10 juillet 2024 | International, Aérospatial
F-16s to be ‘flying in the skies of Ukraine this summer,’ US says
However, one analyst says this news doesn't necessarily mean the jets are ready for combat.
14 août 2018 | International, Aérospatial, Naval, Terrestre, 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.”
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Iranian Cyber Group TA453 Targets Jewish Leader with New AnvilEcho Malware
Iranian state-sponsored TA453 hackers target a prominent Jewish figure with new AnvilEcho malware via sophisticated phishing.
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2 avril 2020 | International, Aérospatial, Naval, Terrestre, C4ISR, Sécurité
Pentagon turns to new buying tools 10 times more often
By: Aaron Mehta WASHINGTON — The amount of funding for defense research awarded through other transaction authorities have increased nearly tenfold in five years, according to a new analysis seen exclusively by Defense News. The report, by data and analytics firm Govini, shows the use of OTAs and small business innovation research contracts has expanded to the point that, in 2019, the two methods accounted for $9.6 billion, or 10 percent of the Defense Department's research, development, test and evaluation spending. OTAs are small contracts awarded to companies of any size, in theory targeted at nontraditional defense contractors, with the purpose of conducting research or prototype efforts on a specific project; they are not subject to Federal Acquisition Regulation rules. SBIR contracts are targeted at small businesses in order to act as seed money for them to conduct research and development efforts; they are subject to the FAR rules. Overall, $34.5 billion have been handed out in the last five years through the two contracting methods, to 6,503 unique vendors. However, more than half the OTA dollars are going to only three consortia. The two contracting methods may be about to jump in importance for the department, in light of the new coronavirus outbreak. Navy acquisition head Hondo Geurts, in a March 24 memo, ordered his workforce to do what they can to keep small companies assigned to naval research programs on track, including specifically calling out the need to protect SBIR efforts. Govini tracked the use of OTA and SBIR contracts over a five-year period, from fiscal 2015 through fiscal 2019. “The Defense Department's surging use of OTAs reflects its strong desire to break free from the stringent acquisition process, better access innovative technologies, and lure new companies to the defense ecosystem who otherwise may not see the federal government as a viable or lucrative potential market,” said Tara Murphy Dougherty, Govini CEO. “Fundamentally, the Department is driven by the imperative to outpace China's military modernization in order to retain a military advantage, and they understand that leveraging emerging technologies and the very best technology available in American industry — not just the Defense Industrial Base — are critical to achieving that goal,” she added. OTA dominance The numbers tell a particularly stark story of how the department is increasing its use of OTA contracts. From 2015-2017, the government awarded $12.5 billion in SBIR contracts, versus $4.9 billion in OTA contracts. But from 2018-2019, the government awarded $5.7 billion in SBIR contracts, while it handed out $11.4 billion in OTA deals — an increase large enough to nearly draw even over the five-year period. That increase in OTA funding also ties into the mission laid out by the National Defense Strategy, which encourages a focus on great power competition with China and Russia. According to Govini, the two biggest OTA investments of RDT&E dollars during this time period were $5 billion for munitions and long-range fires, and $3 billion for space systems. While the dollar totals are becoming closer, overall SBIR recipients continue to dwarf OTAs — 6,213 to 290 during the five-year period. In the number of OTA awards per service, the Army leads the way. (Govini) The Army leads the way with use of the two contract methods ($14.1 billion) during this period, followed by the Air Force ($10.4 billion), defensewide agencies ($6 billion) and the Navy ($4 billion). The two contract types also split their dollars in divergent ways. The top SBIR vendor, Colsa Corporation, received 4 percent of total SBIR awards, and the top ten (which includes Colsa) received less than 20 percent of the overall total. In comparison, the top three OTA vendors are consortia managers that make up more than half of total OTA contracts. Those three are Analytic Services Inc. ($5.429 billion), Advanced Technology International ($1.616 billion) and Consortium Management Group Inc. ($1.238 billion). Traditional defense corporations are taking advantage of OTAs as well. The fourth highest recipient of OTA money is United Launch Alliance, co-owned by Lockheed Martin and Boeing; the sixth highest recipient is Lockheed; the eight highest is Northrop Grumman; and the 10th highest is Boeing. Given that OTAs were designed to reach out to nontraditional defense firms, “it's surprising how many traditional defense contractors benefit from OTA arrangements,” Murphy Dougherty said. “Lockheed Martin, Northrop Grumman, and Boeing were all top OTA vendors over the past five years. This is a good example of how accessing the data can help the Department measure its success in terms of achieving intended outcomes through actions like increased OTA use.” Earlier this month, Ellen Lord, the Defense Department's top acquisition official, was asked at a McAleese & Associates conference about data that shows prime contractors taking advantage of OTA contracts. Lord indicated her office needed to gather more data on the issue before taking a look. “The whole premise of OTAs was to get the nontraditional [vendors] and the smalls there,” Lord responded. “I find it hard to imagine a situation where large primes would predominately use OTAs, but I don't know what I don't know. That wasn't the objective. “Oversight is one of our responsibilities in A&S [the office of acquisition and sustainment] that I take very seriously, so we need to make sure that we don't have unintended results from some of the polices that we implement. We're always trying to improve that.” https://www.defensenews.com/industry/2020/04/01/pentagon-turns-to-new-buying-tools-10-times-more-often/