round and then further development indicate that it will be several years before the new interceptor is developed and fielded. This means that the current fleet equipped with the SM-3 will remain the sea based defense against theater ballistic missiles.
Contracts for August 26, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
Acquisition Reform and Budget Machinations Begin to Affect Programs
Filed under: Austal, Business Line, Companies, Congress, Contract Awards, Department of Defense, Events, Federal Budget Process, Lockheed Martin, Military Aviation, Northrop Grumman Corp., Proposal, Restructuring, Services, U.S. Air Force, U.S. Army, U.S. Marine Corps, U.S. Navy, development program, production program
Updated to change competitor to Austal USA and General Dynamics vice Northrop Grumman in the first contest.
The U.S. Defense Department has been warning that flat or smaller budgets may be on the horizon. At the same time led by Secretary of Defense Robert Gates the Department is working to promote efficiencies in contracting and acquisition. These two factors seem to have start affecting some program decisions.
The U.S. Navy just announced that they are delaying the decision on who has won the new contract to build Littoral Combat Ships (LCS). Two bids were submitted for ten ships by Lockheed Martin (LM) and Austal USA, part of Austal (ASB:AU) of Australia. A decision was supposed to be announced this month but that has been delayed three-to-six months now. The whole LCS acquisition strategy was changed last year when a plan to have General Dynamics (GD) and Lockheed each build large numbers of two completely different designs for the LCS mission was ended after four ships were built. Now there will be this competition and then a further one in 2012 for up to 55 ships. The delay has reportedly been caused by a need for the Navy to have further discussions with the bidders. Then final proposals will be submitted. Some theories about the delay are a need by the Navy to try and make the award protest proof or costs need to be refined to meet reduced future spending. Either way a delay in the award will in the short term affect both bidders as it delays potential revenue and planning for the contract.
The Army announced yesterday that they have put on hold the ongoing competition for a new ground vehicle capable of transporting infantry across battlefields. This program had just received bids from three industry teams. The new GCV program was started due to the cancellation of the Future Combat System (FCS) by the Army in 2009. The Service stated that it may need to change the terms of the proposal after conducting a full review this Spring. That may mean requirements are being changed or cost again is driving a need to change quantities and schedule. It looks like the bidders may have to submit whole new proposals. If this is required the program would be set back several months as it would take time to redo the proposals and the source selection would be extended.
Another program facing scrutiny by Gates and his staff is the U.S. Marines new Expeditionary Fighting Vehicle (EFV). This is a armored vehicle designed to carry troops quickly from Navy amphibious ships to the beach and beyond. It will replace the venerable LVTP-7 system that has been in use since the 1970′s. Over the last decade the EFV has survived other reviews despite is cost and difficult requirements. In terms of big ticket items that are attractive to the budget hawks the EFV is certainly attractive. It has had a long development profile and the total cost of the system is high. The Marines though have a need to replace the large, slow LVTP for several years and the if the EFV was canceled a new program would have to be restarted to meet this mission. It may be that the Pentagon ends up seeing this one through.
There have been many concerns expressed over the last two years that the U.S. budget situation will adversely affect the Department of Defense. Unlike in past budget cycles Gates has remained committed to investing in some modernization programs. His recent plan to free up $100 billion over ten years from efficiencies and service contracts is not to cut the budget but to plow back into these programs. The problem he and the U.S. military face may be that there is only so much money available so only select programs get funded. The F-35 Joint Strike Fighter and KC-X aerial tanker for example will eat up a large amount of these funds. These program decisions may be a reflection of that situation.
Photo from avhell flickr photostream.
Contracts for August 25, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
Protest Strikes Sweden’s Contract with Patria Again
Filed under: Business Line, Companies, Contract Awards, Countries, Events, Finland, Protest, Services, Sweden, production program
The U.S. Government has seen an increase in contract protests over the last ten years. This has been especially true with defense contracts. The situation reached a point that late last year the Defense Department’s Undersecretary of Defense for Acquisition, Logistics and Technology, Ashton Carter, actually complained about the problem they had become. Protests of awards while perfectly legal lead to delays in the start of work by the winner and in the case of the KC-X aerial tanker program cause the contest to start over causing major delays to the fielding of a new aircraft.
One of the major reasons for the amount of protests is the small number of large contracts available to be won. This means that each and every win is more important to a company’s bottom line. It is not even with just hardware contracts that you see protests but also with service ones. The last round of TRICARE health care management contracts led to protests some of which were upheld. These contracts were worth billions and the competition was pretty fierce. Now it has become almost expected that the loser of a contract will protest the decision.
It is not only in America though that the problem of protests exists. Sweden had awarded a contract earlier this month to Finnish company Patria Land and Armament Oyj for over a hundred new armored vehicles. The contract has a total value of over $300 million. Now an unidentified Swedish company is protesting the award.
As part of the contract Patria offered to offset the cost of the contract with one hundred percent investment in Sweden’s economy including using Swedish sub-contractors for major components.
The AMV vehicle has been in production for several years and over 1,000 have been ordered since 2004. Interestingly Patria won this contract in 2009 but a protest by BAE Systems Hagglunds, a component of Great Britain’s defense giant, BAE Systems (BAE:LSE), caused a recompete won again by Patria.
In the worst case this protest could lead to another competition delaying the start of the program by another year. Certainly competitors have the right to protest especially if they feel the award was not conducted properly but it does in the end delay the delivery of the hardware which in some cases is necessary for the modern battlefield.
Photo from hr.icio’s flickr photostream.
Contracts for August 24, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
Force Protection to Upgrade U.S.M.C. MRAP Vehicles
Filed under: BAE Systems, Business Line, Companies, Contract Awards, Department of Defense, Events, Force Protection, Navistar, Oshkosh Truck Corp, Services, U.S. Marine Corps, logistics, production program
The United States Marine Corps announced that they are awarding a Force Protection (FRPT) a contract to upgrade over two thousand Mine Resistant Ambush Protected (MRAP) vehicles previously purchased. The contract to modify the seats on these Cougar vehicles is worth over $60 million.
The U.S. military has invested billions in MRAP vehicles since 2005 due to the prevalence of the mine and Improvised Explosive Device (IED) threat in Iraq and Afghanistan. MRAP provide the ability to move troops across terrain with a higher level of protection then more conventional armored vehicles. Force Protection along with Navistar (NAV), BAE Systems (BAE:LSE) and Oshkosh (OSK) have built thousands of these vehicles for the U.S. military and many Allies.
One of the advantages of being a major hardware supplier to the U.S. military and other customers is the ability to win contracts to modify, support and maintain that hardware. This contract is a good example of that as Force Protection is earning revenue off of already delivered and in-service vehicles.
Force Protection stock has struggled since its high of almost $30 in 2007 to where in the last year it has been between $4 and $6. The U.S. has turned mainly to Oshkosh for its latest MRAP-AT vehicle designed for the more rugged terrain of Afghanistan.
Contracts for August 23, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
Navy to Upgrade Tomahawk Missiles Through Contract with Lockheed
Filed under: Business Line, Companies, Contract Awards, Events, General Dynamics, IT, Industry Analysis, Lockheed Martin, Military Aviation, Raytheon, Services, U.S. Navy, development program, production program
The U.S. military still uses many weapon systems originally developed in the Seventies and Eighties. The fact that they can is a testament to good maintenance practices and the capability inherent in the systems to be continuously upgraded to take advantage of improvements in technology. The BGM-109 Tomahawk is a subsonic land attack cruise missile that has seen quite a bit of use especially in Desert Storm. Originally developed by General Dynamics (GD) it is now produced by Raytheon (RTN). It currently exists in ship and submarine launched versions.
In order to continue the ability to use the system the U.S. Navy has announced a contract for Lockheed Martin (LMT) worth up to $57 million. This contract is to develop new software that controls the missile. The first year of the contract has a value of a little over $16 million.
The idea of continuously improving systems like this is that the military may take advantage of their substantial investment in building the missiles over the last thirty years. This practice also allows development of countermeasures and improved performance against any new defenses developed over time.
This approach maximizes the value of existing weapon systems and their basic capabilities.
Photo from morebyless’ flickr photostream.
Contracts for August 20, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
Defense Agency Contracts for Leadership Training
Filed under: Business Line, Companies, Contract Awards, Events, Federal Budget Process, Services, logistics, training
There have been consistent criticisms of the lack of training received by Federal managers and supervisors. Many of the complaints about the failed National Security Personal System (NSPS) which was a radical attempt to change how Department of Defense civilian employees were assessed and paid was that managers did not receive the necessary training to implement the new system. The NSPS has been abandoned and employees are transitioning back to the old General Service (GS) pay system.
The government has passed different laws and paid for a variety of training systems and schools to help their managers understand what they need to do to support their employees. In June the Senate passed yet another bill to require more and quicker training for new supervisors. There is a recognized need for these key personnel to receive the necessary training to maximize their abilities and contribution to the smooth running of the government.
The Defense Financial Accounting Service (DFAS) is taking another tack. They are contracting with The Ken Blanchard Companies a company that provides training and development experts to individuals and organizations to deliver their leadership model training. The DFAS contract will also allow other parts of the government to access the contract to receive the training.
The use of contracting for this type of service seems to be the most sensible way to gain these kind of skills. Rather then the government pay for the course material or to design and execute their own curriculum they buy an established, proven program. The contract is for more then one year but no value was given.
Contracts for August 19, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
Rockwell Collins Wins Contract to Upgrade Air Force Test Ranges
Filed under: Business Line, Companies, Contract Awards, Events, Rockwell Collins, S&T, Services, U.S. Air Force, development program, logistics, training
All of the U.S. services operate test and training ranges. Some of these are joint and allow the interaction of various types of weapon systems as well as troops. The ranges also provide the ability to collect data to support weapon system development as early, complex and frequent testing is a key part of the acquisition process. One important component of the ranges are systems that collect data on the position of the participants as well as data about what is occurring with the weapons.
The U.S. Air Force awarded this week a contract to Rockwell Collins (COL) to begin development and deployment of a new system to support their test ranges. The contract to produce the Common Range Integrated Instrumentation System (CRIIS) is a follow on to two contracts let in 2008 to do risk reduction for this system. Based on those results Rockwell Collins was selected for the next stage in CRIIS.
The new contract is worth about $140 million.
Rockwell Collins will be joined by other companies such as Cubic Defense Applications, Honeywell and ArgonST to carry out the work required to deliver the CRIIS.
As weapon systems and the command and control networks that support them get more complicated more sophisticated and realistic testing must be done. The CRIIS will provide data to support the deployment of new and advanced systems for the U.S. military.
Contracts for August 17, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
HUMVEE Production to Continue for Afghan Sales
Filed under: Business Line, Companies, Contract Awards, Department of Defense, Events, General Dynamics, Services, U.S. Army, development program, logistics, production program
Last year the U.S. Army announced that it was not planning on buying any more of the ubiquitous jeep replacing HUMVEE after the 2010 order. This was because they had met their Acquisition Objective early helped by the improving situation in Iraq which saw less of the vehicles damaged or destroyed. Other parts of the U.S. military would still require some of the systems but the Army was the largest buyer and things looked bleak for AM General the producer of the system.
This week, though, it was announced that the U.S. would buy at least 2,500 of the vehicles for use by the Afghanistan government. This while not similar numbers to what the Army was buying it will keep the plant going for another year.
AM General is participating as a partner with General Dynamics Land Systems (GD) as one of the three teams awarded Joint Light Tactical Vehicle (JLTV) development contracts. The JLTV will be the replacement for the HUMVEE when it goes into production. This means AM General has a good chance to stay in the business of building vehicles for the U.S. military and its allies.
Photo from Nevada Tumbleweed’s flickr photostream.
Contracts for August 16, 2010
Filed under: Contract Awards, Department of Defense, Syndicated Industry News
Dueling View on Defense Competition
Filed under: Boeing, Business Line, Companies, Congress, Connecticut, Contract Awards, Department of Defense, EADS, Events, Federal Budget Process, GE, Industry Analysis, Kansas, Military Aviation, Northrop Grumman Corp., Pratt & Whitney, Proposal, Protest, Restructuring, Rolls-Royce, Services, Sikorsky, States, U.S. Air Force, UTC, development program, production program
Last week the former Reagan era U.S. Secretary of Defense John Lehman had an opinion piece in many newspapers across the country discussing the need for competition in large defense contracts. He specifically was writing in support of the dual engine track for the F-35 Joint Strike Fighter (JSF). This controversial program where a second source of engines for the advanced multi-role aircraft is being funded by Congress despite the objections of two Administrations, the Pentagon and the Air Force is being defended as risk reduction and as offering potential cost savings. This is how Lehman discusses it.

Certainly the idea is sound in that the second engine in development by General Electric (GE) and Rolls-Royce (RR:LSE) as an alternative to the main one being made by Pratt & Whitney, part of United Technologies (UTC), may end up costing less and be ready sooner but at a time when the program is struggling as well as the whole Federal budget it may be a luxury that the country cannot afford. Lehman cites previous examples of using alternate engines from when he was at the Defense Department that showed “benefits came swiftly and have endured. Reliability, performance and fuel economy improved steadily. Engine-caused accidents dropped. By the second year of full competition, the cost per engine had dropped 20 percent.” He points out that for the three major fighter programs of the Seventies and Eighties — the F-14, 15 and 16 — this approach was used successfully.
For both 2010 and 2011 the Obama defense budget request asked for no funding for the second engine. In the 2010 budget Congress found it by adding money and not taking it out of the core F-35 program. For 2011 the Senate has moved to try and not fund the program but the House markups so far continue it. If the final bills from each part of Congress contain differences it will have to be worked out in Conference. Obama has threatened to veto the bill if it contains the second engine but he did that last year and ended up accepting it. Obviously the Congressional delegations from the states where GE and Rolls-Royce are doing their work support it while the Connecticut delegation where P&W makes their engine have been trying to counter it.

In another view Congressman Tiahrt (R-KS) recently was interviewed about his efforts to promote the use of American contractors for programs. Tiahrt wants the Pentagon to maximize the use of American defense contractors even when it would have to lead to a sole source contract as there would only be one U.S. company able to do the work. The Pentagon does everything it can to avoid sole source contracts as that transfers most of the risk from the contractor to itself leaving little options of the program’s schedules and cost increases. Competition has long been one of the cornerstones of defense acquisition.
Tiahrt believes that the Defense Department must maximize the use of U.S. companies to provides jobs. At this time of current economic problems basically using the defense budget to provide “stimulus”. The problem this faces is that due to the decline of the U.S. industrial base in the Nineties there are often only one U.S. supplier for a product. Tiahrt uses the example of the buying of Russian Mil-17 helicopters for use in Afghanistan by the Afghan military rather then purchasing the UH-60 from Sikorsky, another part of United Technologies. The reasons given for the purchase are more driven by requirements and the needs of the Afghan environment and capability. This is a system they are familiar with, it is simple to maintain and matches well to the environment.
Tiahrt, a former Boeing (BA) employee, is also a big supporter of awarding the new KC-X aerial tanker to that company and preventing the European defense giant, EADS (EADS:P). He had criticized the previous award to Northrop Grumman (NOC) and EADS overturned on Boeing’s protest in 2008. Now that Boeing and EADS are in direct competition for the latest attempt to award this contract he has kept up the criticism.
The problem that the Pentagon faces is only Boeing and EADS have the capability to provide this aircraft. The last tanker that was purchased was the KC-10 in the Eighties made by McDonell Douglas, who are now part of Boeing. With those two companies merged there is no U.S. competitor for the KC-X. In the early part of this decade the U.S. Air Force did award Boeing a sole source lease for KC-767 tankers but this was overturned after Congress found collusion by Air Force and Boeing officials this decision launched the second contest won by Northrop and EADS in 2008.
Tiahrt is right in that the Defense Department should try to award to American companies but the number of those producing major systems has declined. The increase in spending since 9/11 has seen major market penetration by European companies mainly through acquisition of U.S. companies and the establishment of subsidiaries. This has been driven by the need for multiple sources for systems to help keep prices low.
Without a major investment in revitalizing the U.S. industrial base this will be the situation faced anytime a major contract comes up for award Congressman Tiahrt’s protests notwithstanding.
In order to meet Lehman’s desire for competition the U.S. has to allow foriegn bidders which is an unfortunate fact-of-life. Congress will need to face this unless they just want to give contracts to American companies which would counter their desire to do defense purchasing more efficiently and at less cost. The decline of the Nineties is the root cause of this situation and there is no easy short term answer.
KC-10 photo from Mr. T in DC’s flickr photostream.
F-35 photo from Rob Shenk’s flickr photostream.
