October 25, 2018 | International, Aerospace
By: Ben Werner
Lockheed Martin officials say their loss to Boeing in three recent aircraft competitions indicates that Pentagon weapon buyers are valuing low price tags over high-tech capabilities, which may lead the company to question its participation in some future competitions.
The company reported strong revenue growth and expected solid earnings in the future, but during a Tuesday morning conference call with Wall Street analysts, company officials sounded burned by losing out on three significant contracts during the recently completed third quarter of 2018.
“We do see that affordability is a very important element for them,” said Marillyn Hewson, Lockheed Martin's chief executive, referring to the Pentagon's weapons buyers.
In a competition pitting designs from Lockheed Martin, General Atomics and Boeing, the Navy awarded Boeing an $805-million award in August to build the first four unmanned carrier-based aerial refueling tankers, the MQ-25A Stingray. Ultimately, the Navy wants to purchase 72 more vehicles, for a program price of roughly $13 billion. Boeing also beat out Lockheed Martin for a pair of Air Force contracts – $2.38 billion to replace the Air Force fleet of H-1 Huey helicopters, and $9.2 billion for the new fleet of Air Force T-X trainer jets.
“We believe our proposals represented outstanding technical offerings at our lowest possible pricing,” Hewson said. “Had we matched the winning prices and been awarded the contracts, we estimate that we would have incurred cumulative losses across all three programs in excess of $5 billion; an outcome that we do not feel would have been in the best interest of our stockholders or customers.”
Hewson and Bruce Tanner, Lockheed Martin's chief financial officer, downplayed the long-term significance of missing out on this trio of large contracts. Lockheed Martin reported revenues of $14.3 billion for the quarter, compared to revenues of $12.3 billion a year ago. Earnings for the quarter were $1.5 billion for the quarter, compared to earnings of $963 million a year ago.
Increased sales of F-35 Lightning II Joint Strike Fighters as production increases, as well as increased demand for missiles, were vital to the revenue increases. Looking forward, even with Pentagon spending not expected to grow, Tanner expects Lockheed Martin's profits from sales to grow, resulting in cash from operations to remain in the $7-billion range for the next three years.
However, neither Hewson nor Tanner masked their disappointment in the selection of Boeing over Lockheed Martin for the three aviation programs.
“Those were disappointing for a lot of reasons. But the fact they really decided, all three, on an LPTA (lowest price technically acceptable) basis, didn't help the situation,” Tanner said. “It's not getting the best capabilities for the warfighter in the hands of the warfighter.”
A year ago, when discussing the MQ-25 program, Navy officials suggested capability was their primary focus. Cost estimates were specifically not addressed because the Navy wanted to learn what was possible, Rear Adm. Mark Darrah, Program Executive Officer Unmanned Aviation and Strike Weapons, told USNI News in July 2017.
“When we put a number out there, eerily they tend to get to that number and go backwards, go backwards in their development, so they hit that number. We are taking a different approach this time. We're not going to define that number at this point and direct them to provide us with their input so that we can adequately and accurately determine what they truly can do,” Darrah said in the 2017 interview.
On Tuesday, Hewson acknowledged the types of projects Lockheed Martin bids on in the future could be affected by the Pentagon's focus on price when seeking new weapons programs.
“We're going to pursue good business opportunities for us,” Hewson said. “We have talked about this before: affordability is an important value for them.”
Hewson also addressed the growing speculation over whether defense contractors would be allowed to continue doing business with Saudi Arabia, as the United States government still grapples with the fallout from the death of journalist Jamal Khashoggi after last seen entering the Saudi consulate in Istambul. The kingdom is a Lockheed Martin customer, but Hewson said the company had relatively minor exposure to any fallout from having arms deal nixed by the U.S. government.
Currently, the largest contract Lockheed Martin has with Saudi Arabia is to build the kingdom's fleet of four multi-mission surface combatant ships, based on the Littoral Combat Ship, worth $6 billion. Saudi Arabia just awarded Lockheed Martin a $450-million detailed planning and design contract, which is related to the planned four-ship purchase.
“The largest order we've been waiting on obviously is for THAAD (Terminal High Altitude Area Defense), ” Tanner said. “That has not taken place yet. Not sure when that will take place. The interesting thing with the THAAD order is, while it brings a significant increase in backlog, the resulting sales, profit, and cash flow with that order are very much pushed to the right.”
Required upgrades to Saudi Arabia's radar technology will delay the $15-billion THAAD order delivery for at least four years, Tanner explained. Without the technical refresh, he said Saudi Arabia would be unable to use the missiles effectively.
“I think we have in 2019 about less than half a billion dollars of sales planned, and I looked out into in 2020, and it's less than $900 million in sales,” Tanner said. “So it's not a huge amount of dependency on the activity, even though the opportunities we've described are much larger than that obviously.”
January 31, 2024 | International, Aerospace
The move follows a provision in the National Defense Authorization Act that lifts some restrictions on what range fees the Space Force can collect.
September 9, 2020 | International, Aerospace, Naval, Land, C4ISR, Security
AIR FORCE Northrop Grumman Systems Corp., Roy, Utah, has been awarded a $13,293,562,839 cost-plus-incentive-fee contract for a tested and fully qualified design of the Ground Based Strategic Deterrent (GBSD). The GBSD will replace the Minuteman III Intercontinental Ballistic Missile Weapon system. This contract will provide for the engineering and manufacturing of the GBSD. Work will be performed in Roy, Utah, and multiple other locations nationwide, and is expected to be completed February 2029. This award is the result of a competitive acquisition and one offer was received. Fiscal Year 2020 research, development, test and evaluation funds in the amount of $85,000,000 are being obligated at the time of award. Air Force Nuclear Weapons Center, Hill Air Force Base, Utah, is the contracting activity (FA8219-20-C-0006). NAVY Raytheon Technologies Corp., Pratt and Whitney Military Engines, East Hartford, Connecticut, is awarded a $174,221,174 modification (P00022) to previously awarded fixed-price-incentive-firm, cost-plus-fixed-fee, cost contract N00019-18-C-1021. This modification exercises an option for the production and delivery of 14 F135-PW-100 low rate initial production Lot 14 propulsion systems for the Air Force in support of the F-35A conventional take-off and landing aircraft. Work will be performed in Middletown, Connecticut (46%); East Hartford, Connecticut (22%); Windsor Locks, Connecticut (16%); North Berwick, Maine (11%); Phoenix, Arizona (3%); and Santa Isabel, Puerto Rico (2%), and is expected to be completed in June 2022. Fiscal 2020 aircraft procurement (Air Force) funds in the amount of $174,221,174 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. RDA Inc.,* Doylestown, Pennsylvania, is awarded a $19,983,378 cost-plus-fixed-fee order (N68335-20-F-0360) against previously issued basic ordering agreement N68335-20-G-3039. This order provides for continued advanced technology research and development efforts for Small Business Innovation Research (SBIR) products for anti-submarine warfare (ASW) and under-sea warfare (USW) systems under SBIR topic N98-035 titled “Signal Processing and System Concepts to Exploit Passive Signals in Airborne Active ASW Missions; topic N04-247 titled “Littoral Environment Parameter Estimation from Bistatic and Multistatic Fleet Air ASW Acoustic Reverberation Data;” and topic N06-011 titled “Multi-Sensor Data Fusion for Littoral Undersea Warfare.” Further development and research efforts will include engineering, technical, managerial, analysis, prototyping, maintenance, quality control, training and test participation. Additionally, this order provides operational software development, acoustic capability enhancements and technical engineering for further development and transition of technologies and system performance improvements, providing on-going fleet training and maintenance products for deployed systems. Work will be performed in Warrenton, Virginia (45%); Patuxent River, Maryland (35%); and Doylestown, Pennsylvania (20%), and is expected to be completed in September 2025. Fiscal 2020 research, development, test and evaluation (Navy) funds in the amount of $852,759 will be obligated at time of award, none of which will expire at the end of the current fiscal year. The Naval Air Warfare Center Aircraft Division, Lakehurst, New Jersey, is the contracting activity. Northrop Grumman Systems Corp. Aeronautics Systems, San Diego, California, is awarded an $11,635,599 cost-plus-fixed-fee order (N00019-20-F-0103) against previously issued basic ordering agreement N00019-20-G-0005. This order provides non-recurring engineering for qualification testing and integration of the Redundancy unmanned air vehicle common automatic recovery systems and multi-platform anti-jam Global Positioning System navigation antenna integrated upgrades into the MQ-8C Fire Scout aircraft. Work will be performed in San Diego, California (90%); and Moss Point, Mississippi (10%), and is expected to be completed in January 2023. Fiscal 2019 aircraft procurement (Navy) funds in the amount of $11,635,599 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. DEFENSE INFORMATION SYSTEMS AGENCY Qwest Government Solutions Inc., doing business as CenturyLink QGS, Herndon, Virginia, was awarded a $70,250,013 modification (P00004) against non-competitive firm-fixed-price, indefinite-delivery/indefinite-quantity contract HC1013-19-D-0002 to increase the current contract ceiling. This modification allows for the continued operations and maintenance support for dark fiber and commercial facilities in the continental U.S. to support the Department of Defense. Funding will be obligated at the individual task orders. The total contract ceiling value has increased from $126,895,698 to $197,145,711. The period of performance is Nov. 30, 2018, through Nov. 29, 2023. The Defense Information Technology Contracting Organization, Scott Air Force Base, Illinois, is the contracting activity. ARMY Amentum Services Inc., Germantown, Maryland, was awarded a $29,034,547 hybrid (cost-no-fee, labor-hours) contract for contractor labor support services at Anniston Army Depot and Watervliet Arsenal. Bids were solicited via the internet with three received. Work will be performed at Anniston Army Depot, Alabama; and Watervliet Arsenal, New York, with an estimated completion date of Jan. 15, 2023. Fiscal 2020 Army working capital funds in the amount of $29,034,547 were obligated at the time of the award. U.S. Army Contracting Command, Detroit Arsenal, Michigan, is the contracting activity (W56HZV-20-F-0396). Manson Construction, Seattle, Washington, was awarded a $26,493,750 firm-fixed-price contract for maintenance dredging. Bids were solicited via the internet with two received. Work will be performed in Plaquemines, Louisiana, with an estimated completion date of June 20, 2021. Fiscal 2020 civil operations and maintenance funds in the amount of $26,493,750 were obligated at the time of the award. U.S. Army Corps of Engineers, New Orleans, Louisiana, is the contracting activity (W912P8-20-C-0061). Kallidus Technologies Inc.,* Lowell, Massachusetts, was awarded a $15,478,911 firm-fixed-price contract to construct a new security forces and communications training facility. Bids were solicited via the internet with six received. Work will be performed in Westhampton Beach, New York, with an estimated completion date of April 1, 2022. Fiscal 2020 military construction (Army National Guard) funds in the amount of $15,478,911 were obligated at the time of the award. U.S. Property and Fiscal Office, New York, is the contracting activity (W50S8E-20-C-0005). Bell Textron Inc., Fort Worth, Texas, was awarded a $13,500,000 order-dependent contract to conduct design studies, analyses, simulation, testing, integration and fabrication activities in order to mitigate risks, investigate operational usage and conduct maturation activities at the technology, subsystem and system-level maturation for the Future Attack Reconnaissance Aircraft and its variants. Bids were solicited via the internet with two received. Work locations and funding will be determined with each order, with an estimated completion date of Sept. 7, 2025. U.S. Army Contracting Command, Redstone Arsenal, Alabama, is the contracting activity (W911W6-20-D-0006). Enviremedial Services Inc.,* Oceanside, California, was awarded a $9,455,140 firm-fixed-price contract for a vehicle wash system, preventive maintenance and inspections, labor, management, supervision, tools, materials and equipment to perform facility support services at Marine Corps Reserve centers. Bids were solicited via the internet with one received. Work locations and funding will be determined with each order, with an estimated completion date of March 28, 2026. U.S. Army Corps of Engineers, Charleston, South Carolina, is the contracting activity (W912HP-20-D-3000). DEFENSE ADVANCED RESEARCH PROJECTS AGENCY HRL Laboratories LLC, Malibu, California, was awarded a modification to incorporate sole-source additional scope totaling $8,390,427 to previously awarded contract HR0011-19-C-0006 for a Phase 2 Millimeter-wave GaN Maturation (MGM) project. The modification brings the total cumulative face value of the contract to $18,789,575 from $10,399,148. Work will be performed in Malibu, California, with an expected completion date of September 2022. Fiscal 2020 research, development, test and evaluation funds in the amount of $1,950,000 are being obligated at time of award. The Defense Advanced Research Projects Agency, Arlington, Virginia, is the contracting activity. Kryptowire LLC, McLean, Virginia, was awarded a $7,337,148 cost-plus-fixed-fee contract for a research project under the Open, Programmable, Secure 5G (OPS-5G) program. The OPS-5G program will create open source software and systems enabling secure 5G and subsequent secure mobile networks such as 6G. Work will be performed in McLean, Virginia; Blacksburg, Virginia; and Fairfax, Virginia, with an expected completion date of September 2024. Fiscal 2020 research, development, test and evaluation funding in the amount of $883,977 is being obligated at time of award. This contract was a competitive acquisition under an open broad agency announcement and 40 offers were received. The Defense Advanced Research Projects Agency, Arlington, Virginia, is the contracting activity (HR0011-20-C-0154). *Small Business https://www.defense.gov/Newsroom/Contracts/Contract/Article/2340084/source/GovDelivery/
June 16, 2024 | International, Land
Poland's defence group PGZ now boasts Eastern Europe's only hardware-in-the-loop laboratory after an offset from Lockheed Martin under Wisła.