March 3, 2021 | International, C4ISR, Security
Italy’s Leonardo to list DRS subsidiary on New York Stock Exchange
Italian state-controlled defense company Leonardo has confirmed plans to list U.S. subsidiary DRS on the New York Stock Exchange.
September 4, 2020 | International, Aerospace, Naval, Land, C4ISR, Security, Other Defence
Pentagon, Defense Contractors Are Out Of Step On Tech Innovation, GAO Finds
Two years after the Pentagon set out to spend billions on 10 breakthrough research and engineering efforts, defense contractors instead are putting most of their money in less ambitious research projects. The development gap between the military and its suppliers troubled investigators at the Government Accountability Office, or GAO, who determined in a report released Thursday that the Defense Department isn't keeping good watch over those private efforts and doesn't know how much of it would fit into the military's tech goals.
The Pentagon's undersecretary for research and engineering in 2018 laid out several big idea research areas that would be most relevant to maintaining an edge on China or Russia. Many are in the very early stages of maturation; the biggest breakthroughs are expected in the second half of the coming decade.
They are: artificial intelligence, autonomy, biotechnology, directed energy, space, cyber, microelectronics, hypersonics, networked command and control, and quantum science. These areas of the future will go on to determine technology superiority in 2030, and the Department of Defense is eager to invest . It plans to spend $7.5 billion on artificial intelligence, autonomy, hypersonics, and directed energy this year, according to the report.
But GAO found that defense contractors in the past four years have been putting only 40 percent of their independent research dollars, sometimes called IR&D, against those priorities. Coincidently, “our analysis also showed that the majority (67 percent) of IR&D projects completed between 2014 and 2018 focused on incremental, rather than disruptive, innovation.”
In other words, while defense contractors are spending some of their money on big ambitious goals, they prefer to spend more on low-hanging fruit, in little improvements to existing technologies that they can sell to the government more easily.
Part of the reason for the apparent spending priority gap may be that the Defense Department doesn't track contractors' research and development spending very well. “Neither DOD nor the military departments review industry IR&D projects as part of their science and technology strategic planning processes. DOD is not reviewing IR&D projects because DOD's IR&D instruction does not require such consideration of the projects,” notes GAO.
The Defense Department maintains a database to track the projects where contractors are spending research money. But individuals within the department make very little use of it. “For example... the Air Force accounted for more than 55 percent of all searches in 2019, primarily, from users with the Air Force Research Laboratory (AFRL).” The Pentagon's own lack of awareness could result in components, offices, or other parts of the military investing in research projects without knowing that a private company has a similar project underway.
GAO recommends a few simple things to put the Pentagon and contractors more on the same page. First, make it mandatory for personnel in the office undersecretary of research and development to actually review defense industry IR&D; and, second, make the database more useful by asking the contractors to submit more data, like whether the projects they are undertaking are disruptive or just incremental, and the estimated cost when completed.
On the same subject
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August 14, 2018 | International, Aerospace, Naval, Land, C4ISR
For IT companies, the secret to success in defense is all about big growth
By: Jill Aitoro WASHINGTON — The secret to tackling the defense information technology market may be scale. Looking specifically at the pure-play IT companies that landed on the 2018 Defense News Top 100 list, many of those that have doubled down in some capacity saw defense revenue increase during fiscal 2017. That came on the tail end of another trend among the largest defense primes, to get out of the IT business. “The evolution started a couple years ago, where the large defense primes who had boned up on IT service work during the war [on terror] started to realize that for a variety of reasons they might not be able to compete as effectively, or extract the returns they want out of a business like that,” said Jon Raviv, senior analyst and vice president for aerospace and defense at Citi Research. Divestitures followed, and pure-play IT companies were able to quickly scale up not just in size and their ability to support massive contracts, but also in capability set. The acquisition of Lockheed Martin's IT business transformed Leidos from a $5 billion company to a $10 billion company. That deal closed in late 2016, explaining how the company saw double-digit growth in defense revenue in both 2016 and 2017 — despite the buy actually making the company less defense heavy overall. Similarly, CACI closed on the acquisition of L3 Technology's National Security Solutions for $550 million in February 2016 — three months before the end of its fiscal year. The associated revenue contributed to the 16 percent increase in defense revenue during 2017. Leidos CEO Roger Krone, in an interview with Defense News in 2016 soon after the acquisition closed, pointed to “scale, but not scale for scale's sake” as a big factor in the buy — noting, too, the importance of balancing the portfolio and geographic distribution. He also pointed to sheer numbers — 15,000 employees specifically — many with security clearances. The trend does seem to be continuing. CSRA chose to not participate in the 2018 Top 100 because its $9.7 billion acquisition by General Dynamics closed by the time data collection for the list kicked off. While General Dynamics is a top defense prime, its IT business functions as a largely separate entity, similar to the pure-play IT companies. The acquisition of CSRA, which reported $2.25 billion in defense revenue for fiscal 2016 — will add significant scale to GDIT. It is also likely to influence the company's Top 100 rank next year. The future promises more cyber and IT-related merger and acquisition activity in the vein of that deal, according to Daniel Gouré, a vice president with the Lexington Institute think tank. “Raytheon is still in acquisition mode with cyber, so it's an area that's still kind of churning,” he said. “I wouldn't be surprised to see some of these big players acquire some of the more defense-oriented cyber players.” Unclear is what the sweet spot may be for those exclusively IT-focused firms. “Where we sit right now, it's not clear what the right size is,” Raviv said. “GDIT and Leidos are about $10 billion in sales; SAIC and CACI and ManTech are lower tier. All of those companies say they are happy with scale but could do a deal. Whether they call it scale, or marrying capability sets — it's all marketing, I suppose.” And there are other tactics that achieve scale without acquisition. Perspecta emerged on the 2018 Top 100, having launched June 1, 2018 through the combination of DXC Technology's U.S. public sector business, Vencore, and KeyPoint Government Solutions. As one entity, Perspecta reported $2.73 billion in defense revenue and ranked 37. To put that in perspective, Vencore ranked 67 in last year's list, with $886.59 million in defense revenue. And all of these pure-play companies are increasingly marketing themselves as conduits to the “nontraditional players” that the Pentagon is so keen to attract. Amazon Web Services, for example, will often partner with government IT companies on defense contracts to hand off some of the contracting morass. That said, for all the potential, the bulk of the defense IT market is notoriously fickle. Services often set aside IT projects in an effort to preserve platform buys, and margins can be low. Agencies also struggle to balance upkeep of existing systems versus modernization efforts versus research and development into the next great technological marvel. But as Raviv noted, it's all IT. “Yes, there are companies working on high-end cyber, the ability to launch attacks through cyberspace or to harden the communication node on a new missile so it can't be hacked by, say, China. And while the word cyber came up a lot three or four years ago, now you hear a lot about AI, autonomy and machine learning. But it's all technology. And it's a lot of smart people working on a lot of advanced things many of us don't understand.” https://www.defensenews.com/top-100/2018/08/09/for-it-companies-the-secret-to-success-in-defense-is-all-about-big-growth/
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July 6, 2020 | International, Aerospace, Naval, Land
Le missilier MBDA appelle l’Europe à construire son autonomie stratégique
Arrivé à la tête de MBDA, voici un an, Éric Béranger, son PDG, entend réussir la transformation numérique de la société et appelle l'Europe à soutenir la filière défense. « J'appelle à la poursuite de la construction de notre autonomie stratégique, déclare-t-il. Le grand programme fondamental pour la défense de l'Europe contre les missiles balistiques et hypervéloces, c'est Twister ». Son coût total « de plusieurs milliards d'euros » doit être en partie pris en compte par le Fonds européen de défense. Conduit par la France, Twister comporte deux piliers. Le premier porte sur le développement d'un système d'alerte avancée depuis l'espace afin de détecter un décollage de missiles et de le suivre. MBDA y travaille aux côtés d'Airbus Defence and Space, Thales Alenia Space et l'allemand OHB. Le second porte sur le développement d'un intercepteur européen de missiles balistiques ou hypervéloces capable de neutraliser la menace. Le Figaro du 3 juillet 2020