16 juin 2020 | International, Aérospatial, Naval, Terrestre, C4ISR, Sécurité
By: Joe Gould
WASHINGTON ― Economic shock waves from the coronavirus pandemic are threatening U.S. arms sales to its allies and partners, who may suddenly have less to spend.
U.S. defense exports, through either the Foreign Military Sales process (which is government-facilitated) or the Direct Commercial Sales process (from a firm to a nation), are a means for the U.S. to strengthen ties with friendly countries and, as President Donald Trump likes to make explicit, pump revenue into the U.S. economy.
Though the U.S. made $55 billion in foreign military sales in fiscal 2019, observers see headwinds in declining oil prices and the potential for allies to prioritize their domestic response to COVID-19 over defense spending.
The Middle East is a leading market, and Saudi Arabia the world's leading purchaser. But the falling price of crude oil has fueled projections that Gulf Cooperation Council budgets will shrink, and with them demand for U.S. weapons. To boot, a Saudi-initiated oil price war has only added to Capitol Hill's ire toward the kingdom.
Arms sales to Saudi Arabia reentered Congress' crosshairs as lawmakers probed Secretary of State Mike Pompeo for firing of a State Department inspector general who'd been investigating Pompeo for bypassing a congressional freeze on arms sales to the kingdom. Previous objections to the sale centered around Riyadh's role in Yemen's civil war and — U.S. intelligence agencies believe ― the death of columnist Jamal Khashoggi.
“I think the trends are a bit worrisome,” Roman Schweizer, the managing editor of Cowen Washington Research Group, said during a Defense One event. “The Saudis have been in the penalty box with the U.S. Congress since the Khashoggi killing, and most recently with the overproduction of crude oil. ... So getting a deal though the U.S. Senate for the Saudis are probably a bridge too far.”
Within NATO and the European Union, allied purchases of U.S. equipment have been lagging, as Trump has jousted with leaders in Western Europe, Schweitzer said. At the same time, allies nearer to the border with Russia have been buying U.S. arms more heavily.
In the long term, tensions with Russia and China are still likely to drive demand, observers say. China ― the Pentagon's pacing threat ― is raising defense spending by 6.6 percent in 2021 even as it cuts education and public services.
“The growth rate may have slowed, but the fact the budget increased is still a significant indication of the focus and prioritization that the [Chinese Communist] Party puts on modernization plans and national security interests,” Meia Nouwens, an expert on Chinese military affairs with the International Institute for Strategic Studies, said at the same event.
For now, it's unclear whether COVID-19 will turn Europe's focus away from burden-sharing, said Edward Ferguson, a former British ambassador now serving as minister counselor for defense at the U.K. embassy.
What is clear: European governments will have to have difficult conversations.
“Right now within NATO, what we see are allies proliferating rather than reducing,” Ferguson said at the event. “Notwithstanding the additional demands on treasuries and exchequers is the fundamental shifts in technologies we're seeing and [the] need to invest in that, and the increasingly complex strategic environment, whether it's Russia or China. "
Along similar lines, the industry itself has been largely optimistic about the prospects of overseas sales.
On recent investor calls, Lockheed Martin executives said there's been no reduction in demand from the Middle East. They touted F-16 fighter jet deals with Bahrain, Bulgaria, Slovakia and ― pending government approval ― Taiwan, as well as demand for Hellfire missiles and the Guided Multiple Launch Rocket System, the Joint Air-to-Surface Standoff Missile and the Patriot Advanced Capability-3 missile.
Lockheed Chief Financial Officer Kenneth Possenriede, on an investor call earlier this month, pointed to demand for the F-35 jet from Poland, Belgium and Japan, and Lockheed's plans to participate in aircraft competitions in Switzerland, Spain and Finland.
“We're in the final stages of the Canada competition, which we feel pretty good about,” he said.
In Raytheon's May 7 earnings call, CEO Greg Hayes acknowledged Saudi Arabia is challenged by the lower oil prices, but added: “I don't think peace is breaking out anytime soon in the Middle East.” The company anticipated Riyadh will buy its AN/TPY-2 Surveillance Transportable Radar, which is linked to the Terminal High Altitude Area Defense missile defense system.
“So far, we have continued to see good cash come in from the Middle Eastern customers during the first quarter, surprisingly even with oil out there,” Hayes said. “They need the equipment, they want the equipment and we need to help them defend themselves.”
https://www.defensenews.com/congress/2020/06/15/will-us-foreign-military-sales-catch-the-coronavirus
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AIR FORCE General Electric Aviation, Cincinnati, Ohio, has been awarded a $318,014,000 indefinite-delivery/indefinite-quantity contract for the Engine Component Improvement Program. This contract provides for a list of projects each calendar year to include developing engineering changes to the engines, developing organizational, intermediate and depot level repairs as needed, and designing modifications to existing support equipment as well as initiating new support equipment designs as required by engine driven changes. The program also provides support to resolve service-revealed deficiencies and maintain or extend the life limits of aircraft engines. Work will be performed at Cincinnati, Ohio, and is expected to be complete by Dec. 31, 2029. This award is the result of a sole-source acquisition. Fiscal 2020 research and development funds in the amount of $503,338 are being obligated at the time of award. The Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, Ohio, is the contracting activity (FA8626-20-D-0002). Advanced Electronics Co. Ltd., Riyadh, Saudi Arabia, has been awarded a $17,022,427 cost-plus-fixed-fee, cost reimbursable contract modification (P00027) to previously awarded contract FA8730-16-C-0019 for the Royal Saudi Air Force (RSAF) F-15SA Cyber Protection System (CPS) and Related Facilities program. This modification provides for three years of in-Kingdom Contractor Logistics Support (CLS) for the CPS. The scope of this contract effort will include the extension of existing CLS support for three additional years, as well as related mobilization, de-mobilization, transportation and housing expenses for CLS personnel. This is a Foreign Military Sales (FMS) acquisition between the U.S. government and the Kingdom of Saudi Arabia, described in the Letter of Offer and Acceptance SR-D-SAO Amendment 5, dated July 5, 2015. FMS case SR-D-SAO is for the total package of acquisition and fielding of 84 F-15A aircraft; the upgrade of 70 F-15SA aircraft to the F-154SA configuration; the procurement of associated equipment, weapons, and spares; and the construction, refurbishment, and infrastructure improvements of support facilities for the F-15SA in the Kingdom of Saudi Arabia. Work will be performed at RSAF facilities in the Kingdom of Saudi Arabia and is expected to be complete by May 31, 2022. This award is the result of a sole-source acquisition utilizing 100% FMS funding; FMS funds in the amount of $17,022,427 will be obligated at the time of the award. Total cumulative face value of the contract is $150,835,663. The Air Force Life Cycle Management Center, Hanscom Air Force Base, Massachusetts, is the contracting activity. Modern Technology Solutions Inc. (MTSI), Alexandria, Virginia, has been awarded a cost-plus-fixed-fee contract in the amount of $11,141,208 under the Small Business Innovation Research (SBIR) Phase-III program. Under this SBIR Phase III effort, MTSI will mature the technologies developed in the previous Phase I and III contracts, which relate to the acquisition and fusion of data for space situational assessments. MTSI will provide system architecture, system administration, and software engineering solutions to deliver a real-time, data-driven architecture for developing and integrating space situational awareness, and intelligence community data sources for use in algorithms, machine learning tools, and data fusion technologies for United States Air Force Space Command and their mission partners. In maintaining its role in bringing capabilities to operations, MTSI will continue to refactor existing applications and develop new applications for integration into the next-generation infrastructure that the Space and Missile Systems Center and the Air Force Research Laboratory are developing. Work will be performed at Alexandria, Virginia; and Kirtland Air Force Base, New Mexico, and is expected to be completed by January 2025. Fiscal 2019 research development, test and evaluation funds in the amount of $300,000 are being obligated at time of award. The Air Force Research Lab Space Electronics Branch, Kirtland Air Force Base, New Mexico, is the contracting activity (FA9453-20-C-0004). ARMY International Business Machines, Bethesda, Maryland, was awarded a $145,808,087 modification (P00072) to contract W52P1J-17-C-0008 for the full range of services and solutions necessary to support and maintain the Army's General Fund Enterprise Business System. Work will be performed in Bethesda, Maryland, with an estimated completion date of Jan. 15, 2021. Fiscal 2020 operations and maintenance, Army; research, development, test and evaluation, Army; and other procurement, Army funds in the amount of $8,922,318 were obligated at the time of the award. U.S. Army Contracting Command, Rock Island Arsenal, Illinois, is the contracting activity. Vectrus Systems Corp., Colorado Springs, Colorado, was awarded a $134,493,229 modification (P11142) to contract W52P1J-10-C-0062 for Kuwait base operations and security support services. Work will be performed in Camp Arifjan, Kuwait, with an estimated completion date of Sept. 28, 2020. Fiscal 2020 operations and maintenance, Army funds in the amount of $88,000,000 were obligated at the time of the award. U.S. Army Contracting Command, Rock Island Arsenal, Illinois, is the contracting activity. DEFENSE ADVANCED RESEARCH PROJECTS AGENCY Lockheed Martin Corp., Missiles and Fire Control, Grand Prairie, Texas, has been awarded a $31,938,845 cost-plus-fixed-fee contract to support the Operational Fires Integrated Weapon System Phase 3 program, which will enable capabilities for a mobile, ground-launched tactical weapon delivery system capable of carrying a variety of payloads to a variety of ranges. Fiscal 2019 and 2020 research and development funds in the amount of $12,920,000 are being obligated at the time of award. Work will be performed in Grand Prairie, Texas (68%); Huntsville, Alabama (21%); Toledo, Ohio (5%); Elkton, West Virginia (5%); Kirkland, Washington (less than 1%); and Camden, Arkansas (less than 1%) with an estimated completion date of January 2021. The Defense Advanced Research Projects Agency, Arlington, Virginia, is the contracting activity (HR001120C0038). NAVY EMR Inc.,* Niceville, Florida, is awarded a $17,017,000 firm-fixed-price task order N69450-20-F-0875 under a multiple award construction contract for the design and construction of P288 temporary maintenance hangar at Naval Air Station (NAS) Whiting Field, Florida. The work to be performed provides for a temporary hangar space and supporting spaces for helicopters and includes design, assembly and installation of temporary, relocatable structures for the hangar and support spaces such as administrative, restroom and breakrooms. This project will provide foundation and aqueous film forming foam containment trench and extend utilities to temporary facilities. The structures will be temporary in nature and require removal from the site once permanent facilities are available. The task order also contains five unexercised options, which if exercised, would increase the cumulative task order value to $20,267,000. Work will be performed in NAS Whiting and is expected to be completed by October 2025. Fiscal 2020 military construction (Navy) contract funds in the amount of $2,222,000 are obligated on this award and will not expire at the end of the fiscal year. Fiscal 2020 operations and maintenance (Navy) contract funds in the amount of $14,795,000 are obligated on this award and will expire at the end of the current fiscal year. Two proposals were received for this task order. Naval Facilities Engineering Command Southeast, Jacksonville, Florida, is the contracting activity (N69450-18-D-1318). DEFENSE LOGISTICS AGENCY Condor Pacific Industries of California Inc.,** Newbury Park, California, has been awarded a maximum $14,461,300 firm-fixed-price, indefinite-delivery/indefinite-quantity contract for rate gyro assemblies. This was a competitive acquisition with four responses received. This is a five-year contract with no option periods. Location of performance is California, with a July 6, 2025, performance completion date. Using military service is Army. Type of appropriation is fiscal 2020 through 2025 Army working capital funds. The contracting activity is the Defense Logistics Agency Land and Maritime, Warren, Michigan (SPRDL1-20-D-0036). The Boeing Co., St. Louis, Missouri, will be awarded a maximum $14,002,398 firm-fixed-price delivery order (SPRPA1-20-F-LB02) against a five-year basic ordering agreement (SPRPA1-14-D-002U) for spare items in support of the Flight Control Surfaces utilized on the F/A-18 aircraft. This was a sole-source acquisition using justification 10 U.S. Code 2304 (c)(1), as stated in Federal Acquisition Regulation 6.302-1. This is a five-year base contract with one five-year option period. Location of performance is Missouri, with a May 30, 2022, performance completion date. Using customer is the Swiss Navy. Type of appropriation is fiscal 2020 Foreign Military Sales funds. The contracting activity is the Defense Logistics Agency Aviation, Philadelphia, Pennsylvania. Puerto Rico Apparel Manufacturing (PRAMA) Corp.,*** Mayaguez, Puerto Rico, has been awarded a maximum $11,856,002 modification (P00012) exercising the first one-year option period of a one-year base contract (SPE1C1-19-D-1127) with four one-year option periods for various types of coats and trousers. This is a firm-fixed-price, indefinite-delivery/indefinite-quantity contract. Location of performance is Puerto Rico, with a Jan. 31, 2021, performance completion date. Using military services are Army and Air Force. Type of appropriation is fiscal 2020 through 2021 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pennsylvania. *Small Business **Veteran-owned Small Business ***Woman-Owned Small Business in historically underutilized business zones https://www.defense.gov/Newsroom/Contracts/Contract/Article/2054955/source/GovDelivery/