December 14, 2017 | International, Aerospace, Naval, Land, C4ISR, Security
WASHINGTON — A large number of American companies supplying the U.S. military may have left the defense market, according to a study announced Thursday, raising alarm over the health and future of the defense industrial base.
The Center for Strategic and International Studies study said the number of first-tier prime vendors declined by roughly 17,000 companies, or roughly 20 percent, between 2011 and 2015.
The full study, due to be released in January, was authored by CSIS Defense-Industrial Initiatives Group Director Andrew Hunter, Deputy Director Gregory Sanders and Research Associate Rhys McCormick. It was sponsored by the Naval Postgraduate School and co-produced by the Aerospace Industries Association, which released an executive summary on Dec. 14, the day of its annual aerospace and defense luncheon in Washington.
The authors, who used publicly available contract data, write that it's unclear — due to the limitations in the subcontract database —whether the companies have exited the industrial base entirely or still perform work at the lower tiers.
“There is no doubt that a huge portion of the recent turbulence in the defense industrial base has taken place among subcontractors, who are less equipped to tolerate the defense marketplace's funding uncertainly and often onerous regulatory regime — yet it remains extremely difficult to determine the real impact of these conditions on subcontractors,” the authors conclude.
Further details may yet be revealed by the Trump administration's ongoing review of the resiliency of the defense-industrial base. Defense Secretary Jim Mattis' assessment is due to President Donald Trump by mid-April 2018.
The CSIS summary links 2011 Budget Control Act caps, subsequent short-term budget agreements, and Congress' “unpredictable and inconsistent” appropriations process to the “lost suppliers, changes in competition and market structure, and other turmoil” it found. The years 2011-2015 are considered a period of defense drawdown and decline.
The authors, rather than focus strictly on the total decline of defense contract obligations over the entire period, chose to chart the “whipsaw” effect that struck certain sectors of the industrial base amid the imposition of sequestration in 2013 and subsequent budget caps.
Though the defense budget had been declining in the years leading up to the Budget Control Act, the implementation of an across-the-board sequestration budget cut in 2013 “marked a severe market shock that had a considerable impact on the defense industry,” the authors say.
Compared to the pre-drawdown fiscal 2009-2010 period, the start of the drawdown in fiscal 2011-2012, average annual defense contract obligations dropped 5 percent. When sequestration was triggered in fiscal 2013, defense contract obligations dropped 15 percent from the previous year. Average annual defense contract obligations fell 23 percent during the so-called BCA decline period, fiscal 2013-2015.
The Army, which has a checkered modernization history, bore the brunt of the decline. Average annual defense contracts dropped 18 percent at the start of the drawdown, then 35 percent during the BCA decline period.
Missile defense contract obligations actually gained 7 percent at the start of the drawdown and then dropped only 3 percent under budget caps. During his presidency, Barack Obama reversed course from early cuts to missile defense to spur the development and deployment of missile defense systems in Europe, Asia and the Middle East.
Lockheed Martin CEO Marillyn Hewson reacted to the internally circulated findings earlier this month, saying budget cuts are responsible for the industry being “more fragile and less flexible than I've seen it, and I've been in the industry many, many years.”
“What we've seen in the industry, I'll give you an example at Lockheed Martin: At the outset of budget cuts we were about 126,000 employees; today we are at 97,000 employees,” Hewson said at the Reagan National Defense Forum in California. “Our footprint has shrunk dramatically. We see some of our small and medium-sized business, some of the components that we need, there's one, maybe two suppliers in that field where there were many, many more before.”
Budget cuts have squeezed the Defense Department to unduly prioritize low-cost contracts over innovation and investment. Cost “shootouts,” she said, are endangering the military's plans to grow in size and lethality.
AIA Vice President for National Security Policy John Luddy said companies have coped through a variety of “healthy efficiencies,” such as mergers and acquisitions, consolidating facilities, exploring shared services, and offloading certain contracting activities.
“Our companies have done an amazing job of managing the downturn, they've pulled all kinds of levels to make it work, they've shown the ingenuity of the American free market system,” Luddy said. “Nonetheless, the uncertainty of the budgeting process has become a huge challenge for us.”
Army Secretary Mark Esper, formerly of Raytheon, warned lawmakers at a Senate hearing Dec. 7 that uneven funding is driving small suppliers — “an engine of innovation” — out of the defense sector.
“If you're a small mom and pop shop out there, and I'm referring to my industry experience, it's hard for them to survive in the uncertain budgetary environment,” Esper said. “And we risk losing those folks who may over time decide that they're going to get out of the defense business and go elsewhere. So that's a big threat to our supply chains.”
But the CSIS study found that small vendors either increased their share of platform portfolio contract obligations or held steady, while large and medium vendors were most harmed by the market shock from sequestration and the defense drawdown.
June 25, 2024 | International, Land
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March 18, 2020 | International, Naval
By: David B. Larter and Courtney Mabeus WASHINGTON — U.S. shipyards are adjusting to meet the new coronavirus threat, but work continues across the country. In the wake of news that Fincantieri's shipyards in Italy has suspended operations for two weeks to help stem the spread of the illness, US shipyards have responded with more modest changes: suspending international travel, limiting domestic travel and suspending participation in conferences and trade shows for shipyard employees. Yards are also changing leave policies to allow workers time to adjust to restrictions that have closed schools and businesses across the country. While to date the changes have been minor, several company officials told Defense News that the situation was evolving and more could be coming down the pike as the government responds to the unfolding crisis that has rocked the country over the past week. Huntington Ingalls Industries' president and CEO Mike Petters addressed employees in a video message posted to the company's website Monday. Peters said he is meeting regularly with division leadership and the company has posted links to the Centers for Disease Control and Prevention, which he urged employees to check for the most accurate information. Employees who are experiencing symptoms or believe they may have been exposed should let the company know, he said. “Now more than ever we need to work as a team and look out for each other,” Petters said. Also on Monday, HII's Newport News Shipbuilding division president Jennifer Boykin extended "liberal leave" policies through second shift on March 20. In a post on the company's website, Boykin added that work would be "minimized" during the weekend and that with some exceptions, parking lots at the yard – the nation's only aircraft carrier manufacturer – would be open through Friday with no reserved spaces. Newport News Shipbuilding spokesperson Duane Bourne said the health and safety of workers remained the primary focus, calling it "premature to speculate on the impact of COVID-19 on our contracts." "We are having ongoing discussions with our customers and will continue that dialogue in preparing contingencies and future plans," Bourne wrote in an email. Fincantieri's Marinette shipyard in Wisconsin has suspended all international travel, all noncritical domestic travel and has suspended intracompany travel to prevent any potential spread between shipyards, said Eric Dent, the company's spokesperson. However, to date the company has seen no delays in operations. “So far, we have experienced no production delays,” Dent said. “Obviously like other businesses and shipyards, we have to balance force health protection and production as we work through this.” At General Dynamics' shipyards, both Bath Iron Works and submarine builder Electric Boat are continuing work, though they – like all the other yards – are allowing anyone who can work from home to do so, said Jeff Davis, a GD spokesperson. GD has likewise curtailed travel and ceased company participation in trade shows, Davis said. Electric Boat spokesperson, Liz Power, said the submarine builder is following all government recommendations. “Electric Boat remains open for business,” Power said. "Our ongoing mission is to provide our Navy with the high-quality submarines they require to complete their missions. “We have initiated all government-recommended measures to mitigate spread of the disease and continue to work closely with our employees, customers, suppliers, stakeholders and our community to keep them informed.” The ship repair industry is also taking precautions. Colonna's Shipyard Vice President Bob Boyd said the company is also asking its estimated 700 employees to follow the CDC's guidelines and advising anyone who feels sick to stay home. The company is doing additional screening with non-employees at its entrance, asking about recent travel and contacts, and talking with subcontractors about policies, Boyd said. With schools closed throughout Virginia, Colonna's "just taking it day-by-day." Dock landing ship Gunston Hall left Colonna's Shipyard in Norfolk last week and the company is currently working on Coast Guard vessel as well as Military Sealift Command's expeditionary fast transport ship Burlington, Boyd said. He said he couldn't speculate on what an order to stop work to counter the spread of the virus could mean for federal contracts. “Obviously, if they're shut down or we're ordered not to perform work, then you know, we'll follow those orders and resume work once we're cleared, but you know, it hasn't happened,” Boyd said. "We can't speculate that it will. So, we don't really know what will happen if and when those types of decisions are made, but so far they have not. " https://www.defensenews.com/coronavirus/2020/03/16/with-coronavirus-on-the-loose-us-shipyards-make-adjustments-but-keep-building/
November 5, 2018 | International, Aerospace, Naval, Land, C4ISR, Security
ARMY American Mechanical Inc.,* Fairbanks, Alaska (W911KB-19-D-0001); Osborne Construction Co.,* Kirkland, Washington (W911KB-19-D-0002); and Patrick Mechanical LLC,* Fairbanks, Alaska (W911KB-19-D-0003), will compete for each order of the $48,000,000 firm-fixed-price contract for design, construction and repair of various utilidor systems in military family housing on Eielson Air Force Base, Alaska. Bids were solicited via the internet with six received. Work locations and funding will be determined with each order, with an estimated completion date of Oct. 31, 2023. U.S. Army Corps of Engineers, Anchorage, Alaska, is the contracting activity. DynCorp International LLC, Fort Worth, Texas, was awarded an $18,153,589 modification (P00199) to contract W58RGZ-13-C-0040 for aviation field maintenance services. Work will be performed in Afghanistan, Iraq and Germany, with an estimated completion date of Dec. 31, 2018. Fiscal 2019 operations and maintenance funds in the amount of $18,153,589 were obligated at the time of the award. U.S. Army Contracting Command, Redstone Arsenal, Alabama, is the contracting activity. U.S. SPECIAL OPERATIONS COMMAND Boeing Co., Ridley Park, Pennsylvania, has been awarded a $42,835,847 cost-plus-fixed-fee contract modification under delivery order H92241-18-F-0022-P00002 for four new build MH-47G rotary wing aircrafts. The contract modification satisfies an urgent need to sustain U.S. Special Operations Forces heavy assault, rotary wing aircrafts. The contract modification is funded with fiscal 2018 procurement; and aircraft procurement, Army funds. The majority of the work will be performed in Ridley Park. This contract modification is a non-competitive award and is in accordance with Fair Acquisition Regulation 6.302.1. U.S. Special Operations Command, Tampa, Florida, is the contracting activity. AIR FORCE The Boeing Co., St. Louis, Missouri, has been awarded a $14,592,654 firm-fixed-price, cost-plus-fixed-fee, time-and-material contract for the F-15 Royal Saudi Air Force (RSAF) Aircraft Maintenance Debrief System (AMDS). This contract provides administration and support to the RSAF F-15C, D, S and SA aircraft sustainment program at up to six locations throughout the Kingdom of Saudi Arabia. Services acquired under this effort include, but are not limited to, providing fully-trained AMDS personnel to operate, maintain AMDS equipment and to provide AMDS familiarization training to RSAF members that will enable them to safely and efficiently operate all AMDS equipment. Work will be performed in the Kingdom of Saudi Arabia and is expected to be completed Nov. 4, 2023. Foreign military sales in the amount of $8,744,949 are being obligated at the time of award. This award is the result of a sole-source acquisition. Air Force Life Cycle Management Center, Robins Air Force Base, Georgia, is the contracting activity (FA8505-19-C-0001). (Awarded Oct. 31, 2018) NAVY Detyen's Shipyards Inc.,* North Charleston, South Carolina, is awarded an $8,175,517 firm-fixed-price contract for a 59-calendar day shipyard availability for the mid-term availability of USNS Arctic (T-AOE 8). Work will include furnishing general services for the ship, collection holding tank, piping repairs, 4 overhead steel replacement, tank top steel replacements, main switch board cleaning, refurbish unrep saddles, winches, and drive chains, vent systems cleaning, underwater propellers cleaning and generator cleaning. The contract includes options which, if exercised, would bring the total contract value to $8,175,517. Work will be performed in Charleston, South Carolina, is expected to be completed by Jan. 23, 2019. Navy working capital funds in the amount of $8,175,517 are obligated and will not expire at the end of the current fiscal. This contract was a small business set-aside with companies solicited via the Federal Business Opportunities website, with one offer received. The Navy's Military Sealift Command, Norfolk, Virginia, is the contracting activity (N3220519C6001). Raytheon Co., Space and Airborne Systems, McKinney, Texas, is being awarded a $7,676,741 cost-plus-fixed-fee delivery order (N0001919F0270) against a previously issued basic ordering agreement (N00019-15-G-0003). This order provides for completion of Engineering Change Proposal (ECP) 0043 for the Advanced Targeting Forward Looking Infrared Processor and Video Obsolescence Avoidance system upgrade. This ECP productionizes the Input Image Processor Version 2 (I2P2) Circuit Card Assembly (CCA); updates associated support test equipment; and performance of I2P2 CCA qualification to enable future growth and mitigate potential obsolescence issues. Work will be performed in McKinney, Texas, and is expected to be completed in November 2019. Fiscal 2018 aircraft procurement (Navy) funds in the amount of $7,676,741 will be obligated at time of award, none of which will expire at the end of the current fiscal year. The Naval Air Systems Command, Patuxent River, Maryland, is the contracting activity. *Small Business https://dod.defense.gov/News/Contracts/Contract-View/Article/1680751/source/GovDelivery/