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  25 septembre 2018 | International, Terrestre

  SAIC boss tackles Engility acquisition, space market and revenue goals

  WASHINGTON — News that SAIC would buy Engility was just the latest in a recent string of acquisitions among the professional services firms. But if you ask the CEO of SAIC, Tony Moraco, unlike some of the company's peers this was not transformational. This was instead a merging of two complementary businesses. In his words, “a momentum builder, as we are stronger together in the marketplace.” It's also the next phase for a company that technically formed five years ago, with the split of the $11 billion legacy company with the same name. Defense News sat down with Moraco to see how the acquisition fits into SAIC's future strategy, and how far the company has come since gaining independence. About a year after SAIC split from Leidos, I asked you about your vision for the company. And you said to return to an $11 billion company. How does this acquisition fit into your vision for SAIC these days? The Engility acquisition is very much consistent with our current strategy. It is not a deviation or a reset, as perhaps some of the other major transactions have been for some of our peers. But it really is about the theme of being stronger together, with [particular] compatibility of the intelligence community ... and also attributes in space market segments that we think we can both serve better. For us, this is opening market access to channels that we didn't have. It's momentum building, a vision and a strategy that was five years in the making, and it's a continuation of that strategy going forward. So have you been looking for an extended period of time? And why Engility specifically? We consistently look at the market. We were not going to be a high-volume buyer, but more selective. The Scitor [acquisition] was more than three years ago. But we felt that we had a good position in the marketplace to grow organically. And we proved very strong performance over five years and since [that last acquisition of] Scitor. And then we've looked at many deals, large and small, to see what makes the most sense to us, staying true to our strategy. The attraction with Engility was probably first sparked by the multi-intelligence agency portfolio that they have. Instead of buying a number of smaller concentrated firms, we could get a couple agencies in one larger deal. The company is large enough, they have a mature system. Again, in contrast to perhaps some of the small businesses, we think it has been through its own cultural shift to align very much to ours. Also of interest is the space market. Today, with denied access and with the threats that we have, space is becoming a much more serious domain. The U.S. wants to invest more in it for a range of reasons. And when we think about space, it does cross, in fact, with the intelligence community, the defense sector with Air Force and the other services, and then also the civilian agencies with NASA, [and the National Oceanic and Atmospheric Administration]. As that market evolves, I think the U.S. government will be a principal customer. I believe that the commercial space entities will find a way where they'll also require key outsourced space services just as the government had. So for a single transaction at scale where we could in fact use our equity, [and face] probably fewer buyers, filling three or four of our strategic initiatives in market access and in capabilities — we felt it was worth a serious look. But it's not just about space and intel. Defense will still be the largest part of our portfolio — 55 percent after we close [from 61 percent]. With the benefit of having the broader diversification in intel and federal civilian agencies, that serves all of our customers from a technology transfer perspective. We've seen an interesting transition in the market, where the big primes are shedding portions of their services segments. Have we officially returned to the days when manufacturers focus on platforms only and leave the rest to the professional services companies? I think we [for a period of time] faced a market that was uncertain. Our customers were reprioritizing their mission areas, and the industry was doing the same — looking at where they were going to focus their precious dollars, identify businesses they were going to protect, and areas that maybe weren't core. Then as the market started to improve and move away from cost reductions to protect margins to having some cash and some flexibility, you started seeing more portfolio shaping from the larger players. It's not just about scale. There's [a focus on] the diversification because as you know, the whole business is based on past performance and on what qualifications you have in people and in contract vehicles; if you have a broader base concentrated in a few key areas, your ability to compete and win in those domains is improved. There are a lot of technologies that are more heavily influencing the battlefield — whether ISR, electronic warfare, even still cyber, which is evolving. It seems those areas don't fit quite as neatly in one model or the other. We've been around. It's not a body shop service that we run. It is services and solutions. But technology integration is a direct link to the customer's demand for modernization, the interest in innovative solutions from nontraditional players, the ability to field capabilities faster in a much shorter development cycle, and that leads you to a technology integration model that we have. It allows us to take mission understanding and translate requirements into capability needs. So we can integrate, we can innovate with the technology and we can implement the solutions, which is fundamentally what the customer needs to migrate them from a current state to a future state. But we're seeing more and more opportunities through the [Defense Innovation Unit], the [other transaction authorities], and other contract vehicles that provide a little more rapid prototyping flexibility. SAIC bid for the Marine Corps Amphibious Combat Vehicle and is now working to compete for the Army's Mobile Protected Firepower program.How does that all fit into the broader strategy? We do see it as a viable area, and I would characterize it as the next tier of complex technology integration, system integration. It's an extension of our command-and-control and ISR integration. I recall we pushed through 30,000 MRAP systematic build packages. That kind of integration of subsystems into a platform is what we felt was a baseline business that we could look to expand; and as the customer looked at, in this case, starting with Assault Amphibious Vehicle. Not a start-from-scratch build — the survivability upgrade really was around the armor, the underbelly and then your armaments protecting the vehicle. And then the related mobility requirements to change out transmissions and engines to support that extra weight. We felt that those subsystems and our mission knowledge afforded us the ability to extend to a little more of the physical platform itself. We're doing work on the next-gen combat vehicle. And we're using a services model for MPF. Again, nondevelopmental, major integration of existing platforms for rapid field development. That fits well into our technology and integration model. We see the ground vehicles and perhaps maritime [areas] as one that was probably more approachable versus, say, airframes. Modernization of aircraft has its own barriers of entry of getting flight readiness and the like. We've extended our test-equipment knowledge to partnering with Lockheed on the propulsion system for torpedoes, for example. So we're just looking for selective areas to do more complex system integration under this broad technology integration umbrella. It just happens to be bigger subsystems. Complex system integration sets us apart from some of the current peers in the marketplace right now. But we're selective in what we go after. How hard of a hit was the loss of the Marine Corps Amphibious Combat Vehicle in moving forward with that? It's disappointing. We try to be practical and objective about our market position. It's an alternative model. It's still early in the life cycle. But I think that as we see different opportunities, we learn from it as the customers get more comfortable. So yes, disappointing on ACV, but at the same time we learned a lot from it and I think the customer ultimately got a very good result by having a competitive phase. And we think that the Army [with MPF] will be as successful and come up with [the] best solution if they can maintain a competitiveness early in the process. When the split first happened, you and Leidos were generally two different companies. With this acquisition, and with the Leidos acquisition from Lockheed, have you all started to mirror each other more? I think we may be looking a little more alike. Five years ago I did not expect it. I think we had very clear strategies that [we] were intending to diverge, and therefore we did not have any formal noncompetes. We were looking at the services business model, and Leidos was looking to do more system development. I think their execution of that didn't play out as fast as they'd like. Roger [Krone, Leidos CEO], buying back in the services, more of the information system side, was a bit of a surprise. So if anything, they came back towards us versus us changing direction. So I'd say they probably navigated slightly different than expected. But even today we're still two different companies. We're still very focused on letting our investors and customers know what we do, and Leidos still has a pretty diverse portfolio from health systems and some engineering services. We compete in similar subsegments but not in all. We're also organized very differently, we go to market differently. When the deal closes, where does that put your total revenue at? Right around $6.5 billion. You told me you wanted to get back to $11 billion. Should we expect more? No, not right away. That was very tongue in cheek at the time. You knew I'd remember though. Oh, I know. I remember it too, actually, because we laughed. There are lots of things we can do, but I felt very comfortable then and still do that we've got a great future and can grow the business organically as well as through acquisition. But it's not to chase the size. It really is about the market leadership. Running good margins and providing good mission capabilities for our employees. I think our market is still very motivated by mission. Our employees are very motivated to serve in different capacities whether it's in uniform or not. https://www.defensenews.com/interviews/2018/09/24/saic-boss-tackles-engility-acquisition-space-market-and-revenue-goals

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  17 décembre 2018 | International, Aérospatial

  Budget watchdog warns this fighter could cost three times that of the F-35

  By: Valerie Insinna WASHINGTON — A next-generation air superiority jet for the U.S. Air Force, known by the service as Penetrating Counter Air, could cost about $300 million in 2018 dollars per plane, the Congressional Budget Office states in a new study. At that price, PCA would be more than three times that of the average F-35A jet, which is set at about $94 million to capture both the expense of early production lots and the decline in cost as the production rate increases, according the report, which predicts the cost of replacing the Air Force's aircraft inventory from now until 2050. This sum, while not an official cost estimate from the Pentagon, represents the first time a government entity has weighed in on the potential price tag for PCA. The CBO estimates the Air Force will need 414 PCA aircraft to replace existing F-15C/Ds and F-22s, the Air Force's current fighters geared toward air-to-air combat. It also surmises that the first aircraft will enter service in 2030, based on the service's stated desire to begin fielding PCA around that time frame. The reason for the whopping price tag? Part of it comes down to the cost of new technology. “The PCA aircraft would probably have a greater range and payload, as well as improved stealth and sensor capabilities, than today's F-22; those characteristics would help it operate in the presence of the high-end air defenses that DoD believes China, Russia, and other potential adversaries may have in the future,” the CBO states. The other reason comes down to history. The Air Force doesn't have a great track record when it comes to producing stealth aircraft at the low costs initially envisioned by leadership. Both the B-2 and F-22 programs were truncated in part due to the high price per plane — which in turn contributed to the production rate never accelerating to the point where unit costs begin to decrease. The early years of the F-35 program were also marred by a series of cost overruns that eventually prompted the Pentagon to restructure it. “Containing costs for the PCA aircraft may be similarly difficult,” the report states. The Air Force has said little about PCA since the release of the Air Superiority 2030 flight plan in 2016, which stated a need for a new fighter jet that would be networked into a family of systems of other air, space, cyber and electronic warfare technologies. “The replacement may not be a single platform,” Gen. Dave Goldfein, the Air Force's chief of staff, told Defense News earlier this year. “It may be two or three different kinds of capabilities and systems. And so as we look at air superiority in the future, ensuring that we're advancing to stay ahead of the adversary, we're looking at all those options.” Although Air Force leadership won't say exactly what it's doing to develop PCA or when a new jet may be coming online, it's clearly making investments. In the fiscal 2019 budget, the service requested $504 million for “next-generation air dominance,” its portfolio of future fighter technologies and weapons. The Air Force expects to ramp up funding to $1.4 billion in FY20, hitting a high in FY22 with a projected $3.1 billion in spending. According to the CBO's analysis, Air Force procurement of new aircraft could peak at about $26 billion in 2033, as the service buys both the F-35 and PCA. Those two fighters, together with the B-21 bomber, are set to be the largest drivers of cost as procurement reaches its height in the mid-2030s. “Although the Air Force could probably modify both retirement plans and replacement schedules to smooth out the 2033 peak, the average annual costs of procuring new aircraft would still be higher than in the recent past: $15 billion in the 2020s, $23 billion in the 2030s, and $15 billion in the 2040s,” the report states. Dealing with an upcoming bow wave CBO's estimates included 35 platforms that will be replacing legacy systems, with six programs making up more than 85 percent of the projected procurement costs cited throughout the report: the F-35, PCA, the KC-46A, the B-21, the C-130J cargo plane as well as the yet-unannounced C-17 replacement. The report envisions a future where the Air Force is allowed to retire all of its legacy fighter and attack aircraft — the A-10, the F-15, the F-16 and even the F-22 — in favor of three aircraft: the F-35, PCA and a light attack aircraft configured to take on low-threat missions. The Air Force has yet to decide whether to buy a light-attack aircraft or how extensive its purchase may be, although the service is expected to put out a request for proposals by the end of the month. “Funding for new fighter aircraft makes up about half of the total projected costs of procuring new aircraft,” the CBO states, with the F-35 set to be the most expensive program through the 2020s until PCA takes its place in the early 2030s. The Air Force could decrease costs in a couple of ways, although all of them come with significant drawbacks. For one, it could extend the lives of its legacy fighter and attack aircraft, and delay programs like PCA. However, the CBO notes that “obtaining replacement parts can be both difficult and expensive, and a refurbished fleet may not provide as many available and mission-capable aircraft as a new fleet.” If the service wants to increase the availability of its inventory without paying the high price associated with developing a new stealth fighter, it could retire its legacy F-15s and F-16s and buy new ones. That option is probably more expensive, but would result in aircraft that are more reliable. The Air Force could also defer the PCA program while allowing some of its legacy aircraft to be retired, the CBO posits. However, Air Force leadership contend that the service is already too small, with Secretary Heather Wilson arguing that the number of operational squadrons needs to increase from 312 to 386 — a goal that necessitates buying more aircraft. https://www.defensenews.com/air/2018/12/14/budget-watchdogs-warn-of-expensive-price-tag-for-next-air-force-fighter/

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  13 août 2019 | International, Terrestre

  It’s official: US Army inks Iron Dome deal

  By: Jen Judson HUNTSVILLE, Ala. — The contract to purchase two Iron Dome systems for the U.S. Army's interim cruise missile defense capability has been finalized, according to the deputy in charge of the service's air and missile defense modernization efforts. Iron Dome was co-developed by American company Raytheon and Israeli defense firm Rafael. It is partly manufactured in the United States. Now that the contract is set in stone, the Army will be able to figure out delivery schedules and details in terms of taking receipt of the systems, Daryl Youngman told Defense News at the Space and Missile Defense Symposium in Huntsville, Alabama, on Aug. 8. The Army was shifting around its pots of funding within its Indirect Fires Protection Capability (IFPC) program — under development to defend against rockets, artillery and mortars as well as unmanned aircraft and cruise missiles — to fill its urgent capability gap for cruise missile defense on an interim basis. Congress mandated the Army deploy two batteries by fiscal 2020 in the service's fiscal 2019 budget. Iron Dome could feed into an enduring capability, depending on how it performs in the interim, Youngman said during a separate interview shortly before the symposium. “We're conducting analysis and experimentation for enduring IFPC,” Youngman said. “So that includes some engineering-level analysis and simulations to determine the performance of multiple options, including Iron Dome — or pieces of Iron Dome — and then how we integrate all of that into the [integrated air and missile defense] system.” Col. Chuck Worshim, the Army's project manager for cruise missile defense systems with the Program Executive Office Missiles and Space, told Defense News in April that the service was reworking its enduring IFPC program strategy and would experiment throughout the summer and fall to get a better sense of how IFPC might look beyond interim capabilities. In the meantime, Iron Dome will be fielded to operational units and will likely participate in formal and informal exercises to identify how it can be used as part of the IFPC and air defense architectures, compared to how it is currently employed in Israel countering incoming rockets and missiles at short range. Iron Dome is one of the most used air defense systems in the world. https://www.defensenews.com/digital-show-dailies/smd/2019/08/12/its-official-us-army-inks-iron-dome-deal/