14 août 2018 | International, Aérospatial, Naval, Terrestre, C4ISR

For IT companies, the secret to success in defense is all about big growth

By:

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/

Sur le même sujet

  • United Technologies’ F-35 Engines Chronically Late, Pentagon Says

    3 juillet 2019 | International, Aérospatial

    United Technologies’ F-35 Engines Chronically Late, Pentagon Says

    By Anthony Capaccio United Technologies Corp.'s Pratt & Whitney unit is chronically late delivering engines for the Pentagon's costliest program, the F-35, raising questions about whether the company is ready for a surge to full-rate production scheduled for next year. Pratt remains under a previously unreported “Corrective Action Request” from the Defense Contract Management Agency that cites “poor delivery performance” on its current batch of engines for the fighter jet, including for the most complicated version used by the Marine Corps and the U.K. for vertical takeoffs and landings. The agency's action is likely to be watched not only by the Pentagon and international buyers of the F-35 but also by shareholders and investors assessing United Technologies' planned merger with Raytheon Co., which would fortify the combined company's standing as one of the top U.S. defense contractors. The F-35 engines would be one of the new company's top revenue producers. United Technologies Corp.'s Pratt & Whitney unit is chronically late delivering engines for the Pentagon's costliest program, the F-35, raising questions about whether the company is ready for a surge to full-rate production scheduled for next year. Pratt remains under a previously unreported “Corrective Action Request” from the Defense Contract Management Agency that cites “poor delivery performance” on its current batch of engines for the fighter jet, including for the most complicated version used by the Marine Corps and the U.K. for vertical takeoffs and landings. The agency's action is likely to be watched not only by the Pentagon and international buyers of the F-35 but also by shareholders and investors assessing United Technologies' planned merger with Raytheon Co., which would fortify the combined company's standing as one of the top U.S. defense contractors. The F-35 engines would be one of the new company's top revenue producers. The company, which is the sole supplier of engines for the fighter built by Lockheed Martin Corp., must demonstrate by year-end that it has delivered on promised improvements to solve the problems that led to the agency's formal request in December, spokesman Mark Woodbury said in a statement outlining the issues. Full Production The $428 billion F-35 program is scheduled for approval next year to enter full-rate production, the most lucrative phase of a weapons program for contractors. The decision is contingent on an assessment during the aircraft's current round of intensive combat testing that it's effective and can be maintained. Of the $428 billion, as much as $66 billion is to be spent on at least 2,470 engines -- designated the F135 -- for U.S. jets, including $53.4 billion in procurement, according to the Defense Department's latest Selected Acquisition Report on the F-35. Pentagon budget documents indicate the engine program is valued at about $2 billion annually for Pratt, according to Bloomberg Intelligence analyst Douglas Rothacker. John Thomas, a spokesman for Pratt, said in an emailed statement that “we take seriously our responsibility to meet F135 production commitments. The corrective action plan submitted earlier this year lays out how we are doing that. Over the past year, we have invested more than $200 million for additional capacity, and currently have over 100 Pratt & Whitney employees deployed to our supplier facilities in support of production obligations.” Revenue Potential Pratt & Whitney President Bob Leduc underscored the engine's revenue potential to analysts June 17 at the Paris Air Show. United Technologies Corp.'s Pratt & Whitney unit is chronically late delivering engines for the Pentagon's costliest program, the F-35, raising questions about whether the company is ready for a surge to full-rate production scheduled for next year. Pratt remains under a previously unreported “Corrective Action Request” from the Defense Contract Management Agency that cites “poor delivery performance” on its current batch of engines for the fighter jet, including for the most complicated version used by the Marine Corps and the U.K. for vertical takeoffs and landings. The agency's action is likely to be watched not only by the Pentagon and international buyers of the F-35 but also by shareholders and investors assessing United Technologies' planned merger with Raytheon Co., which would fortify the combined company's standing as one of the top U.S. defense contractors. The F-35 engines would be one of the new company's top revenue producers. The company, which is the sole supplier of engines for the fighter built by Lockheed Martin Corp., must demonstrate by year-end that it has delivered on promised improvements to solve the problems that led to the agency's formal request in December, spokesman Mark Woodbury said in a statement outlining the issues. Full Production The $428 billion F-35 program is scheduled for approval next year to enter full-rate production, the most lucrative phase of a weapons program for contractors. The decision is contingent on an assessment during the aircraft's current round of intensive combat testing that it's effective and can be maintained. Of the $428 billion, as much as $66 billion is to be spent on at least 2,470 engines -- designated the F135 -- for U.S. jets, including $53.4 billion in procurement, according to the Defense Department's latest Selected Acquisition Report on the F-35. Pentagon budget documents indicate the engine program is valued at about $2 billion annually for Pratt, according to Bloomberg Intelligence analyst Douglas Rothacker. John Thomas, a spokesman for Pratt, said in an emailed statement that “we take seriously our responsibility to meet F135 production commitments. The corrective action plan submitted earlier this year lays out how we are doing that. Over the past year, we have invested more than $200 million for additional capacity, and currently have over 100 Pratt & Whitney employees deployed to our supplier facilities in support of production obligations.” Revenue Potential Pratt & Whitney President Bob Leduc underscored the engine's revenue potential to analysts June 17 at the Paris Air Show. “So another way to think about the F135 is a year ago we made about eight engines a month,” he said. “Right now we are between 13 and 14 engines a month. But when you think about the F135, it's 16 engines a month for the next 30 years. There will be over 4,000 of these airplanes when it's all said and done,” including foreign sales. The primary issues resulting in late engine deliveries “have been related to supply-chain capacity, material shortages” and production issues, according to the contract management agency. “Engine test failures due to high vibrations and foreign object debris continues to plague” production, the agency said in an internal quarterly assessment for January through March. Deliveries of the Marine Corps model engines “have been consistently late,” it said. As of early June, Pratt & Whitney was contractually required to deliver 108 engines in the latest production contract, the program's 11th. Of the 90 delivered, 88 were “late by an average of 40 days,” Woodbury said in his statement. The Pentagon is close to finalizing the award of the 12th and largest F-35 contract to date with Lockheed and Pratt. Spotty Record The current delays add to Pratt & Whitney's spotty track record. Even as deliveries increased to 81 in 2018 from 48 in 2012, 86% of those were delivered late, up from 48% in late 2017, according to an April report from the Government Accountability Office. Asked whether the contract management agency has confidence Pratt will be ready for a full-production decision, Woodbury said the agency is monitoring milestones in Pratt's corrective action plan and needs to see progress before making that judgment. The agency's assessment said that in light of Pratt & Whitney's track record it believes the company “will encounter issues keeping up with demand for any future low-rate and full-rate production contract” that increases quantities. — With assistance by Rick Clough https://www.bloomberg.com/news/articles/2019-07-02/united-technologies-pratt-slow-on-f-35-engines-pentagon-says

  • Contract Awards by US Department of Defense - January 11, 2019

    14 janvier 2019 | International, Aérospatial, Naval, Terrestre, C4ISR, Sécurité

    Contract Awards by US Department of Defense - January 11, 2019

    NAVY Microsoft Corp., Redmond, Washington, is awarded an estimated $1,760,000,000 value single-award, firm-fixed-price, indefinite-delivery/indefinite-quantity contract for Microsoft Enterprise Services for the Department of Defense (DoD), Coast Guard, and intelligence community. Support includes Microsoft product engineering services for software developers and product teams to leverage a range of proprietary resources and source-code, and Microsoft premier support for tools, knowledge database, problem resolution assistance, and custom changes to Microsoft source-code when applicable. This contract is issued under the DoD Enterprise Software Initiative (ESI) in accordance with the Defense Federal Acquisition Regulation Supplement, Section 208.74. DoD ESI is an initiative to streamline the acquisition process and provide information technology products and services worldwide that are compliant with applicable DoD technical standards and represent the best value for the DoD. The work will be performed worldwide. The ordering period will be for five years with a completion date of Jan. 10, 2024. This contract will not obligate funds at the time of award. Funds will be obligated on individual task orders using primarily operations and maintenance funds (DoD). This sole-source procurement is issued using other than full and open competition in accordance with Federal Acquisition Regulation Subpart 6.302-1 and 10 U.S. Code 2304(c)(1) - only one responsible source. The Space and Naval Warfare Systems Center Pacific, San Diego, California, is the contracting activity (N66001-19-D-0019). Raytheon Co., Marlborough, Massachusetts, is being awarded $9,347,391 for cost-plus-fixed-fee, firm-fixed-price order N6339419F0002 under a previously awarded basic ordering agreement (N6339417G5103) for engineering services in support of the Aegis SPY-1 radar and Mk 99 fire control system. This order will provide technical, logistical and engineering services from the original equipment manufacturer. This contract includes options which, if exercised, would bring the cumulative value of this order to $19,497,003. Work will be performed in Yorktown, Virginia (90 percent); and at various ship locations (10 percent), and is expected to be completed by January 2021. Fiscal 2018 other procurement (Navy) funding in the amount of $960,282 will be obligated at time of award and will not expire at the end of the current fiscal year. The Naval Surface Warfare Center, Port Hueneme Division, Port Hueneme, California, is the contracting activity. DEFENSE LOGISTICS AGENCY GE Medical Systems Information Technologies Inc., Wauwatosa, Wisconsin, has been awarded a maximum $450,000,000 firm‐fixed‐price, indefinite‐delivery/indefinite‐quantity contract for patient monitoring systems, accessories and training. This was a competitive acquisition with 36 responses received. This is a five-year base contract with one five‐year option period. Location of performance is Wisconsin, with a Jan. 10, 2024, performance completion date. Using customers are Army, Navy, Air Force, Marine Corps, and federal civilian agencies. Type of appropriation is fiscal 2019 through 2024 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pennsylvania (SPE2D1‐19‐D‐0010). Transaero Inc.,* Melville, New York, has been awarded a maximum $23,237,500 firm-fixed price, indefinite-delivery/indefinite-quantity contract for fixed landing gear. This was a competitive small business set-aside acquisition with four offers received. This is a five-year contract with no options periods. Location of performance is New York, with a Jan. 10, 2024, performance completion date. Using military service is Army. Type of appropriation is fiscal 2019 through 2024 Army working capital funds. The contracting activity is Defense Logistics Agency Aviation, Redstone Arsenal, Alabama (SPRRA1-19-D-0043). AIR FORCE Lockheed Martin Aeronautics, Marietta, Georgia, has been awarded a $131,604,450 contract for C‐5 sustainment. This contract provides for sustaining engineering services. Work will be performed in Fort Worth, Texas; Marietta, Georgia; and Palmdale, California, and is expected to be completed Jan. 25, 2019. This award is the result of a sole-source acquisition. A combination of fiscal 2019 transportation working capital funds; and operations and maintenance funds in the amount of $23,543,771 are being obligated at the time of award. Air Force Life Cycle Management Center, Robins Air Force Base, Georgia, is the contracting activity (FA8525‐19‐D‐0001). MISSILE DEFENSE AGENCY Raytheon Co. (Raytheon) Space and Airborne Systems (SAS), San Diego, California, is being awarded a single award with a contract ceiling of $9,607,811 for an indefinite-delivery/indefinite-quantity contract for Multi-Spectral Targeting System (MTS) sensor support. Raytheon will provide subject matter expertise as a member of a government-led sensor development and demonstration team and will provide research, development, fielding and test support, operations, maintenance, and as-needed repairs on the government-owned MTS-class sensors. Raytheon is the sole designer, developer, and manufacturer of the MTS-class sensor. Work will be performed at El Segundo and San Diego, California. The ordering period and the period of performance is five years from the date of award. The first task order will be awarded at the same time the basic contract is awarded. Fiscal 2018 research, development, test and evaluation funds in the amount of $1,299,520 for the first task order is being obligated at time of award. The award to Raytheon SAS is the result of a proposal submitted in response to a sole-source solicitation (HQ0147-18-R-0013) one offer was received. The Missile Defense Agency, Redstone Arsenal, Alabama, is the contracting activity. (HQ0147-19-D-0013). DEFENSE HEALTH AGENCY CACI NSS Inc., Chantilly, Virginia, was competitively awarded a firm-fixed-price contract for $8,582,382 on Jan. 11, 2019. Contract has an effective date of Jan. 29, 2019. This award provides for non-personal Information Technology services in support of the legacy Theater Enterprise-Wide Logistics System (TEWLS) application to be known in the future as the systems, applications and products in the LogiCole application. The award will provide for pre-planned product improvement, life cycle management, and business process, and technical integration support and reengineering services for TEWLS. The contractor will provide software maintenance services to support Joint Medical Logistics Functional Development center in the configuration, technical sustainment and continued enhancement of the TEWLS as part of the Defense Medical Logistics – Enterprise Solution. The contractor place of support is Ft. Detrick, Maryland. This contract has an additional four option periods, if exercised. This contract is an acquisition under General Service Administration's IT schedule 70 with fiscal 2019 operations and maintenance funds in the amount of $8,582,382 obligated at time of award. The Defense Health Agency, Contract Operations – Health Information Technology,San Antonio, Texas, is the contracting activity (HT0015-19-F-0018). *Small business https://dod.defense.gov/News/Contracts/Contract-View/Article/1730557/source/GovDelivery/

  • Pentagon unveils ‘Replicator’ drone program to compete with China

    28 août 2023 | International, Aérospatial, C4ISR

    Pentagon unveils ‘Replicator’ drone program to compete with China

    The program will seek to scale unmanned, attritable systems to offset China's bulk capacity, Hicks said.

Toutes les nouvelles