February 3, 2021 | International, Aerospace, Naval, Land, C4ISR, Security
NEW DELHI — India on Monday allocated $18.48 billion for weapons procurement in its 2021-2022 defense budget amid an ongoing military standoff with China and financial stress on the national economy due to the coronavirus pandemic.
Excluding pensions, the new defense budget totals $49.6 billion, an increase of more than 3 percent from the previous year's $47.98 billion. New capital expenditure of $18.48 billion meant for arms procurement witnessed an increase of about 16 percent from the previous year's $15.91 billion.
This is the highest-ever increase in capital outlay for defense in the last 15 years, according to Indian Defence Minister Rajnath Singh.
An additional $2.84 billion was spent on emergency arms purchases in the summer of 2020 to deal with the ongoing confrontation with China.
The budget's revenue expenditure meant for maintenance of existing weapons, pay and allowances, and recurring expenses is set at $29.02 billion, compared to $28.75 billion in the previous defense budget.
Officials in India point to the COVID-19 pandemic as disrupting the economy and thus affecting the government's income and driving spending decisions. Consequently, the defense budget might not be as high as it would've been were there not a pandemic, said Amit Cowshish, a former financial adviser for acquisition at the Ministry of Defence.
Cowshish noted that the funds may be inadequate for all the planned acquisitions from abroad and at home to be signed during the upcoming financial year, which begins April 1.
Capital expenditure is essentially defense funding meant for fresh arms procurement and existing liabilities from previously conducted defense contracts. Revenue expenditure is defense spending meant for the pay and allowances of military personnel as well as the maintenance of weapons and other existing inventory items.
The Army will receive $4.9 billion in capital expenditure, which is an increase of 8.17 percent from the previous year's $4.53 billion. “The service could buy additional military vehicles and upgrade its drones fleet,” a senior Army official said.
The service's revenue expenditure is set at $20.37 billion, compared to $20.11 billion in the previous budget.
The Navy will receive $4.55 billion in capital expenditure, which is an increase of nearly 22 percent from previous year's $3.73 billion. This could pave the way for the service to buy 10 tactical MQ-9 Reaper drones from General Atomics through the U.S. Foreign Military Sales program, an Indian Navy official said.
The revenue expenditure for the Navy is $3.19 billion, which is meant for the maintenance of warships and submarines, compared to $3.13 billion in the previous budget.
The Air Force will receive $7.2 billion in capital expenditure, which is a hike of 19 percent from the previous year's $6.05 billion. According to a service official, this will go toward a new contract for 83 homemade LCA MK1A Tejas light combat aircraft, an existing commitment to pay for 36 Rafale fighters from France and five units of S-400 missile defense systems from Russia, among other efforts.
The Air Force's revenue expenditure is $4.19 billion, compared to $4.1 billion in the previous budget.
About $1.55 billion in capital expenditure will go toward the state-owned Defence Research and Development Organisation for new projects, compared to $1.47 billion in the previous budget. DRDO has also been given a revenue expenditure totaling $1.24 billion, compared to $1.2 billion last year.
This year, existing liabilities could eat up to 90 percent of the new capital expenditure, which will impact several new weapons procurement efforts, an MoD official said.
But if that high percentage is accurate, according to Cowshish, there must be a lot of equipment already on contract. The military will have to make do with whatever amount is left over for acquiring new systems, he noted.
“Capability-building and self-reliance ... are long-term projects, which are not dependent entirely on the budgetary allocation in a particular year. Hopefully things will improve in the future.”
October 29, 2021 | International, Aerospace
Lockheed Martin's $4.4 billion acquisition of Aerojet Rocketdyne is expected to close in the first quarter of 2022, one quarter later than expected.
July 5, 2023 | International, Aerospace
The contract has a duration of 7.5 years and serves as an extension of the A400M In-Service Support contract that had been in place since December 2014.
May 7, 2020 | International, Aerospace
After decades of building traditional helicopters in traditional ways, contractors must get ready for the Army's new high-speed Future Vertical Lift aircraft. Small makers of key parts need help. By SYDNEY J. FREEDBERG JR.on May 06, 2020 at 2:14 PM WASHINGTON: What worries the Army's aviation acquisition chief as he helps industry get ready to build a revolutionary new generation of aircraft in the midst of a global pandemic? “It's the mom and pop shops,” Patrick Mason said today. “It's the Tier 3 suppliers, typically on the hardware side.” “Those are the ones we remain focused on, because those are those are the ones that can end up in a single point failure,” the program executive officer for Army aviation continued. “That's what we're doing right now through COVID and we're going to continue to do that as we look ...to Future Vertical Lift.” While the big Tier 1 prime contractors should be fine, they depend on smaller Tier 2 suppliers for key components, and they depend on yet smaller Tier 3 suppliers. As you trace the provenance of a crucial component down that supply chain, you all too often find a single point of failure. That's some tiny, easily overlooked company that happens to have the only people who know how to build a particular part, like an actuator or a valve, or the only one who can apply a particular heat treatment or protective coating to someone else's part so it can survive the stresses of flight. It would be easier if the Army was just winding down production of one kind of traditional helicopter and ramping up another. Then industry could build any new parts required in the old way. But Future Vertical Lift is about building new kinds of aircraft in new ways. Even the most traditional-looking competitor, Bell's proposal for the FARA scout helicopter, is being designed, built, and tested using new digital tools. Those tools allow much greater precision and efficiency than traditional blueprints, but only for facilities that have the necessary technology installed. Bell and its rivals, Sikorsky and Boeing, are also all eager to use 3D printing and other advanced manufacturing techniques to improve the performance and reliability of key parts while reducing their cost. That's another set of new technologies that small firms can't easily afford. Will increasing sales of drones help make up the revenue? In addition to the optionally manned FARA scout and FLRAA transport, which will have human crews aboard for most missions, FVL is also building a whole family of completely unmanned aircraft. The major companies can get in on much of that business, Mason said, but some of their smaller suppliers can't. If you build electronics or write flight control software, then. you can work on either manned or unmanned aircraft. But, Mason said, if you specialize in building a particular kind of hardware for manned aircraft, most drones are so much smaller that they use entirely different systems, such electric actuators instead of hydraulics. So for small manufacturing shops, he said, “there's less synergy.” Mason's concerns were well supported by a study of the FVL industrial base by the Center for Strategic & International Studies, released today. “The primes are all in,” said Andrew Hunter, director of defense industrial studies at CSIS, who hosted yesterday's call, “[but] it's a big challenge for those Tier 3 and lower suppliers to make this transition.” During months of workshops with industry, “the concern that we heard expressed repeatedly was lower down the supply chain, [with] Tier 3 and lower suppliers,” Hunter said. “It's an expensive investment that they may be challenged to raise the capital to do, [and] it certainly will involve retraining their workforce to use these new manufacturing techniques.” “Industry has to see they're going to get a return on that investment,” he said. “Even optimistic management who are true believers and think they are definitely going to get a return on this investment because they're going to win [FVL contracts], they've still got to justify it to the banks. They've still got to justify it to their corporate boards.” Changing The Rules What complicates the business case for contractors is that the Army wants a new approach, not just to building the new aircraft, but also to how it keeps them flying. Over an aircraft's decades in service, the long tail of operations, maintenance, and upgrades dwarfs the up-front cost of research, development, and acquisition. While the CSIS study calculated that the Army could afford to build the Future Vertical Lift if budgets remain near historical averages – not guaranteed in the wake of the pandemic – the bigger risk is whether or not the service can control those Operations & Sustainment costs in the long term. Army Futures Command's director for aviation modernization, Brig. Gen. Walter Rugen, said he was confident that extensive physical prototyping and digital modeling would help the service get a handle on those costs. “Our requirements... are still in draft form, so if we need to trade one away to maintain our budgets, we will do that,” he said. “We are going to understand to the greatest degree possible what our O&S costs are and make sure that it's within our budget.” For helicopters, Hunter said, O&S is typically 65 percent of the total cost over the lifetime of a program. Now, not all that money goes to aerospace contractors, since sizable chunk goes to pay military maintenance personnel, buy fuel, and so on. But contracts to sustain existing aircraft are a more important revenue stream for most contractors than actually building new ones. While projected spending on R&D (blue) and procurement (red) rise and fall, remaining under $2.5 billion a year, Operations & Sustainment costs (green) remain largely constant at over $7.5 billion — a crucial source of cash for industry. (CSIS graphic) So any Army effort to economize on operations & sustainment hits contractors where they live. What's more, the Army isn't just trying to squeeze savings out of the existing process; it's changing the rules of the game. Historically, companies could bid low to build a new weapons system because, once they got the contract, they had a de facto monopoly on maintaining and upgrading that system for decades. Now the Defense Department is pushing hard to break this “vendor lock” in two main ways: It's increasingly requiring companies to hand over their intellectual property and technical data. The government can then give that data to potential competitors trying to build cheaper alternatives, as on the Army-run Joint Light Tactical Vehicle program. Second, it's requiring companies to make their products compatible with government standards for how different components fit together physically and connect electronically, with the aim of creating Modular Open System Architectures where you can swap out one company's component and replace it with another vendor's. Developing a common MOSA for all manned and unmanned aircraft is a top priority for the Army's Future Vertical Lift initiative. “Part of what we're doing [over] the next year, year and a half, is the strategy associated with the operational availability, that we want out of these platforms, the intellectual property we want to obtain,” Mason said. “What's the valuation of the IP, the intellectual property? Because intellectual property drives their ability to control the aftermarket, and the aftermarket is where you see the year over year cash flow [that's] critical to most of their business models.” “As you look at Modular Open System Architecture...the business case and the business model associated with it is something that we're working through with industry right now,” Mason said. “It is critical that we have the right incentive structure, it is critical that we provide the right framework so that industry continues to invest and they continue to see a return on that invested capital.” To prevail in future conflicts, “we can't afford not to do Future Vertical Lift,” Brig. Gen. Rugen said. “What this report talks to is national interest we have in preserving the rotorcraft industrial base as we go forward.” https://breakingdefense.com/2020/05/armys-shift-to-fvl-poses-big-risks-for-small-suppliers/