April 27, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

COVID cash crunch still hurting small defense firms

By: Joe Gould

WASHINGTON ― Cash flow for small defense contractors is continuing to suffer under the coronavirus pandemic, according to a survey by the National Defense Industrial Association.

The survey echoes warnings from the Pentagon that these firms, part of a vast network of suppliers that makes up the defense-industrial base, are especially vulnerable. The Pentagon this week announced it will make $3 billion in new “progress payments" to increase cash flow to prime contractors, expecting the money would then trickle down.

Of the NDIA survey respondents:

67 percent of companies with less than $1 million in annual revenue have seen a cash-flow disruption.
60 percent said the crisis has interfered with their cash flow.
60 percent expect to have long-term financial and cash-flow issues stemming from the crisis.
66 percent said accelerated payments from the Defense Department or prime contractors would be the most helpful step toward business recovery.

L3Harris Technologies said this week it will issue more than $100 million in payments to its small suppliers. Lockheed Martin announced Friday it executed $256 million in accelerated payment toward its $450 million goal.

Both of these promised followed the Pentagon's announcement this month that it will boost progress payment rates from 80 percent to 90 percent for large companies, and to 95 percent for small businesses.

The payments are made to contractors, usually on a monthly basis, for costs incurred and work performed under a contract; a 90 percent rate means that if $1 million in expenses are submitted on the program, the Defense Department will reimburse $900,000.

Sixty-six percent of the respondents also said it would help them to receive flexibility on the performance of their contracts.

Seventy-two percent expected to avoid overruns on their firm fixed-price contracts as a result of disruptions caused by COVID-19.

On Thursday, acquisitions officials with the Army said they expect costs to rise, and in response will guard against program slips and closely watch vulnerable lower-tier companies with less slack in their workforces. Pentagon officials anticipate workforce and supply chain issues will yield a three-month delay across the majority of its Major Defense Acquisition Program portfolio.

“The supply chain does have some challenges, and that's probably where the vast majority of any slips would occur that are tied to individual companies,” said Bruce Jette, the Army's acquisition chief. “These companies are small, and if one person gets COVID in the company, the next thing you know you've lost 14 days with the company because everybody that didn't get it is in quarantine.”

As of April 10, 769 small businesses responded to the NDIA survey. The number of companies expecting cash-flow disruptions was slightly lower last month, when 458 small businesses responded.

Factoring into cash-flow problems, according to the NDIA, are cuts to billable hours, delayed payments from prime contractors and government customers, a lack of telework options or schedule flexibility in contracts, and shelter-in-place orders that prevent employees from working.

Beyond revenue expectations, meeting contract obligations and access to capital are where small businesses are taking the biggest hits during the pandemic. Other areas of difficulty were workforce availability, access to secure facilities, contracting officers accessibility, clear information from the Defense Department, confidence in the supply chain, and stock and cost of materials.

The technology and services sectors reported more disturbances from the crisis than the manufacturing sector, NDIA noted. And businesses with fewer than 50 employees are feeling the brunt harder than businesses with more than 500 employees.

Defense Contract Management Agency data this week showed that 106 out of 10,509 primary Pentagon contractors are closed, and 68 companies closed and then reopened. Of 11,413 subcontractors, 427 were closed, with 147 having closed and reopened.

https://www.defensenews.com/2020/04/24/covid-cash-crunch-still-hurting-small-defense-firms/

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January 27, 2021 | International, Land

NATO customer awards Rheinmetall multimillion-euro contract for artillery ammunition and propelling charges
January 25, 2021 - A NATO customer has awarded Rheinmetall an order for modern artillery ammunition. The Group's South African subsidiary, Rheinmetall Denel Munition (Pty) Ltd., will supply several thousand conventional and extended-range artillery shells of the Assegai family (Base Bleed and V-LAP) as well as M92 Assegai tactical modular charges. Delivery commenced in December 2020 and is to be complete by May 2021. The order is worth around €25 million. Manufactured by Rheinmetall Denel Munition, the tactical modular charges of the Assegai Series are intended to propel artillery shells from 155mm gun systems. The charge system is fine-tuned to the customer's specific weapon systems and artillery shells for maximum effectiveness. Their modular design simplifies logistics and makes handling in self-propelled artillery systems easier. They also offer other advantages: Assegai charges reduce barrel wear (RDM's Barrel Wear Reducer/BWR) and produce lower muzzle flash (RDM's Muzzle Flash Reducer/MFR); the former results in longer barrel life, the latter makes the artillery system harder for the enemy to detect. “Thanks to our current product portfolio and new products in the development pipeline, we want to offer customers the full range of possibilities for indirect fire support and maintain our lead in artillery ammunition technology. This applies especially to our new developments in artillery projectiles, which we aim to meet our goal of attaining ranges of over 155 kilometres with. In addition, Rheinmetall Denel Munition is eager to support the troops with our new uni-modular charges, which achieve better performance and simplify the logistics, especially in gun systems with automatic loading,” says Jan-Patrick Helmsen, Rheinmetall Denel Munition's CEO. Rheinmetall and its South African unit Rheinmetall Denel Munition possess proven expertise in advanced indirect fire systems. At a test fire event held at the Alkantpan test range in South Africa in 2019, Rheinmetall and Rheinmetall Denel Munition achieved several new range records for indirect artillery fire with various guns, attaining maximum ranges of up to 76 kilometres. This display of technological achievement and capability sparked the interest of artillery users across the globe. Rheinmetall Denel Munition has embarked on a phased development approach, including the continuous improvement in range capability of artillery ammunition. The range demonstration showed the potential of the first phase and reinforces Rheinmetall Denel Munition's goal of meeting a user-specified range requirement of more than 155 km. About Rheinmetall Denel Munition The South African company Rheinmetall Denel Munition (Pty) Ltd is a cutting-edge maker of ammunition and explosive products, supplying military and civil users in numerous countries around the globe. Rheinmetall Denel Munition is a joint venture co-owned by Rheinmetall (51%) and Denel SOC Ltd of South Africa (49%). RHEINMETALL AG Corporate Sector Defence Press and Information Oliver Hoffmann Rheinmetall Platz 1 40476 Düsseldorf Germany Phone: +49 211 473-4748 Fax: +49 211 473-4157 View source version on Rheinmetall Denel Munition (Pty) Ltd: https://www.rheinmetall.com/en/rheinmetall_ag/press/news/latest_news/index_22656.php
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COVID cash crunch still hurting small defense firms

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