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More CROWS for the Army from Kongsberg

Kongsberg is a Norwegian conglomerate that supports the maritime and oil industries as well as having a fairly active defense group. One of its more important products this last decade is supporting the U.S. Army through the production of Crew Remote Operated Weapon Systems (CROWS).

CROWS allow a soldier to aim and fire his weapon while inside his vehicle under maximum protection. The CROWS consists of a turret mounting a variety of machine guns or grenade launchers, visual detecting and aiming systems, and controls for the gunner. The use of these type of mountings has greatly reduced casualties by reducing the exposure of the crews to direct fire as well as the mine and Improvised Explosive Device (IED) threat.

The Army has just awarded Kongsberg a further five year contract for production of the systems. If all options are exercised the contract could be worth up to just under a billion dollars. Previous contracts have seen Kongsberg deliver almost 10,000 systems for use on HUMVEE’s, MRAP vehicles and other support vehicles.

The company operates a plant in Pennsylvania to support these efforts.

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Army Orders More CH-47 from Boeing

The U.S. Army and other services have made heavy investments in their rotary wing forces over the last decade. Due to the terrain and the situation in Iraq and Afghanistan heavy use of helicopters were required to provide fire support and logistics transportation. This meant that not only was the existing fleet of aircraft being heavily used but more were needed as well as new systems.

The U.S. Army cancelled the RAH-66 Comanche program in 2004. This was an advanced scout attack helicopter. They utilized the funds to build new programs such as the UH-60M, UH-72A and CH-47F aircraft. The Marines and Air Force also made a heavy investment in the V-22 OSprey tilt rotor aircraft.

One aircraft that has made a major contribution to the fighting is the large, cargo helicopter CH-47 Chinook. Not only has the U.S. Army increased its inventory of these aircraft but also many other countries have bought it to support their combat troops in Afghanistan. These have included the U.K., Canada and Australia. Due to the altitude and temperature conditions the CH-47 is the most capable aircraft for carrying large loads of supplies or troops.

The CH-47 is manufactured by Boeing (BA) at their plant in Pennsylvania and they just received yet another production contract for the aircraft. A further 14 were ordered with an value of around $370 million.

These aircraft will be used by the U.S., Australia and the U.A.E. continuing to demonstrate the FMS value of the CH-47.

The expected budget cuts will most likely slow down the investment in aviation by the Army but not end programs. The U.S. needs to either re-capatilize or replace systems that have seen a great deal of use in Iraq and Afghanistan. Even with smaller ground forces it makes sense to continue to increase aviation assets as it is easier to quickly build up infantry units then rotary winged ones.

The CH-47 due to its demonstrated capability will remain a core component of the U.S. Army’s aviation forces and will continue to see steady overseas sales.

Photo from The California’s National Guard Flickr photostream.

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Creative Protest of TRICARE Dental Contract by United Concordia Fails

TRICARE is the primary healthcare provider for the United States’ military, their dependents and retirees. It works similar to a HMO with a network of providers and prescription services to supplement the available military hospitals. TRICARE requires a small co-pay from members for themselves and their dependents. Due to the size of the U.S. military the TRICARE management contracts awarded to commercial providers are quite large. This includes the one to provide dental benefits.

Two years ago the Department awarded new contracts for the various TRICARE regions to manage the system. These contracts were all worth $2-3 billion a year and at least three were protested. Earlier this year the various protests were resolved but there is still an outstanding protest of one of the new contracts awarded due to the protests.

Late last year the TRICARE dental contract was awarded. Unlike the medical ones this pretty much covers everyone in TRICARE in only a single contract rather then having multiple regional ones. It was won by Met Life (MET) over the incumbent, United Concordia Companies Inc., which is part of Highmark Inc. Met Life was awarded the $3.09 billion contract and United Concordia promptly protested.

While Met Life was cheaper then United Concordia the incumbent based part of their protest on the fact that the change in contractors would cause hardship for TRICARE subscribers due to the need for them to potentially change providers. This meant being the incumbent should help the evaluation of their bid. They asked the Government to review how the Source Selection criteria were applied in the decision.

The Government Accountability Office (GAO) denied the protest. They ruled that the contract was awarded properly.

When a contract is re-competed it is easy for the Government to be favorable to the incumbent. These are people they have worked with for several years and trust. The source selection must look past these types of personal relationships and evaluate the bids against the criteria. Often the winner hires most of the former workers and one of the concerns with this contract is that because Met Life’s bid is smaller it may not support the same size workforce as United Concordia did.

If there is really reductions in U.S. defense spending and it is very likely then the chances of protests will increase as there is less work for the same amount of bidders. Each contract becomes more valuable to companies and they will fight hard to get them and if they are the incumbent keep them.

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Northrop Grumman’s Shipbuilding Spinoff Proceeds Smoothly

The first major shake up in the U.S. defense industry since the implementation of the reforms by Secretary of Defense Robert Gates completed last Thursday as Northrop Grumman (NOC) spun off its shipbuilding arm to its shareholders. One of the biggest defense contractors in the world the company had announced last year that they were looking at leaving the business of building warships primarily for the U.S. Navy due to contraction in that service’s plans and expected budget reductions in the future.

As soon as the transfer of the assets to the new company, Huntington Ingalls Industries (HII), was complete the U.S. Navy followed up with the announcement of an order for the tenth San Antonio class amphibious assault ship, the U.S.S. John P. Murtha. The $1.5 billion ship is named for the former Congressman from Pennsylvania and Marine Corps veteran. Huntington has also inherited four other LPD-17 class ships already under construction at their Pascagoula, MS and Avondale, LA yards.

Prior to the decision to spinoff the business Nortrop had announced plans that they would consolidate their capabilities which would lead to the closing of the Avondale facility. This is still on track to be done by 2013 but the new company says there are opportunities to keep it open if viable work can be found for the shipyard. As well as the two Gulf Coast yards Huntington Ingalls now also operates Newport News shipbuilding which constructs aircraft carriers.

The decision by Northrop has led to rumors that the remaining company now separated from its services arm, TASC, and no longer building ships might be planning on merging with one of the other large defense contractors such as Boeing (BA), Lockheed Martin (LMT), General Dynamics (GD) or Raytheon (RTN). Moves like that were not uncommon in the Nineties when last the defense budget declined precipitously. This time around, though, the Pentagon has made it clear that it does not want to reduce industrial base capabilities and may not allow such mergers.

Huntington Ingalls must compete with primarily General Dynamics for a small shipbuilding budget for cruisers, destroyers and larger amphibious ships. The Navy is building at least twenty Littoral Combat Ships (LCS) over the next several years but these are smaller combatants made in smaller yards owned by Austal America and Marinette Marine. The U.S. if it wants to preserve industrial base must award enough ships to keep both companies going and their yards open.

Photo from surfaceforces’ flickr photostream.

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Despite Record Defense Spending Layoffs Starting to Mount

The Obama Administration submitted its 2012 budget to Congress yesterday and it contains a record request for defense funding. This includes over a $100 billion to conduct operations in Afghanistan and Iraq while continuing the investment in new equipment to improve capabilities against other threats. Despite this and due to the cyclical nature of defense programs and spending several companies, large and small, announced recently a restructuring of their workforces.  As the U.S. defense budget adjusts to fiscal reality and requirement changes more companies may be in this situation.

Defense acquisition programs tend to be built in large quantities over a span of several years as the military attempts to field its needs quickly. This can lead to a requirement for a contractor to ramp up facilities, staff and production very quickly and then just as quickly cut it back as the U.S. military meets its requirements. It behooves a contractor to identify other customers or programs that it may support to try and maintain a steady production line and workforce. This is not always possible and the history of the Mine Resistant Ambush Protected (MRAP) vehicle production in America illustrates this as several companies invested in large plants that are now running at a much lower capacity as the U.S. has met its needs for the MRAP.

Recent layoff announcements include:

  • Amherst Systems of New York, which is a subsidy of Northrop Grumman (NOC), the engineering and manufacturing company provides systems to support electronic systems and test ranges.  They will be laying off over one hundred people or almost twenty percent of their workforce due to “a drop in orders”.
  • Northrop Grumman itself is eliminating 150 jobs at its Laser Systems facility in Florida.  The company had won a contract to produce laser rangefinders and designators.  Again the reduction is related to a future lack of work.
  • BAE Systems (BAE:LSE) is letting go about 50 people at a plant in Pennsylvania that makes MRAP vehicles.  The U.S. has shifted to one supplier, Oshkosh (OSK), for its new MRAP and relies on others to support and repair the existing fleet mainly purchased in 2005-2009.  Companies will now have to look for other countries to invest in MRAP to maintain their production and right now that is not happening.

Stories like this may accelerate in the near future as companies figure out what will be needed by the Defense Department in a time of reducing budgets.  At the same time there are other defense contractors who need to hire people to support their new work or programs.  Many times, though, the new company is not located near places where the layoffs are happening so that transferring people may not be so easy.

The history of the U.S. defense budget has been cycles of rapid, large expenditures followed by years of smaller budgets.  The U.S. may be entering a period of extended decline in defense spending with a negative effect on the defense contracting industry.

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Army Buys More CROWS from Kongsberg

The U.S. Department of Defense was faced with an intense IED and mine threat in Iraq and Afghanistan. They attempted to defeat this threat and protect troops through a multi-pronged approach. Part of this was increasing the armor of basic vehicles such as HUMVEE and trucks. Another was to introduce the growing Mine Resistant Ambush Protected (MRAP) fleet.

Another way of maximizing protection for soldiers in vehicles was to introduce remotely operated turrets and weapons. Key to this effort was the Norwegian company Kongsberg. Kongsberg makes the major components of the Crew Remote Operated Weapon System (CROWS).

The CROW is a turret that may be attached to a variety of vehicles and hold different types of standard U.S. support weapons such as the .50 caliber machine gun or 40 mm grenade launcher. The operator is able to sit low inside the vehicle and use different sensors to detect targets and aim the weapons. This means that they do not need to expose themselves outside the vehicle leaving them vulnerable to snipers, small arms or blast weapons.

The U.S. has invested millions in the system and just awarded the company a further contract extension to continue manufacturing. The value of that contract is about $120 million. The company had won a contract in 2006 worth over a billion.

Even though the company is based outside the U.S. they like so many other European defense contractors have invested in U.S. facilities either through building a plant or acquiring a U.S. company. Kongsberg manufacturing facility is located in Johnstown, PA. The company also markets the system world wide and because the U.S. uses it on their General Dynamics (GD) Stryker vehicle based on a Canadian system Kongsberg also has a presence in that nation.

Photo from Colonel Killgore’s Flickr photostream.

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Kongsberg Continues Sales to U.S. Defense Market

Kongsberg is a Norwegian defense contractor that sells products across the world. One of the their most successful systems has been components of the U.S. military’s CROWS system. The Crew Remotely Operated Weapon System allows a turret or other weapon mount to be operated from within a vehicle so the gunner does not need to expose themselves. As part of the U.S. reaction to the Improvised Explosive Device (IED) threat in Iraq and Afghanistan the CROWS was installed on HUMVEES, Strykers and other U.S. crew transport vehicles.

Kongsberg has executed several sub-contracts with companies that provide parts or assemble armored vehicles for the U.S. Kongsberg has done so well with this that they have a factory in Pennsylvania for building the components. In 2009 the company received almost a billion dollars worth of contracts as part of the multi-billion CROWS program.

Now they have been awarded more work. This contract is worth about $18.5 million. The sub-contract is with General Dynamics (GD) and supports installation on US. Army Stryker vehicles. GD makes the Stryker and it is based on a system they have made for years for Canada’s military.

The world’s defense spending is large and the ability to have a niche product like this has done very well for Kongsberg.

Photo from The U.S. Army’s Flickr Photostream.

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Kongsberg To Build More CROWS

The U.S. Department of Defense added to a contract previously won by Kongsberg of Norway for Crew Remote Operated Weapon Stations (CROWS). The value of this addition is over $800 million. The add to the existing contract will purchase a further 3,849 CROWS bringing the total to over 10,000.

The contract will be done over five years at Kongsberg Pennsylvania facility. CROWS allows weapons to be operated by a gunner sitting in the vehicle rather then up in the turret. This provides maximum protection to them in combat. CROWS are installed on HUMVEES as well as MRAP vehicles and are used in Iraq and Afghanistan.

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Army Moves To Build New Generators

Due to grounding issues generators provided by KBR led to the accidental deaths of several soldiers in Iraq as they went to take showers. The generators were powering hot water systems. The Army went ahead and designed new systems that are larger and have more sophisticated circuitry to prevent these issues. By centralizing power generation more fuel is saved as well as less individual generators are used.

Fidelity Technologies of Pennsylvania has begun to ramp up to produce these generators. The initial contract is for about $24 million and will produce over three thousand of the generators. In order to meet this new order the company is actually hiring personnel.

This shows that as programs end others start. Different priorities allow companies to move into niches that may not have existed before. This allows new business lines to develop and grow. Unfortunately the boom-or-bust nature of U.S. defense procurement can make this difficult for sustained growth or stability.

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Army To Upgrade And Refurbish M2 Bradleys

In the 1980′s the U.S. Army upgraded their heavy units with the M1 Abrams tank and M2/M3 Bradley Infantry Fighting Vehicles (IFV). These vehicles have been upgraded over the last twenty-five years and saw service in Desert Storm as well as the invasion and stabilization operations in Iraq. There has been no new production of them for several years and since 2001 the Army has spent a great deal of money to keep the vehicles up and running.

BAE Systems was awarded a contract to repair and upgrade another 600 M2 vehicles. This contract is worth about $600 million over its full life. This is enough to equip about twelve battalions. Normally when the vehicles go through this process they are completely rebuilt and also receive any current upgrades available. At the end of the process basically a brand new vehicle is delivered back to the Army.

Work on this contract will be done in Texas and Pennsylvania. BAE Systems has been doing the bulk of this kind of work on the M2 for the last several years. The vehicles were originally made by FMC a company that has long since been merged and bought out of existence.

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US Awards DE Technologies Contract to Develop Warheads

The U.S. Navy awarded DE Technologies of Pennsylvania a contract worth up to almost $7 million to work on small shaped charge warheads. The press release is at Your Industry News. The research will aid in the development of larger warheads for use in the Compact Rapid Attack Weapon system. This is a lightweight torpedo type system that would be launched by a ship or submarine and may also have defensive missions. See this at Navy.mil for more.

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