Army To Stop Buying AM General’s HUMVEE Vehicles

In their 2011 budget request the Army reports that 2011 will be the last year of procurement for the ubiquitous AM General HUMVEE light truck. This four wheeled vehicle replace the venerable Jeep in U.S. military service in 1984. The HUMVEE will still be available for purchase by other U.S. services and for sales overseas but the Army states it has met its Acquisition Objective. There will also be contracts to maintain the existing fleet of vehicles.

The Army though does provide about half the market for the vehicle so the loss will be a blow to AM General. There is a new program in development called the Joint Light Tactical Vehicle (JLTV) that will when complete start replacing the HUMVEE. The U.S. is also investing in thousands of new trucks. Losses in Iraq and Afghanistan have been substantial but one of the reasons HUMVEE production is ending is recently there have been less damaged or destroyed then estimated.

U.S. Army Moves Out on Future Combat Systems (FCS) Replacement

One of the major budget decisions of the Obama Administration was to end the U.S. Army’s Future Combat Systems (FCS) program. This overarching system-of-systems was to provide new vehicles, weapons, unmanned vehicles and data links to provide a rapid, hard hitting replacement for the heavy armored force built around the M1 tank and the M2 Bradley fighting vehicles. The FCS had seen major growth in cost and schedule and it’s requirements pre-dated operations in Iraq and Afghanistan. The administration decided to end the program. Boeing (BA) and SAIC (SAIC) were the prime contractors on it.

To replace FCS the Army stood up a Brigade Modernization Program that would take parts of the old program and also begin development of new requirements and vehicles. With the passage of the 2010 defense budget last week the Army took the first step by awarding Boeing a contract for initialization of Increment 1 of the new program. This contract is to provide the soldier on the ground enhanced surveillance, reconnaissance and intelligence capabilities. Increment 1 will include some unmanned ground and air vehicles as well as sensors and a network to integrate them.

Further increments of the program will see further investment in new vehicles and weapons designed to the new requirements.

Air Force Buys Five Global Hawks

Despite the debate in Congress over how many Global Hawks could be ordered with the 2010 money the Air Force went ahead and used their Continuing Resolution Authority (CRA) money to buy five. The House had written into their version of the Defense Appropriations bill that only three could be purchased due to concerns with delays in the program. The Senate had said five. The bill currently is in Conference as the two versions are reconciled. It is proving to be a long process as their are several key differences between the two.

Northrop Grumman was awarded a contract worth a little over $300 million for the five aircraft plus supporting equipment.

Nortrop Grumman Faces Cuts to Global Hawk Production

A little discussed part of the House’s version of the Defense Appropriations Bill is a cut in number of the Global Hawk strategic UAV from five to two. This was done because the House felt that the development of the latest version was behind schedule so some procurement dollars could be saved by delaying sixty percent of the planned quantity. Northrop Grumman feels that the schedule has been caught up and the program is on track. The Senate has supported the full buy of five. That means that the exact number will have to be worked out in the Conference Committee and hopefully for Northrop that will be the full amount. If the aircraft are cut Northrop will have to lay off some workers and it may lead to a production break in the line. This would seriously impact future buys as there will be a cost associated with starting the line up again.

F-35 Program Has Issues DCMA Says

The F-35 Joint Strike Fighter (JSF) has become the aviation program in the Obama defense budget. This multi-variant, multi-service aircraft will be the only new tactical aircraft built in the United States for several years now that the F-22 Raptor was canceled in the 2010 budget. In fact Secretary of Defense Robert Gates wanted to speed up production and testing of the aircraft in order to replace the aging F-15 and F-16 fleet more quickly.

Earlier this summer there were reports that a review panel had found the potential for delays and cost growth in the program that would seriously affect the plans for the aircraft. Yesterday there were reports that the Defense Contract Management Agency (DCMA) has been reporting that the program is facing production and test delays as well as having cost issues. DCMA monitors contractors for performance and delivery and reportedly Lockheed Martin and its supporting contractors are already behind on the latest schedule established in May, 2008.

When the budget was announced with the decision to cancel the F-22 and focus on the F-35 some doubts were raised that the plan would work out. The schedule was not firm enough and cost was still being worked out for the three different aircraft being developed for the U.S. and its Allies. The F-35 if unit costs do rise significantly could see lower annual buy quantities which stretches out production and extends the time the older aircraft must be flying. While it is certainly possible that the schedule problems may be overcome delays and cost increases will undermine the reasoning behind the whole proposed Obama aviation modernization budget. This report may give Congress pause and interest in re-starting the F-22 production.

SMALL BUSINESSES DEMAND ENFORCEMENT OF PENALTIES AND ACCURATE ACCOUNTING OF THEIR CONTRACTS — Press Release

SMALL BUSINESSES DEMAND ENFORCEMENT OF PENALTIES AND ACCURATE ACCOUNTING OF THEIR CONTRACTS

Size Protest Victories without anything to Show for them and Agencies Unfair Reporting of Small Biz Contracts prompts Demand for Congressional Hearings

Size Protest Process must be Strengthen1 and Data Quality Act 2 Implemented

JACKSONVILLE, FL., November 2nd, 2009. – “My second Size Protest victory within two months against a large business which had misrepresented its size to win small business contracts3 will help demonstrate that the size protest process does not work as Congress had intended and the process needs a major overhaul,” said Raul Espinosa, President of FitNet, a government purchasing group in Northern Florida.

He added, “Violators are not concerned with the penalties Congress had imposed for fraud because there is no enforcement and the protest winners cannot get back the contract they fought for nor collect any fees nor expenses for their efforts.”

In 2005, Espinosa founded The Fairness in Procurement Alliance (FPA), following his Size Protest victory against a front for a large business to help demonstrate that the Size Protest process did not deliver justice4. FPA has since become a major national coalition to advance ‘partnership concepts’ and encourage bureaucrats to pay attention to out-of-the-box solutions. The flagship of this effort is The Umbrella Initiative5,
whose goal is to level the playing field in government contracting not only at the Federal level, but at the State and local level as well. Among its published Reports, is a White Paper on Why Size Protests Need Strengthening6, which cites numerous mishandled size protest cases and recommends specific solutions for the process to deliver justice.

FPA is now relying on its successes7 to help secure funding for seven pilot projects in Florida8 that do not only encourage small business participation in government contracting, but their projected results can be replicated in other States. Espinosa said, “The Umbrella Initiative pilot programs intend to make better use of existing networks of service providers such as the Small Business Development Centers (SBDC) and the Women’s Business Centers (WBC).”

Through an appeal before the Office of Hearings and Appeals (OHA) for yet another alleged mishandled size protest9, Espinosa is also attempting to demonstrate how Agencies are not only overlooking size standards violations, but allowing the abusive procurement practice referred to as unfair justification10 to abuse small businesses. “FPA has demonstrated that the Size Protest process is ineffective at delivering justice and
deterring fraud and abuse,” said, Borden Hallowes, Esq., Acting Director of the FPA Legal Center. He added, “There are entrepreneurial ways with which to fix the protest process and protect the statutory small business reservation with the Data Quality Act. FPA intends to bring attention to the ways it can be done.”

Anthony Robinson, President of MBELDEF said, “Espinosa’s determination since winning his 2005 key court victory to deter fraud and abuse in government contracting and help bureaucrats meet the objective of P.L. 95-50711 deserves the attention of Congress and the consideration of bureaucrats.”

Dr. Henry Thomas, Director of the FPA Think Tank at UNF said, “Our efforts are aimed at bringing attention to what we call “entrepreneurial solutions” that can level the playing field in government contracting. He added, “Our government is blinded by pro big business — Too big to fail thinking.”

Espinosa added, “FPA has corroborated what the SBA OIG has already claimed is the SBA biggest challenge:12 Stopping large businesses from taking small business contracts and preventing Agencies from taking credit for small business contracts awarded to large businesses.”
“For small and disadvantaged businesses to receive maximum practicable utilization in government contracting, as required by P.L. 95-507, all contracting abusive practices must be eliminated,” said Roger Campos, President of the Minority Business Round Table (MBRT) and a Member of the National SBA Advisory Committee.

Paul Murphy, President of Eagle Eye, a strategic partner of FPA said, “Transparency has allowed us to show that Federal Agencies had taken credit for $4.01B in small business contracts awarded to 48 multi-billion dollar businesses in FY 2008 which the Agencies did not account for to SBA.”13

Bob Coakley, a former staff director to former Florida Governor and Senator Lawton Chiles who is a FPA advisor noted, “Congress ought to inquire into the accuracy of the underlying data of the SBA Report Card. He added, “The Data Quality Act was intended to extend the requirements of the Chiles authored Paperwork Reduction Act. OMB has an affirmative responsibility to ensure that information disseminated by the federal government is reliable. Moreover, the Obama Administration is insisting upon transparency of government operations. They should determine and act upon the concern that small and disadvantaged businesses were shortchanged $4.01B in contracts they did not receive.”

For the current government outreach initiative to succeed at encouraging more small and disadvantaged businesses to contract with the government, SBA, MBDA and DoJ have to cooperate and support entrepreneurial efforts at eliminating ‘fraud and abuse,’ and at opening more contract opportunities at all levels.

“Eliminating the alleged illegal ‘exemptions’ on the Federal Acquisition Regulations (FAR) will allow $64B in federal contracts to become eligible for the statutory small business reservation,” said Al Piña, Chairman of the Florida Small Business Reinvestment Coalition. (FSBRC) He added, “Accurately accounting for all Florida minority businesses and for the municipal and State contracts disadvantaged businesses are receiving. The
projects of The Umbrella Initiative must be made a priority for the outreach efforts to succeed.”

Murphy, said, “The Umbrella Initiative and their projects will permit an accurate accounting for all disadvantaged businesses at the State level and for the contracts they are receiving from the State and municipal government.” He added, “The Umbrella Initiative intends to match state and municipal data to the Federal statistics and thus help State and municipal officials maximize all efforts at leveling the playing field.”14

Scott Amey, General Counsel for the Project on Government Oversight (POGO) said, “If the Administration is serious about acquisition reform, this is one of the first places it should look to enhance competition and improve federal contract spending.”

Congresswoman Corrine Brown along with other elected officials in Florida are supporting The Umbrella Initiative and its goal to establish a Minority Procurement Center at UNF 15 which would work on projects that would double the number of small businesses contracting with the government by the year 2020.

# # #

1 SBA IG Petition. – http://www.docstoc.com/docs/13394703/Congress-Asked-to-Enforce-Penalties-and–Revamp-Size-Protests
2 The Data Quality Act. – http://en.wikipedia.org/wiki/Data_Quality_Act
3 Size Protests Decisions against Unisen, Inc. – http://www.docstoc.com/docs/13810534/Consecutive-Size-Protest-Decisions-Against-Unisen-Inc
4 The OHA and SBA Decisions. – http://www.prweb.com/releases/2005/10/prweb302024.htm
5 The Umbrella Initiative. – http://www.docstoc.com/docs/3683947/The-FPA-UNF-Umbrella-Initiative
6 White Paper on Size Protests.- http://www.docstoc.com/docs/3651041/Reasons-why-the-SBA-Size-Protest-System-does-not-Work
7 FPA Successes . – http://www.docstoc.com/docs/11209387/FPA-Success-and-Track-Record
8 Proposed Florida Pilot Projects. – http://www.docstoc.com/docs/4458661/?key=N2QyYzg3N2Qt&pass=NjA2ZC00ZThh
9 OHA Appeal for Mishandled Protest. – http://www.docstoc.com/docs/13806343/OHA-Filing-for-Mishandled-Size-Protest
10 The Unfair Justification Procurement Advisory. – http://www.prweb.com/prfiles/2008/08/31/162468/FPAAdvisoryUnfairJustifications.pdf
11 P.L. 95-507. – http://www.docstoc.com/docs/3626707/The-public-law-that-defines-procurement-set-asides
12 The SBA OIG Report 5-15. -http://www.sba.gov/idc/groups/public/documents/sba/oig_gcbd_05-15.pdf
13 48 Ineligible Firms – http://www.docstoc.com/docs/13948639/FPA-List-of–48-Inelegible-Suppliers-Awarded-Small-Biz-Contracts-in-FY08
14 The State and Municipal Efforts. – http://www.docstoc.com/docs/13393316/Florida-Minority-Participation-in-Federal-Highway-Contracts
15 The Minority Procurement Center at UNF. – http://www.docstoc.com/docs/6048073/Cong-Corrine-Brown-Supports-FPA-UNF-Initiative

DARPA Contracts For New Internet “Standard” With Lockheed

The Defense Advanced Research Products Agency (DARPA) awarded a contract to a team led by Lockheed Martin to “develop” a new internet standard for use by the military only. The contract is worth about $31 million. Joining Lockheed will be companies like Microsoft, Juniper Networks, LGS Innovations and Stanford.

The idea is to build for DoD a more secure protocol. Although ARPA, DARPA’s predecessor, paid for the invention of what has become the Internet using primarily TCP/IP protocol this new set up will be optimized for military use and requirements. In some ways this makes a great deal of sense as the current internet faces a host of issues with protection and perhaps starting from scratch it will be easier to add security functions at the lowest level.

Logistical Costs Burden Operations In Afghanistan

Wars are expensive there is no doubt. As part of the planning for adding troops to Afghanistan the U.S. Department of Defense was asked why it costs about a $1 billion a year for a 1,000 soldiers to operate there. One of the main expenses it turns out is fuel. To get one gallon of JP8 to a soldier or airman who needs it costs about $400 if all related costs are taken into account. This figure alone is giving Congress second thoughts.

That is because the gas is shipped to Pakistan and then trucked to Afghanistan. To get it to the various outposts and bases sometimes requires aircraft and helicopters. For a helicopter to carry a gallon of gas probably takes a few gallons of gas and at a high maintenance rate. There is also the cost of all the personnel and contractors to handle the gas and supplies.

This should not really surprise anyone. In John Ellis’ book about World War II soldiers, On The Front Lines, he estimated it took about eleven personnel to support one front line soldier in the Pacific and almost ten in the European. That counted everyone who touched a ton of supplies as it moved from the U.S. to the actual soldier. That cost alone was fairly high. Take into account the gas used to move it and the maintenance of the ships, trucks and aircraft and the costs go up even more. Afghanistan is remote and costs even more.

U.S. Department of Defense Invests In Prostrate Cancer Treatment

The U.S. Department of Defense/Prostrate Cancer Research Program (DoD/PCRP) gave a grant of just over $1.5 million dollars to SRI International to support pre-clinical studies of the non-profit organization’s agents that might be able to develop into drugs to treat prostate cancer. This grant follows an earlier one that had led to some positive results utilizing plant products.

The U.S. defense budget contains a great deal of novel R&D efforts and a lot of funding. Congress has used it to fund breast and other cancer and disease prevention and treatment research. Obviously the military has a great deal invested in their human capital and medical treatment and this funding helps in those areas. SRI International is a spin-off of Stanford University specializing in sponsored research for government, businesses and foundations.

Selling Overseas To Make Up For Coming U.S. Defense Cuts

Arizona is a top beneficiary of defense dollars. This is primarily due to Raytheon and Bell activities in the state. Raytheon makes missile defense systems and Bell helicopters. Now with the possibility that Obama’s cuts to the defense budgets starting in 2010 and out the companies there are looking overseas for work.

Unfortunately this will be the business plan for all defense contractors if their is a significant contraction in U.S. defense spending. The focus will be on selling systems and support to Asian, South American and Middle Eastern companies. India, Brazil, the U.A.E. and Qatar have already made major investments in U.S. and European equipment and there are several major contracts coming. In 2008 the U.S. already captured two-thirds of the market but overall purchases were the lowest they had been since 2005. If this trend continues due to the global downturn in the economy there may be less opportunity for these sort of sales.

These trends may lead to further consolidation of the defense industry in the U.S. and abroad as domestic and foriegn markets may not be able to support the amount of business built up since 2001 primarily by the United States. This will be the most important factor facing the industry which has not seen this situation since the early Nineties and the end of the Reagan arms build-up.

IDGA To Hold Defense Acquisition 2009

IDGA will hold Defense Acquisition 2009

The volume of changes within defense procurement and acquisition has been noticeable. New administration members, changing military strategies and shifting jobs within the sector have all contributed to a sense of uncertainty within this field. Defense Acquisition will address many of these uncertainties by focusing on: Policy Updates, Acquisition Forecasts Across the Services, Critical Chem/Bio Updates, Updates to the DAI Initiative and much more.

Download the completed brochure

Featured Speakers Include:

– Colonel Scot Miller, USA, Principal Deputy, Acquisition & Logistics Center, U.S. Special Operations Command
– David Van Buren, Acting Assistant Secretary for Acquisition, Air Force
– Jaymie Durnan, Deputy Director, Joint Advanced Concepts, Office of the Under Secretary of Defense for Acquisition, Technology and Logistics (OUSD AT&L)
– Katrina Wahl, Director of Acquisition, Missile Defense Agency

Download the brochure to find out the rest!

IDGA looks forward to seeing you at this much anticipated event!

Boeing To Continue Support Of The C-17

Even though the Obama Administration has decided to end production of the C-17 transport aircraft Boeing is still able to make money through modifying and supporting the aircraft. In fact the U.S. Air Force just awarded a contract worth over a billion dollars to the company to do just that. The Air Force provides its own mechanics and has depots but will rely on Boeing for further support including parts, support, logistics management as well as some depot level maintenance.

This is fairly common type of contract to support a system that is utilizing organic military support. If the C-17 used Contractor Logistics Support (CLS) then the contract value would be much higher but the Air Force would not carry the burden of providing mechanics, training and parts.

There is no guarantee that a system’s manufacturer will get this work as there exist plenty of third party companies capable of doing it. The Air Force has the right to choose which ever company makes the best bid. This is more often true after completion of production and fielding. Either way this continues to keep revenue going to Boeing from an existing program in what is looking a like a rough year for the company.

Canada Buys CH-47 Helicopters

Canada awarded Boeing a contact for fifteen CH-47 helicopters. The contract has a value of over $1 billion and requires and equivalent amount of offsets in the Canadian economy. Boeing already is selling the latest version of the heavy lift helicopter so valuable in Afghanistan to the U.S. and Great Britain. Canada being the third most heavily involved country in that war will certainly be able to use them.

The aircraft will be delivered in either late 2013 or early 2014 as they fit in to the current production. Canada has been requiring significant offsets in their latest round of contracts and this favor many U.S. companies as they have either Canadian subsidiaries or already buy parts and support from that nation.

So far the Obama Administration has made little changes to the existing plans for U.S. Army aviation modernization with the UH-60M, UH-72A and CH-47F. The replacement of the Armed Reconnaissance Helicopter (ARH) original canceled contract is also on current path for continuation at this time.

Earmarks Keep Flowing From Congress

Limo-Reid Technologies of Deerfield, MI will receive a two million dollar earmark in the 2010 Defense Budget if it stands. Right now it is included in the House and Senate versions of the bill thanks to Senators Levin and Stabenow as well as Congressman Schauer. The company is developing a hydraulic based hybrid transmission system for heavy vehicles. The goal is a system that is more efficient and durable. Higher mileage is expected with this transmission as well.

Because it is for such a small amount and has the support of a senior Senator like Levin the chances are good that it will make its way through the whole process and be contained in the final budget. The money will be very helpful to the company and might have potential. The problem with earmarks like this is that while they seem small there are several hundred of them and they ad up. One of the services might think pursuing this technology is worthwhile but not to the point of including it in their prioritized budget. The Department of Defense has a great deal of R&D money to throw at problems but cannot obviously fund everything.

Many earmarks are for things like this: One contract for a company working on something that nobody else may be. They bring jobs to the locality and it makes the legislators look good and shows they are helping out the community. It is also true that Michigan needs all the jobs it can get right now with the collapse of the U.S. auto industry. That does not mean this is necessarily the best use of two million of the taxpayers dollars. The money either has to come from taxes or be borrowed. The U.S. right now has massive debt and it is getting worse and this amount doesn’t seem like much but every bit helps.

Competition For Boeing On Missile Defense Support Contract

Boeing has been the lead contractor on the development and deployment of the U.S. Ground Based Missile Defense (GMD) system. This system utilizes radars around the world and interceptors based in Alaska to provide long range, large coverage missile defense. This system was the core defense of the United States as envisioned by the Missile Defense Agency (MDA) and the Clinton and Bush administrations.

President Obama and his Secretary of Defense Robert Gates ended the future production and upgrade of the system but several interceptors have been deployed and a capability has been established. The new Administration intends to focus on the Navy’s long range systems and new technologies.

This does not mean that they are abandoning the deployed system. There may also be construction of further radars if the politics with Russia are worked out. Boeing was awarded a support contract worth about $250 million last year to maintain the system. This makes sense as they are the prime contractor on the system. Now MDA has announced that the next support contract will be openly competed. Lockheed and Nothrop Grumman have already announced that they will bid on the contract.

The idea that is competition will make the cost of the contract cheaper. Once a system is deployed there is technically no reason why any company with the capability cannot support it. The government owns the data rights and can transfer them to whomever they need to. It will have to be seen how competitive the other companies are.

Orbital Earnings Take A Hit

Due to some restructuring of its work due to the Obama Administration’s efforts to reorient defense spending Orbital Sciences Corporation reported a downturn in revenue and operating income in its most recent quarterly results. The company saw a missile defense contract ended and some delays in satellite work leading it to reduce its estimates for the full year.

Of the major defense companies reporting so far results have been mixed. Some have seen better quarters then others. The effects of the major changes planned by Obama and Secretary of Defense Gates may take some months to have effect. The large programs they have ended will still be paying termination costs to the companies as they figure out what fees are needed and what work will be paid for. There are also chances that new contracts will be awarded in the next year or so.

Several programs will be continued in another form it may take two or three years for the next iteration to start. The Army’s Future Combat System (FCS) contract with Boeing and SAIC ended but the technology and work has been inserted into a new program. The contracts for the new program have not been fully awarded, so Boeing and SAIC may end of with revenue from that effort. In the end despite the cancellation the companies may not end up losing much revenue.

GE Bets On House To Keep F-35 Second Engine Alive

Following up on its decision to strip the F-22 funding from the 2010 budget as requested by the Obama Administration the Senate also de-funded the second source for the F-35 JSF engine. This program too had its funding removed in the President’s budget submission but the House and the Senate Committees had restored some money to continue the program.

GE and Rolls-Royce are making this engine, the F136 with Pratt & Whitney responsible for the main F135 engine. The idea of having a second engine was due to the large amount of F-35 aircraft required and the three different versions there might be a need for such capability. GE is claiming that the competition that their engine provides will help control costs and schedule. The company feels that the funding will remain in the final bill as the House will support it in Conference. There is still a chance that the conference bill will also retain some money for the F-22 if the House is hard over on it.

It is interesting that Secretary of Defense Gates‘ wants to end this competitive program to save money when one of the new changes to defense acquisition that he has pushed this year is increased competition in the early stages of a program. Historically when there have been multiple sources trying to win a program there have been cost savings to the Government. In this case the feeling must be that the program is too mature to justify the two sources for the engines.

With the support of the Senate for Obama it may be a contentious conference, or the House may end up ending the programs. It will be an interesting August from the defense budget point of view.

House Moves To Keep VH-71 Increment One Alive

The various defense appropriations and authorization bills are working their way through the House and Senate. Many items have been included not requested by the Obama Administration or Secretary of Defense Robert Gates. This really is not surprising as Gates attempted to cut a lot very quickly. He spared no service cutting Air Force F-22 and C-17 aircraft, Navy VH-71 and destroyers, and Army vehicle and missile defense systems. Congress has pushed back on certain programs.

One that they are trying to keep alive is the VH-71 helicopter for use in transporting the President. This program has not only been unfunded in the President’s 2010 budget but Lockheed Martin has been told to stop work. The company and the Pentagon are negotiating termination costs.

The House Appropriation Defense sub-committee, though, included almost half a billion dollars to try and utilize the Increment One aircraft already procured. The program was structured with two increments of aircraft, the first being basic ones to be used to support testing and development. A larger buy in five or so years would have all the required equipment. To date the U.S. has invested about $3 billion in the program. The House wants to see if some use could be derived of the aircraft already delivered.

While the current fleet of VH-2 and VH-60 aircraft have served the President well they are somewhat dated. The VH-71 would have more modern survivability and communications equipment with greater range and lift. The strenuous requirements are what led to the programs cost and schedule growth. There will be more to come on this issue to say the least.

Australia’s First F/A-18 Delivered

Boeing delivered the first F/A-18 Super Hornet for Australia on July 8. This is the first of twenty-four. The aircraft will provide a stop gap until either the F-35 JSF or the F-22 aircraft Australia has expressed interest in buying. The total value of the contract to Boeing is about $3 billion.

The F-18 for the U.S. Navy and Marine Corps is facing the end of production as the Obama Administration has proposed accelerating deliveries of the F-35 for those services as well as the U.S. Air Force. This is tied in to the ending of F-22 production. Congress has not received these proposals well and have included continued F-22 deliveries in the appropriation and authorization bills working their way through both Houses. The House has also looked at increasing planned F-18 deliveries as well as exploring the award of another multi-year production contract. Multi-year contracts have to be specifically authorized and have been used for large aircraft contracts in a bid to keep overall costs down. If there is a consistent buy profile over several years it makes it easier for the contractors to manage supplies and material ideally reducing costs.

FCS Cancellation Fallout

The cancellation of the current Future Combat Systems (FCS) development contract was one of the cornerstones of the Obama Administrations 2010 defense budget. The program of new vehicles, unmanned aerial and ground systems, and the data links connecting them was estimated at over $160 billion. The Army still has a requirement for a upgrade to their combat brigades currently using the Eighties produced M1/M2 vehicles and the Styker Interim system. As such a new program was set up to replace FCS almost immediately after the contract with Boeing and SAIC was canceled.

Now the Army is concerned that the money planned for in the budget may not be available for this new program. At a minimum some of it will be needed to pay the termination fees related to the various contracts ended prematurely. They were ended at the convenience of the government so the contractors are entitled to payment for whatever work they had done and what it takes to close out the contracts. If the money doesn’t remain in the FCS line then the Army will be forced to fund it from other programs.

Congress in their mark up of the 2010 budget cut most of the money budgeted for this as they felt there were sufficient current funds to cover this. This may be a little too much penny save pound foolish. The Army knows fairly well what is needed and probably budgeted appropriately. The cost to other parts of the Army including the new modernization program may be quite high.

MRAP-ATV Contract Continues On Track

The MRAP-ATV is a program to develop a lighter, more maneuverable Mine Resistant Ambush Protected vehicle for use in Afghanistan. The Army has been working on awarding a production contract by the end of this quarter. Reports indicated that that will happen and one or more companies who are participating in the current testing will receive an order.

The Army and other Services have invested a great deal of money in the last five years into these systems to counter the IED and mine threat in Iraq and Afghanistan. The vehicles due to their size and weight primarily are road bound and provide point-to-point transport. The rougher terrain in Afghanistan and lack of roads has led to the MRAP-ATV requirement. The program has moved fast as basically all of the vehicles proposed are existing systems.

The winner(s) will see a great deal of work quickly as the military hopes to ramp up production and quantities very quickly. The use of MRAP and their force mix are all undergoing study as the U.S. tries to fit them into its regular tactical organizations and doctrine.

HASC Wants To Continue VH-71

In their markup of the 2010 Defense Appropriations Bill the House Armed Services Committee added money for continued production of the F-22. It also recommended that the Navy and Defense Department continue production of the Increment One of the VH-71 New Presidential Helicopter.

They feel that this would be the best use of the over $3 billion already spent on the program. There is obviously still a requirement for this aircraft and a new program is planned. The HASC wants the first group of VH-71 to be used as “the normal transport for the President…” with other systems looked at for the more stringent requirements. Right now the President uses VH-3 for short range, normal duties and then longer ranged CH-53 and UH-60 for other missions. One of the problems faced by the VH-71 was the attempt to buy one aircraft to do all missions.

Finemeccanica had offered to just deliver Increment One aircraft at reduced price for the total program. Of course these did not meet all of the requirements that the Navy had levied. This was a major reason the program’s cost and schedule increased so much.

So far the HASC markup does not necessarily agree with the Obama Administration’s proposals in the area of the F-22 or the VH-71. The bill still needs to go through the process of other committee markups, the full House and Senate and then the Conference. This means that this language may or not make it to the final version but it does show support for the VH-71 program.

Lockheed Plans Further Job Cuts Due To VH-71 Ending

Lockheed Martin had already cut over one hundred jobs at their Upstate New York facility in Owego. This was mainly due to the decision by Obama and Secretary of Defense Gates to end the VH-71 New Presidential Transport helicopter program. Even though the aircraft was made in Italy Lockheed did all the modifications and integration in Owego.

Despite a great deal of argument and pressure to keep the program going in some form or another the contract was recently terminated. Lockheed is now saying that another seven hundred and fifty people may lose their jobs. Right now they are looking for people to voluntarily leave or retire with a promise of severance. The plan is to begin the layoffs in July based on how many people agree to leave voluntarily.

One of the arguments against ending this and other production programs is that they will just add to the joblessness during the current recession. Of course the defense budget is not really a jobs program and that is fairly poor reasoning to continue spending billions of dollars on a system that does not meet requirements. It is still possible that Congress will pass some form of spending that will keep pieces of the program alive in the 2010 defense budget but that will not be finished until the Fall.

E-2D Program Moves Forward

The Navy’s new carrier based radar search and surveillance plane the E-2D had a successful Milestone C Low Rate Production Decision. The aircraft is an incremental upgrade to the existing E-2C. The Advanced Hawkeye program has made steady progress over the last several years and the production decision is a major advance for it and any defense acquisition program.

The company and its team has been awarded contract worth about $430 million to deliver the first four aircraft. The development aircraft had first flown back in late 2007. There has also been discussion of selling the aircraft to selected overseas customers. Right now the E-2C is used by Israel, Egypt, Japan and Singapore among others.

Northrop Tries To Save Kinetic Energy Interceptor

Update — On June 10th the Missile Defense Agency (MDA) terminated the Kinetic Energy Interceptor (KEI) for the convenience of the government. This meant that all of Northrop’s lobbying to continue the program to at least conducting the first key test in the program was wasted.

Moving quickly like he has on the FCS and VH-71 programs the Secretary of Defense Robert Gates had another stop work order issued for a program recommended for cancellation in the 2010 budget. MDA told Northrop Grumman to halt the KEI program. This $4 billion contract had only recently been issued and the first test flight of the propulsion system was planned for later this year.

Congress has shown a great deal of support for this program recently and the decision to end it was not well received. There was some concern expressed that the program had not been given a chance to demonstrate its capability. The total missile defense budget saw almost a twenty percent cut with this and the Ground Based Mid-Course system making up the bulk of that money. The plan is to focus on the Navy’s system as well as shorter ranged Army ones.

Northrop has proposed that even with the termination of the program they will still be able to meet schedule and complete the booster test. This may be an attempt to sway Congressional and Administration support for continuing the program beyond 30 September 2009. If they really can meet this test schedule and the history of missile defense programs is not in their favor due to the complexities of the tests and technology then it might help them carry the program over.

A Northrop Grumman video on the program is below which is kind of amusing as it is done as a fake newscast:

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