Defense Procurement News

DoD reported that all four of the appropriate defense committees approved the reprogramming for ISR assets. See a story here. The transaction will move $1.3 B from various Army, Navy and Air Force procurement programs to buy various systems to support current operations in Iraq and Afghanistan. The focus of the money will be UAVs and their support systems. The majority of the money came from Army tactical wheeled vehicles and some communications systems.

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 »

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

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.

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 »

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 »

According to this article the Indian Navy is canceling its procurement of Druhz helicopters. This light aircraft made indigenously by HAL is failing to meet the operational requirements. The Navy will now look to buy a new, most likely foreign aircraft, to meet its needs. The Indian Army and Air Force are also planning to buy new aircraft, and the original plan was to make a joint Indian-Eurocopter aircraft but that deal fell apart due to corruption issues. For more on that see this.

The Secretary of the Air Force and its Chief of Staff both resigned today. See the story here. The most obvious reason was the completion of an independent review of how the USAF was handling it’s nuclear weapons. Badly was the conclusion since Minuteman fuzes were shipped to Taiwan and a B-52 flew across the country with nukes on board without the crew’s knowledge. Other issues were the problems and favoritism related to Thunderbird contracts as discussed here. On top of the fairly recent scandal with Boeing and the tanker lease it is a dark day for the service.

According to this article the Commanding General of the Army’s Aviation and Missile Command (AMCOM) is worried about the potential supply of workers in the Huntsville, AL area in the future. The last round of BRAC moved two major commands to the Redstone Arsenal in Huntsville. Many of the people working there will not move for a variety of reasons. Major General Myles is concerned that the vacancies will suck people out of the existing Aviation and Missile commands to work at the Army Material Command and Missile Defense Agency. On top of that it is predicted for every government job moved at least one contractor job will be created. These workers have to come from somewhere and MG Myles hopes that local government, industry and higher education will train them without relying on subsidies from the Army. As in the past people will move to Huntsville, like your humble correspondent, to get these jobs, but that may not be enough.

According to this article in ceskenoviny.cz the Czech government will renegotiate the terms of the APC contract that they canceled recently. See this related post. They are retesting the vehicles made by Steyr in Austria, and then will announce a decision. It also sounds like they are reducing the quantity. The Czech-Slovak split probably left both new countries with a motley collection of Soviet and Czech made equipment. I know recently the Czech government sent some Mi-24 and Mi-17 helicopters to Afghanistan for that country’s use.

In 1997 Australia decided to buy 11 upgraded SH-2 aircraft from Kaman to outfit their Navy. Unfortunately the work required to integrate the helicopters with the newer generation of equipment that the Navy possessed was harder and more complicated then originally thought. Imagine that? Anyway ten years and millions of dollars later the program is still not complete. According to this article the new liberal government has decided to axe the contract. There will obviously be some termination costs involved, and now they are back to square one on the aircraft. Perhaps they will look at the US Navy’s MH-60?

The Australian Defence Minister, Mr. Fitzgibbon, now has decided that the plan to buy F/A-18 and then JSF for the nation is a bad idea. Just a few days ago, here, he was applauding the F/A-18. He now states that the US aircraft were not necessarily the way to go to buy modern fighter aircraft. The options, though, were limited. Australia could have bought Russian, or the Eurofighter, or SAAB Viggens, I guess? But I don’t know if the cost would have been comparable. He continues to say that the country really wants F-22 aircraft, which is currently not allowable under US law, even though the US DoD have expressed some support for the idea.

The new liberal government in Australia has talked about canceling the contract to purchase 24 F/A-18 aircraft to be used as a gap fill until the F-35 JSF is available. See ABC News here for details. Unfortunately there is a termination fee of around $400 M (Australian) associated with cancellation.   Read the rest of this entry »

Rosyth Dockyard will received a 50 M pound investment from the British government to facilitate the construction of their two new carriers. See NEWS.Scotsman.com for more. The total value of the construction and fitting out of the ships is almost 4.0 billion Pounds. For more on the new ships see this.

This analysis in The Guardian says that BAE and the VT Group will lose billions in orders from the British government if planned cuts to the defence budget go through. Because some of the contracts for hardware have cancellation clauses the government may be force to buy the systems and then sell them to other nations. This is all part of an attempt to reduce public spending.

This article in The Charleston Post-Gazette discusses how Force Protection Inc. went through a boom period, and now seems to be heading towards a downturn. This is all due to Congress suddenly deciding that the Army and Marines need more MRAPs.   Read the rest of this entry »

The Financial Times in this story is predicting that with the election of Hillary Clinton or Barack Obama that there will be significant consolidation within the US defense industry. The people they talk to say for the next two years there shouldn’t be significant changes in US spending, but the FY10 budget will set the next trend.   Read the rest of this entry »

Based on the information in this article from DefenseNews.com the DoD is going to restart the Joint Light Tactical Vehicle (JLTV) program. The previous program started in 2006 choked under the weight of the vehicles proposed. With the force protection requirements the weights shot up so fast that the Humvee replacements were weighing in at just under 20 tons.

The Japanese government announced that it would not buy the one AH-64D budgeted for next year due to the large cost increases caused by Boeing’s decision to reduce production. Japan had plans to purchase 62 aircraft, with 10 so far delivered. The Boeing decision reduced the remaining quantity to 4, but the the cost almost tripled due to the Boeing cutback. See this story here.

According to a report in a German newspaper, EADS does not expect to reach an operating margin of 10% until 2015. I’d be amazed if they attain it then, because EADS has never attained an operating margin this high before. Its best performance ever was in 2005, when it had a margin of 8.3 percent. Since then, margins have plunged due to the rise in the Euro, and troubles at Airbus. Although, EADS has taken some steps to improve their business, such as selling six Airbus plants, it is clear from this forecast that the company has a long way to go. Given that a prediction of operating margins seven years ahead has little credibility, what EADS is really saying is that there will be no margin recovery for the foreseeable future.

More details on the story can be found at Agency France Presse and MSNBC

On Thursday, Boeing announced that they had formed a new Intelligence and Security Systems (ISS) division to be headquarted in Washington, D.C. According to the St. Louis Business Journal, “Steve Oswald, a retired U.S. Naval Reserve Rear Admiral and former astronaut, was named vice president and general manager. ” He will report to “Roger Krone, president of the Network and Space Systems business of Boeing’s St. Louis-based Integrated Defense Systems.”

More details can be found here, here, and here.