Dog and Cat

U.S. Vehicle Modernization Programs Should Continue Despite Budget Pressures

8408212129_6e55470d16The U.S. military is facing a struggle with its budget over the next 5 year based on current plans. It is winding down its commitment in Afghanistan and facing the effects of debt ceiling limitations and sequestration. At the same time it needs to reset itself after 12 years of commitment in South West Asia and the Middle East. This means force structures will be changed and equipment repaired and rebuilt. There will also need to be investment in certain new programs and capability to continue technical improvement to the forces overall.

Sequestration was implemented for 2013 but had minimal affect on the actual execution of the budge and mission. People were furloughed; some programs didn’t do all their planned development but generally plans were accomplished. The Congress has yet to pass a 2014 budget but the versions that passed the whole House and voted out of Senate Committee assume there will be no sequestration in 2014 and fully fund the President’s request. That assumes some deal being made where either sequestration is cancelled or cuts are made to other parts of the budget.

The recent talk of fighting in Syria by U.S. Navy and Air Forces only has reinforced the view of many in Congress that the defense budget cannot be cut.Vehicle down

There are several core modernization programs in the U.S. that should continue. These include the biggest of them all, the F-35 Joint Strike Fighter, the Navy’s Littoral Combat Ship (LCS) and for the Army, the Ground Combat Vehicle (GCV) and the Joint Light Tactical Vehicle (JLTV).

The GCV will replace the M2 Infantry Fighting Vehicle and the JLTV the ubiquitous HUMVEE. Both programs are following similar paths where they will pay to develop prototypes from vendors to test and then choose one or more for production and entry into service. This was the successful concept used to buy the Mine Resistant Ambush Protected (MRAP)-ATV used in Afghanistan. That concept was won by Oshkosh (OSK) with their MRAP-AT vehicle.

The JLTV is reaching a point where the 3 teams vying for the contract have sent in their prototypes for testing. These are Lockheed Martin (LMT), AM General and Oshkosh. The GCV is still earlier in the program and is working to reach that stage with 2 competitors, General Dynamics (GD) and BAE Systems (BAE), one are working to meet their solutions. Both programs have substantial budgets supporting these development efforts in FY13 and planned for 2014.

The two programs biggest struggle, like many Americans, is with weight. To meet the protection requirements demanded of fending off mines and IED’s while facing a variety of direct and indirect fire threats lead to all discussed designs being very heavy. Both the JLTV and GCV had programs before them that had to be ended and reevaluated due to the total weight of the proposed solutions. The initial JLTV concepts were weighing 18-20 tons and the GCV over 80, or in the class of Main Battle Tanks (MBT).

The solution discussed for both programs are to use add on armor depending on the level of threat. This means in most situations not all of it would be carried improving weight and performance. In high threat areas more would be bolted on with affects on capabilities. In all situations the maximum armament would still be carried while protection would vary. This does though increase the overall cost of the vehicle and the programs at a time when budget dollars are going to be scrutinized and spread very thin.

In the past when the Pentagon faced a similar budget crunch programs in development would see delays as their annual budgets will be decreased. Production quantities will be reduced and spread over more years shifting cost to the “out year” budget and delaying full entry into service. In extreme cases outright cancellation of the project has occurred.

These two systems are critical to the overall upgrade of the U.S. military ground forces. The HUMVEE and M2 are both originally 30 year designs. They have received constant upgrades especially in the last 10 years due to the changed threat in Iraq and Afghanistan. The HUMVEE, especially, has seen more and more armor added and improved weapon and tactical communication systems added.

Their fates are also tied to the removal of the MRAP from service. The MRAP’s were a quick reaction to a specific threat and public outcry over casualties from the IED and mines. They were never meant to be battlefield vehicles and the armor protection requirements for these programs show why. The U.S. is resetting their MRAP force of several different designs and models and trying to fit them into their standard organization and doctrine. Most likely they will be eliminated from these and used only in extreme depending on the threat.

These programs are expected to continue with the possibility of seeing delays and lengthening of schedules. They are critical to the continuing U.S. armored vehicle capability as there are few other systems coming. The Army has proposed shutting down their M1 production facility for several years due to overcapacity and demand. Congress has fought that and will most likely not allow it but it indicates the budgetary situation. If the JLTV and GCV are cancelled or extremely delayed the U.S. could lose industrial base and capability that would affect future modernization efforts down the road.

Photos of the M2 and HUMVEES courtesy of DVIDSHUB flickr photostream.

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Boeing Receives US Army $4 Billion Multi-year Contract for Chinook Helicopters

June 25, 2013 by · Comment
Filed under: Boeing, Syndicated Industry News, U.S. Army 

Boeing has won a five-year contract with the U.S. Army for as many as 217 CH-47F Chinook helicoptersIn an agreement that will save the U.S. government more than $800 million, the Army and Boeing have signed a $4 billion multi-year contract for 177 CH-47F Chinook helicopters, with the Army holding options that could increase its total buy to 215...

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U.S. Navy Sea Based Missile Defense Advances to Shore

In the early 1990’s in a response to Iraq’s use of Scud missiles during Desert Storm the U.S. military, led by the then Ballistic Missile Defense Organization (BMDO), now the Missile Defense Agency (MDA), began investing in defenses against shorter range threats. Previous efforts had been oriented to defending the United States from the large the Intercontinental Ballistic Missile (IBCM) based in the Soviet Union. All three of the major services had programs but the focus was on U.S. Army and Navy missile systems.

The Navy began developing 2 different systems that mirrored the Army’s path. Both involved modifying their current primary long range air defense system, AEGIS. This utilized large phase arrayed radars and the STANDARD Missile-2 (SM-2) interceptor. The AEGIS radars and other systems had originally been developed by General Electric (GE) but by the mid-1990’s had transitioned through Martin Marietta to Lockheed Martin (LMT). The SM-2 was produced by Hughes Missile Systems and Raytheon (RTN) but ultimately Raytheon acquired the whole business.

First, the missile, radars and command and control systems would have capability added to defense against shorter range missiles but still maintain their air defense mission. The Army was doing the same thing with their Patriot surface-to-air missile system. Secondly, a dedicated missile utilizing an exo-atmospheric kill vehicle would be developed. That meant the missile would not be able to engage air breathing targets but much longer ranged missiles.

By the early part of this century the air defense capable version, SM-2 Block IVA, had been cancelled due to budget and schedule issues. The long range SM-3, though, continued development and testing. It has proved successful including being able to intercept and destroy a failing satellite in 2008. The system has entered production and several cruisers and destroyers have been modified to utilize it. The Navy has continued development and the new SM-6 missile has just entered production at a new factory in Huntsville, AL.

The MDA has also decided as a way to supplement the current Ground Based Mid-Course System based in Alaska to develop “AEGIS Ashore”. This places the radars, other systems and missiles in trailers and containers that can be set up in different places and even moved around as necessary.

This program made a major step forward recently with the build up of the first test set that will be installed ultimately at the Pacific Missile Range Facility (PMRF) in Kauai, Hawaii for testing. Once that system is moved a second one will be installed at the main AEGIS production and development center in New Jersey. Ultimately the first set will be set up in Eastern Europe.

Originally the Bush Administration had planned on an expansion of the Alaskan ground based system into Poland and other parts of Eastern Europe. This was cancelled by the Obama Administration and AEGIS Ashore substituted. There is also plans to utilize AEGIS ships to provide missile defense converge of parts of NATO in Europe.

AEIGS Ashore is just one part of the continued Navy and U.S. investment in missile defense as it includes upgrades to the AEGIS radars, C2 systems and steady development of the STANDARD Missile. All of this will be to the advantage of key contractors like Lockheed and Raytheon. Further developments of a new radar, the Air and Missile Defense Radar (AMDR) also include bidders like Northrop Grumman (NOC) so as the program develops there will be chances of contract wins and work for other contractors. These efforts could also flow into the AEGIS Ashore or its replacement system in the future.

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JAGM to Follow JCM in Obama’s Latest Budget

The Joint Air-to-Ground Missile (JAGM) program is an Army run one to develop a replacement for the air launched Hellfire and Maverick missiles. The Hellfire is fired from helicopters and started life as a laser guided anti-tank missile. It now has a variety of warhead options and has seen heavy use in Iraq and Afghanistan from AH-64 and AH-1W attack helicopters. The Maverick is fired from fixed wing aircraft primarily by the U.S. Air Force and too was initially an anti-tank system.

Several years ago there was a similar program in development called the Joint Common Missile (JCM). This was cancelled around 2005. The JAGM program began a few years later. Originally it was planned to have two teams compete for designs and then take one into production. Raytheon (RTN) and Boeing (BA) formed a team and Lockheed Martin (LMT), who had been the prime contractor for the JCM, also competed. One of the requirements for JAGM is the use of a 3 mode seeker utilizing radar, infrared and laser guidance.

In 2012 the Army rather then continuing the contest decided to delay final development and production of the system. Rather the two teams would be given contracts to continue their work and this could then support a later production decision if it was decided to finish out the program. Both contenders were given about $60 million contracts for this work.

Now in the latest budget submitted by the Obama administration last week it looks like a final decision has been made to cancel JAGM. Only the costs of the current development plan are considered which would save a little over $200 million in the 5 years the budget plan covers. It is of course up to Congress to decide whether to remove the funding and end this program.

The Hellfire has a successful history but the JAGM, and JCM, would have offered improvements in size, range and guidance capability. If sequestration continues then the U.S. military will be faced with more choices of deferring new development, using existing equipment or investing in new capabilities for them. The current budget without considering those mandatory cuts already is starting to make those kind of decisions.

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Army Releases Draft RFP for M113 Replacement

Late last month the U.S. Army released a draft Request for Proposals (RFP) for the vehicle to replace the M113 fully tracked, armored personnel carrier. The new Armored Multi-Purpose Vehicle (AMPV) will be used to provide supporting roles on the battlefield to the current M1/M2 forces and also work with the new Ground Combat Vehicle (GCV) as it enters service. The goal is to have the final RFP out later this year and award a single contractor a development contractor by the end of FY2014.

Of course this will have to wait on the available funds in the 2014 budget whihc has yet to be sent to the Hill by the Obama Administration.

The M113 entered service in the early 1960′s primarily as a lightly armored vehicle to move infantry around the battlefield in conjunction with the M48 and M60 tanks. It was designed to protect against small arms and artillery rather then direct anti-tank weapons. Troops would dismount to fight from the vehicle rather then fight while moving. The M113 was very similar to other armed forces systems like the British FV432 or the Soviet BTR50.

Since the M113 chassis was available it was heavily modified to conduct a series of support roles like ambulance, command vehicle, mortar carrier as well as carrying Anti-Tank Guided Missiles (ATGM) and even formed the basis for the M114 scout. The AMPV will not fulfill the infantry mission as the M2 and GCV are for that but is planned to do the supporting roles. The draft RFP calls for different versions including general support, mortar carrier, command vehicles and medical support vehicles. The Army plans to procure about 3,000 of the system.

The Army’s focus right now is on protection to counter the mine / Improvised Explosive Device (IED) threat which was most prevalent in Iraq and Afghanistan. The Mine Resistant Ambush Protected (MRAP) vehicles developed and deployed to counter them there were not tactical vehicles but provided safe ability to transport troops around the countries. The GCV and AMPV will be tactical vehicles and there armor requirements reflect this. The GCV will be tank like in weight to protect 9 troops and 3 crew. The AMPV will not be as heavy but still requires significant underbody protection. At the same time they must be protected against direct and indirect battlefield threats such as tank guns, ATGM and man portable anti-tank weapons.

These requirements will drive up costs and development times. To save money on the AMPV, like the GCV, the Army is now proposing only one winner where previously it had been hoped like the successful MRAP-ATV program more then one development contract could be awarded and a drive off occur. Both General Dynamics (GD), who make the current wheeled Stryker Interim Combat Vehicle, and BAE Systems, the M2 Bradley manufacturer, are expected to bid. Other companies could also bid as there are several systems already in production that could with some modifications meet the requirements.

The winner would not only see the Army 3,00 vehicle requirements but probably quite a bit of FMS sales as other nations adopt the U.S. system.

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BAE Gets Contract for Radford Ammo Plant

Two years ago the British based BAE Systems (BAE:LSE) was able to win away from ATK (ATK) the contract to run the U.S. Army’s Radford facility that manufactures explosives. ATK had had the contract to operate it for several years and due to the demands of the fighting in Afghanistan and Iraq the plant generated a great deal of revenue for the operator. It was a hard fought win due to a protest and there being multiple competitions to evaluate the different proposals.

With the current budgetary situation and the end of Iraq’s fighting along with the winding down of Afghanistan it could be expected that demand for the products at Radford may go down. Luckily for BAE the Army has just announced that they awarded the company a large contract to manufacture explosives primarily for artillery shells at the facility. This could be worth up to $780 million if all options are executed.

As the U.S. military returns from Afghanistan it will need to replenish stocks of munitions as well as continue building newer, more reliable one. Training operations will also need to be supported. While this means that demand may not be as high as before there will still be consumption of artillery and other shells which will require production of new stock at Radford.

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FN Gets New Army M4A1 Contract

At the end of last month the U.S. Army awarded FN Manufacturing, the U.S. owned company of FN Herstal, of Belgium a contract to upgrade M4 rifles to the new M4A1 standard. . FN Manfuacturing will do the work at their plant in South Carolina. The contract has a value of about $77 million if all options are executed.

UP to this contract all M4 production and other work had been done by Colt Defense. Over the last several years the Army has gone back and forth with this company on contracts and costs. The Army has also tried several times to purchase a weapon to replace the M16 and M4, which is basically a shortened version of that venerable rifle.

FN has already has had contracts with the U.S. military to make the M16 and recently M240 machine guns. They were also the initial producer of the M249 SAW.

The problem for Colt is that it may see one of its largest product lines move to other producers as time continues. This contract will just upgrade existing M4 rifles. The next contract may be for production moving to FN or another supplier. It may be a whole different system from Colt, FN or some other small arms company.

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Army to Upgrade Training Centers with Northrop Grumman

The U.S. Army operates 3 training and readiness centers to aid in preparing American and allied troops for deployments. These are the National Training Center (NTC) at FT Irwin in California, the Joint Readiness Training Center at FT Polk, Louisiana; and the Joint Multinational Readiness Center (JMRC) in Germany. All 3 offer simulated terrain and features along with the ability for the units to engage others and pretend enemies. The U.S. has pioneered this concept of training over the last several decades.

Part of the centers ability are complex communications systems that gather data about activities and allow it to be displayed and analyzed to help units learn what they did and how to do it better. Northrop Grumman (NOC) has just been awarded a contract to upgrade the Combat Training Center Instrumentation System (“CTC-IS”) at the 2 U.S. facilities.

The 6 year contract did not have a value provided.

NTC and JMRC were originally set up to provide training against units using Soviet doctrine and equipment. Their missions have evolved since 1991 with focuses on low intensity conflict and the struggles in Iraq and Afghanistan. As the type of engagements and missions of the U.S. military continue to change the 2 bases also will change. Investment in better and more capable communication and data collection will also make them better sites for training.

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Ground Combat Vehicle Decision to be Delayed

3286900481_fe603c77a6_mIt is being reported that the Army has decided to delay the Ground Combat Vehicle (GCV) six months. This is being done most likely in response to the current budgetary situation with the potential sequestration cuts.

The Defense Department has done a good job awarding current contract options this past few months to get things on contract to limit the effects of sequestration on existing work. Unfortunately new contracts will be affected as there may not be as much money available to award later this year. GCV may be in that situation. Delaying it several months should get you into Fiscal Year 2014 with a better handle on what money you have and allow the budget to prioritize funding.

Sequestration may force across the board cuts in all defense appropriations and limit the ability of new, large contracts to be awarded for the remainder of this Fiscal Year.

Two teams of contractors were awarded development contracts by the Army for the M2 Bradley replacement in 2011. One of those designs will be selected to go into Engineering, Manufacturing & Development (EMD) and ultimately into full production. This may still be several years into the future. These were to General Dynamics (GD) and to a team of BAE Systems and Northrop Grumman (NOC). The bid by the 2 prime contractors on the cancelled Future Combat System (FCS) the last attempt to build a Bradley replacement, Boeing (BA) and SAIC (SAIC), was not accepted.

Photo from UNC -CFC-USFK’s flickr photostream.

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Despite Budget Worries Programs Continue

The U.S. Congress and the Obama Administration may have pushed off the decision on sequestration and dealing with the planned budget cuts for the Defense Department but that does not mean development and new programs don’t continue. Using available funding the work goes on to advance these efforts 2 recent press releases illustrate this activity.

General Dynamics and Alenia Aermacchi Join Forces for U.S. Air Force T-X Trainer Competition — “General Dynamics (NYSE: GD) and Alenia Aermacchi, a Finmeccanica company, announced today the signing of a Letter of Intent (LOI) to join forces and compete for the U.S. Air Force’s T-X trainer program, which will replace aging T-38 trainer jets and related training systems.” The American defense contractor will team up with Italy’s Alenia Aermacchi to propose a variant of the M-346 military aircraft trainer designated the T-100. The T-X program will replace the U.S. Air Force’s T-38 fleet. THe M-346 was recently selected by Israel to be their primary training aircraft.

Lockheed Martin JLTV Undergoes Successful Design Review — ” Lockheed Martin’s (NYSE: LMT) family of Joint Light Tactical Vehicles successfully completed a top-to-bottom government design review in late December, well ahead of the first Engineering and Manufacturing Development (EMD) JLTVs that will begin rolling off the assembly line this spring.” The JLTV is the planned replacement for the HUMVEE in use by the U.S. military and potentially its Allies. It will be a large program if fully executed as there will be a requirement for thousands of the vehicles. The U.S. is utilizing a process where multiple designs are being developed independently by contractors and then one or more may eventually be selected to go into Engineering, Manufacturing and Development (EMD) and then production.

The hard decisions facing U.S. defense budget decision makers is whether to cut back funding for these types of programs and make do with existing systems that may cost more in the long run to operate and maintain due to their age and capabilities. In the past it has been tempting to reduce investment in new systems beyond basic development to manage the size of the budget. If these types of programs continue it may mean cuts to current operations and force sizes to fee up the necessary investment requirements. The types of cuts required by sequestration will be hard to implement in the current budget but could be easier in future ones as more specific cuts may be made.

In the end if the cuts are carried out the U.S. will lose capability and may see new programs like these executed.

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US Army to Evaluate Tactical Routers for Combat Vehicles

January 9, 2013 by · Comment
Filed under: Syndicated Industry News, U.S. Army 
The U.S. Army, through the System of Systems Integration (SoSI) Directorate, plans to evaluate the use of tactical routers on vehicles. Such routers will enable multiple users and systems on board and nearby combat vehicles to access vehicular networks and distributed IP based services while maintaining high level of security.

Final Conference Defense Spending Bill from Congress Kills MEADS

Despite threats of a veto from the Obama White House the current conference version of the 2013 Defense Authorization Bill will end the MEADS program. The final version of the law cuts the last planned $400 million expenditure on the new, joint air defense system.

The Medium Extended Air Defense System (MEADS) was being developed by the U.S., Italy and Germany as a replacement for the PATRIOT system made by Raytheon (RTN). Lockheed Martin (LMT) is the lead contractor for the MEADS system. The Administration and Congress have already agreed that newer versions of the PATRIOT will suffice and work on MEADS would end. The dispute is that Congress decided that there was no reason for funding in FY13 rather then completing that year of work.

Italy and Germany had wanted to continue the program having provided several hundred million dollars of funding over its life stretching back to the Nineties. Not only will there be fall out internationally from this decision it is estimated that paying out contract termination fees and close out costs would probably be close to the planned $400 million in funding.

The program had been in its test phase and had recently had some successes.

Unfortunately in the potential fiscal situation new programs that are yet to enter service are the ones that face the biggest cuts as it is possible to utilize some of the things developed but by avoiding production and deployment large amounts of funding are saved. While the Administration wanted that last year of funding it seems clear that Congress intends to not provide it in the FY13 bill.

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GD to Support Army Investment in Medical Facilities

The U.S. military has been spending a larger and larger portion of its budget on medical care and facilities over the last decade. This has been driven by the operations in Iraq and Afghanistan, the recent growth in the size of the military, a large number of retirees along with members dependents. Primary care is through the TRICARE program which operates as a HMO basically. The different services also operate hospitals and clinics across the globe and the U.S.

During the recent round of Base Realignment and Closure (BRAC) hospitals were moved, expanded or built new to handle the changes in personnel assigned to the bases. There was also substantial investment at FT Sam Houston in San Antonio, TX as BRAC dictated centralization of all medical training there. This meant that facilities across the U.S. had to be merged as Army, Navy and Air Force training will take place there.

All of this work requires contractors to manage, execute and conduct the required work. General Dynamics (GD), for example, received recently 3 task orders from the U.S. Army to support their medical facilities. These are worth together about $100 million and have a period of performance of just over 2 years.

They will have GD provide equipment and movement services as 2 new facilities are stood up at FT Riley and FT Benning. These are new hospitals built as BRAC moved substantial numbers of troops to these sites from other U.S. bases. Both are planned to open in 2014. The third task will support new equipment and services for 2 clinics in Korea.

As the U.S. sorts out its budget issues there may be changes to plans right now for this type of investment but there will be some continued efforts to build new and better medical facilities for even a smaller U.S. military.

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Raytheon to Continue JAGM Development

Following the award of a similar contract to competitor Lockheed Martin (LMT) in August, Raytheon (RTN) received a contract from the U.S. Army to continue development of their proposed solution to the Joint Air-to-Ground Missile (JAGM) requirement.

The $65 million contract will provide for a Preliminary Design Review (PDR) and then ultimately allow mating of the Raytheon guidance sections with other missile components. Raytheon will continue to utilize their tri-mode seeker developed as part of the Small Diameter Bomb (SDB) program.

Lockheed received a $64 million contract at the end of Fiscal Year 2012 for the same purpose.

The JAGM is a new missile that will replace the existing Hellfire and Maverick missiles launched from a variety of helicopters and fixed wing aircraft to strike ground and vehicle targets. The Hellfire has seen a great deal of use in Afghanistan and Iraq providing precision fire support for ground troops.

The Army had looked at cancelling JAGM but decided instead to continue development through these small contracts. If the program does go on to complete development and enter production the requirement could be for thousands of missiles at a cost of $10-12 billion. The Hellfire has also seen significant Foreign Military Sales (FMS) and the JAGM would be expected to as well.

Raytheon JAGM mock up photo by Author.

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ATK Gets Order for Aircraft Survivability Components

The A-10 is one of the aircraft equipped with the AAR-47.

Back in October Alliant Techsystems (ATK) received a contract from the U.S. Army to provide replaceable components for the AN/AAR-47 aircraft defense system. This was an Indefinite Quantity/Indefinite Delivery (ID/IQ) contract under whichthe military could order what they needed. Even though the total value could be close to $70 million there was no guarantee that orders would be placed.

The AAR-47 Missile Warning Set is a series of sensors, analysis and display systems mounted on helicopters and aircraft to detect, identity and inform the crew about surface-to-air missile threats. It is currently a product of ATK only but was developed by that company along with Loral in the 80′s.

The ID/IQ contract is to purchase basically replacement parts for the system.

The first order was placed this week an has a value of just over $30 million.

ATK manufactures aircraft components, ammunition and pyrotechnics. They have had a rough 12 months but things recently have got a lot better for the company. They did lose a major contract to operate the Radford Ammunition but kept the one for Lake City. Declines in orders for that type of product by the U.S. military is expected as fighting winds down in Afghanistan. They recently reorganized and the last quarter earnings showed good results from their efforts.

Photo from The National Guard’s flickr photostream.

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More Machineguns from GD

The U.S. military even though the fighting is winding down in Afghanistan still needs to invest in new equipment to replace older weapons. Demand will be going down after 2014 when the last troops return and so without sequestration contractors will see reduced orders for their products.

The M2 50 caliber machine gun has been in use with the U.S. and its allies since before World War II. It is mounted on aircraft, vehicles and used from tripods carried by Soldiers. There have been tens of thousands of them made and even though a new design was recently developed it is still manufactured by General Dynamics (GD). The original weapon was made by Browning and has gone through a series of owners since originally delivered.

GD just received yet another contract for these weapons to be manufactured at their Maine plant. The almost $30 million contract will be for 12,000 of the systems.

As the defense budget begins its decline next year and the military adjusts to new requirements the demand for weapons like these will most likely decline as well. Less will be used in combat meaning existing ones will last longer. There may be more work refurbishing existing weapons then buying new ones.

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ITT Exelis Wins NVG Contract

ITT Exelis (XLS) is the old defense part of ITT Corporation (ITT) that split into 3 parts last year. ITT Corporation is the heir to ITT Industries which was a conglomerate of different businesses including several defense product lines including night Vision equipment, radars, electronic warfare systems as well as engineering and technical support. The defense part along with its water and pump lines were set up as separate companies just over a year ago.

ITT Exelis has continued to compete in their core defense markets and was just recently awarded another contract by the U.S. Army for Night Vision Goggles (NVG). This new Indefinite Delivery / Indefinite Quantity (ID/IQ) contract for Generation 3 systems could be worth over $200 million. Under the ID/IQ structure the Army will order different tasks of what they need so in the end Exelis could see less then the total value of the contract.

The U.S. military has invested heavily in such equipment over the last forty years and has a significant advantage at night operations due to this. The googles are able to be used by aircrew as well as ground units to improve their capabilities in night operations. ITT and now Exelis is one of the leading producers of this equipment in the world.

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Boeing to Provide Logistics Support for CH-47

The U.S. Army has invested billions in rotary wing aviation over the last ten years. The UH-60, AH-64, CH-47 and OH-58D have flown millions of hours in support of fighting in Afghanistan and Iraq. At the same time they have developed and put into operation new versions of the aircraft such as the UH-60M and CH-47F. These aircraft have required intensive maintenance, support and modification due to the demands of the last decade.

Boeing (BA) as the manufacturer of the CH-47 also has benefited through these demands by providing logistic support to the aircraft. It recently received a contract for Performance Based Logistics (PBL) for the main rotor blades of the CH-47. The contract is for 5 years and worth almost $200 million. Rotor blades need to be repaired and rebuilt due to the harsh environments in Iraq and Afghanistan that often cause erosion and wear.

PBL is a current trend in U.S. military logistics support where the government is buying a level of support measured through metrics. This is supposed to be more efficient and cost effective as it minimizes buying too much support and reduces stockpiling of parts. Logistic contracts like this are a boon to the OEM for systems as they often for the first several years a system is in use get most of the support work. Depending on how much of the technical data owned by the Pentagon it may be they are the only ones who can do it and make billions over the life cycle of the system.

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More TOW Missiles from Raytheon (RTN)

As the new Fiscal Year starts and despite the threat of sequestration and the associated reduction in spending the Pentagon continues to award contracts for equipment and services. One of the most recent is to Raytheon (RTN) for production of TOW anti-tank missiles.

The contract is worth almost $350 million and will provide for 5 years of production and will deliver almost 7,000 of the missiles. These are new versions of the systems which will rely on wireless guidance. In the past the TOW had been controlled through a thin wire connecting the missile to the launcher.

The TOW is fired from helicopters, a variety of vehicles as well as ground mounts and is used by the U.S. Army and Marine Corps. The larger Hellfire made by Lockheed Martin (LMT) is laser guided and is primarily used from helicopters such as the AH-64D Apache.

These types of missile have seen heavy use in Iraq and Afghanistan primarily for destroying point targets such as buildings and unarmored vehicles rather then their original planned use as heavy anti-tank weapons.

Until the final resolution of sequestration or the FY13 budget these types of contracts will continue to be awarded.

Photo from U.S. Army flickr photostream.

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ATK Keeps Major Contract for Lake City Plant

Alliant Techsystems (ATK) is a mid-sized defense contractor. It primarily manufactures ammunition, pyrotechnics and rocket motors. The company is experiencing some struggles due to the ending of the fighting in Iraq and Afghanistan and the potential defense budget cuts. It has made several changes recently to adjust to these new market conditions but key to the company’s near term success was retention of the contract from the U.S. Army to manage the Lake City ammunition plant operations.

Last year the company lost the contract for the Radford Plant in Virginia to BAE Systems (BAE:LSE). BAE was also aggressively targeting the Lake City contract as well. ATK had run these plants responsible for large amounts of ammunition and explosives for the U.S. military for several years and they were a core part of their revenue and earnings. Short term the loss of the Lake City contract would have been a blow to the company.

Yesterday it as announced that the Army had decided to award the contract to ATK again. The initial contract is for seven years but it has options for a further three. No value has been reported yet.

To indicate the size of the production at Lake City in September the company and Army celebrated the delivery of 2 billion 7.62mm rounds from the plant. Due to the demands of the last ten years of combat ATK had expanded the plant to produce over 1.5 billion rounds annually of 5.56mm as well as other sizes.

The winning of this contract gives ATK more time to continue its adjustments and reorganization to address the changing market it finds itself in and establish a good foundation for future performance.

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No M1 Production but New Engineering Contract for General Dynamics (GD)

The Army’s proposal to shut down M1 tank production by General Dynamics (GD) for a few years was not well received by Congress. The current budget proposals on the Hill include some production work. Even so the Army is closing out the Fiscal Year by awarding GD a large, engineering contract to begin development of the next major upgrade for the venerable M1 Abrams Main Battle Tank (MBT).

The almost $400 million contract will begin the Abrams Engineering Change Proposal (ECP) 1 program. This will eventually lead to production cut in of a major upgrade to the current M1A2SEPv2 model of the tank.

M1′s have now been in use for almost 30 years and like ships and aircraft programs have seen major changes including the integration of new weapons, systems and improvements. The ECP 1 upgrades will lead to a re-design of the tank’s internal systems freeing up weight, space and power for further enhancements and upgrades. This will take advantage of improvements in design of modern electronics and general changes in technology.

GD will most likely receive some sort of production contract for FY13 despite the Army’s proposal. On top of that there will be continued investment in the M1 even with the sequestration issues for the next few years.

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More Punisher Work for ATK

The XM-25 Punisher is a man portable weapon that fires 25mm programmable air burst shells. It is the result of the U.S. Army’s attempt to develop a new rifle earlier this century. The XM-8 rifle program was cancelled but it was decided to continue work on the XM-25. Alliant Techsystems (ATK) is the prime contractor for the XM-25. The system was issued in small numbers and tested in Afghanistan over the last several months and proved very effective. It is issued at the squad level and provides fire support for the members.

In March ATK was given a contract to continue the Engineering, Manufacturing and Development (EMD) of the Punisher. This was worth about $70 million. Now a further contract to continue EMD was issued this week. That one has a value of around $17 million.

The continued contract awards show that the Pentagon has interest in the Punisher and its further limited production and use. Once EMD is complete a decision will be made to bring it into large scale production.

ATK also will support a further assessment of the weapon in Afghanistan by providing another 36 XM-25 for use. The data collected in these types of trials will only aid development and providing the best systems possible.

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Navistar Decides Not To Go Ahead with JLTV Protest

It is now being reported that Navistar (NAV) will not pursue its protest of the JLTV EMD contracts awarded almost two weeks ago. They did this after Labor Day.

The three Engineering, Manufacturing and Development (EMD) contracts were awarded three weeks ago. They were given to AM General, Lockheed Martin (LMT) and Oshkosh. The Navistar and General Dynamics (GD) proposals did not win.

Navistar had protested right at the end of the window to do so and after receiving their debrief from the Army. By doing this it placed the execution of the contracts on hold until the protest was resolved.

It looks like Navistar filed the protest to make sure they hit the window. After reviewing more information they decided to withdraw it. There has still been no indications that GD will go ahead with one.

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Navistar Reportedly Files Protest of JLTV EMD Contract Awards

Two weeks ago the Army awarded 3 contracts for further efforts on the HUMVEE replacement, the Joint Light Tactical Vehicle (JLTV). The proposals from Lockheed Martin (LMT), Oshkosh (OSK) and AM General were selected. The Navistar and General Dynamic (GD) ones were not. The value of these contracts were between $55-65 million and are for the first year of a two to three year process to build and test prototypes. At the end of this one will be chosen to go into production.

The JLTV program has the potential to be quite large as the estimated quantities are in the tens of thousands. The current cost estimate for production is about $13 billion. This does not take into account future support and parts contracts as well as the potential for foreign and direct military sales to U.S. allies.

It has now come out that Navistar filed a protest late Friday near the end of the ten day period. The losers were supposedly briefed on Thursday as to why their proposals were not chosen.

The filing of the protest means the contracts cannot be executed until it is resolved. The General Accountability Office (GAO) has 100 days to do this. The result could be an overturning of the awards and direction to do a new contest or directing the Army to review its selection process. In some cases the GAO has awarded the protester the contract over the winner.

As the defense budget shrinks and contracts become more valuable to the different defense contractors protests should increase. This was the trend in the Nineties when there was the last major contraction in U.S. spending.

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More Counter IED Work for Lockheed

The primary threat to U.S. forces in Iraq and Afghanistan has been the Improvised Explosive Device (IED) and mine. The Pentagon has spent billions on countering these weapons. Primarily through passive defense by acquiring large, Mine Resistant Ambush Protected (MRAP) vehicles and up armoring other systems. They have though worked on active defense such as systems to detect and jam the IED’s.

Recently Lockheed Martin (LMT) was awarded a contract for spare and repair parts for a system they developed called the Vehicle Optics Sensor System. The contract is worth over $300 million and is good for the next two years.

The VOSS adds different cameras and other optical sensors to mine clearing vehicles. This assists the engineers in detecting IED and helping them neutralize them. The U.S. has also invested in radars that are vehicle mounted to scan the road ahead looking for the same kind of threat.

The U.S. will continue to carry out such types of contracts as long as they are engaged in Afghanistan. Once that ends the military will be faced with a large inventory of systems to counter the IED threat that might not be applicable to future conflicts.

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