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The US GAO’s 2008 Assessments of Selected Weapon Programs is proving to have a longer tail than usual. Booz Allen Hamilton is a strategic/ I.T/ program assistance consultancy with strong representation in the government and defense sectors. This May Day, we refer readers to the recent Washington Post article “One-Stop Defense Shopping,” wherein Booz Allen Hamilton VPs Dov S. Zakheim and Ronald T. Kadish discuss the state of competition in the American defense industry, and some of its consequences:

“The GAO report lays bare a festering problem in our nation’s military procurement system: Competition barely exists in the defense industry and is growing weaker by the day.

It was a different story just two decades ago. In the 1980s, 20 or more prime contractors competed for most defense contracts. Today, the Pentagon relies primarily on six main contractors to build our nation’s aircraft, missiles, ships and other weapons systems. It is a system that largely forgoes competition on price, delivery and performance and replaces it with a kind of “design bureau” competition, similar to what the Soviet Union used—hardly a recipe for success….”

America is certainly not the only country facing these pressures: Britain is even farther down this road, and Europe is aggressively moving to restructure its own industry into a very few global competitors. Ultimately, the policy implications described here will be played out on a near-global basis, with the possible exception of China.

Cpt. Jones & the Mayor
in Karmah, Iraq
(click for interview)

Twentynine Palms, CA has hosted one of the Marine Corps’ most unique assets: battlefield foreign language specialist role players. Iraqis who play D&D? No, Iraqis who can help the Corps simulate life and cultural norms in Iraq. In recent days, the Marines have handed out over $400 million in contracts to keep that capability running – and extend it to Camp Lejeune. Characteristically, Alaskan firms have won both awards, just as they have taken a significant share of Special Operations Command’s foreign language PsyOps support contracts.

These role player awards seems like large but inconsequential outlays, a sort of upside-down Disneyworld for Marines. In fact, they are more critical to current military effectiveness on the front lines than just about any piece of equipment DID covers. An example of how critical this work is can be found in journalist Michael Totten’s reports from the front lines. “Builders of Nations” noted the contrast between prior military training, and the civil administration work that characterizes current deployments to Fallujah. Totten writes:

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JAS-39N CAP Concept
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After Dassault’s Rafale was disqualified, and EADS’ Eurofighter pulled out, the battle to supply Norway’s 48 F-16 replacements has come down to a straight shootout between the F-35A Lightning II, and Sweden’s upgraded JAS-39N. See “F-35 Lightning II Faces Continued Dogfights in Norway” for more.

Gripen International has now delivered its bid to the Norwegian government, on the same day that it submitted its bid for India’s much larger MMRCA fighter competition. Dagbladet reported, and Gripen’s release confirmed, that Norway added a new wrinkle to its competition requirements:

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Totem Ocean Trailer Express, Inc. in Federal Way, WA won a $7.9 million firm-fixed-price contract to charter the Ponce class self-sustaining, roll-on/roll-off (RO-RO) vesselSS Westward Venture, a U.S.-flagged and U.S.-built, contractor-owned ship. The 6-month charter also includes a 6-month option that would extend the contract to a year, and bring the total contract value to $15.8 million. To see where in the world the SS Westward Venture is at the moment, click this handy web page.

Work will be performed primarily between the U.S. East Coast and the Persian Gulf, in support of the war on terrorism and U.S. Central Command (CENTCOM), and is expected to be complete in May 2008 (November 2008 with option). SS Westward Venture has already been used in this role for some time. This contract was competitively procured via the Federal Business Opportunities website and the Military Sealift Command’s website, with more than 80 proposals solicited and 3 offers received by The U.S. Navy’s Military Sealift Command in Washington, D.C.

Centurion 2 engine
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On the face of it, Thielert AG of Hamburg appeared to be a well-positioned company, leveraging respected German engineering to modify a Daimler diesel engine for use in aircraft. The ability to use “heavy” fuel offers light civilian aircraft a convenient, less-expensive option, and can also be an important asset for armies who want a single fuel supply chain for land vehicles and UAVs. That commonality offers lifetime cost savings of its own, less operational risk, and more operational flexibility – which is why the US Army’s flagship MQ-1C SkyWarrior UAV uses Thielert’s 135 hp Centurion engine. By many accounts, the engine itself performs well, though some reports say the engines have some reliability issues and suffer from poor field support. The aero-diesel niche has few competitors at the moment, but several new competitors are expected to unveil products over the next year.

Those alternative options have now become a more urgent matter, given recent developments in Germany. In brief, Thielert is facing advanced stage criminal investigations for serious accounting fraud, providing false evidence, and more. The alternative explanation is that a long list of firms including General Atomics, Northrop Grumman, and Lockheed Martin each left millions of dollars in supplier invoices unpaid for over a year.

Regardless of which explanation is true, Thielert faced financing needs that the firm’s own April 10/08 release described as “an urgent liquidity crisis.” As a first step, the founder tried to sell his entire stake to a Russian hedge fund. Even so, the firm’s own statements confirm that much more cash will be needed, and shareholder lawsuits enabled by German court rulings that have voided their financial reports could drive that figure higher.

The latest developments are three-fold: the dismissal of the CEO and CFO for cause in light of criminal investigations, the collapse of the new investors consortium, and the firm’s filing for bankruptcy. Meanwhile, the US Army says it was unaware of the situation at Thielert, which raises questions concerning its contractor General Atomics’ communications and program risk transparency with the US military….

• Situation Summary
• American Defense Contractors: Unpaid Bills?
• Timeline: Key Events [updated]
• Additional Readings & Sources
  
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In late 2007, European aerospace and defence giant said that they were looking to make at least 2 acquisitions in the American market, as part of a larger strategic plan they called “Vision 2020.” Buying PlantCML of Temecula, CA from Golden Gate Capital, a San Francisco-based private equity fund, for approximately $350 million appears to be the first step.

EADS has created a strong position for itself in the market for “professional mobile radios,” and are responsible for building several national law enforcement and first responder networks using TETRA technology. PlantCML complements these strengths by offering solutions that take advantage of this base, and handle back-end call/command center activities like call management and radio dispatch, emergency notification services, Computer Aided Dispatch (CAD) applications, and mapping services. These services can add to EADS offerings in Europe and beyond, while giving the firm a foothold for its full range of solutions in North America. PlantCML has U.S. operations in California, Alabama, Indiana, and Tennessee, and a Canadian operation in Quebec, and EADS’ release reports that PlantCML’s existing margins and profitability are strong.

Accoridng to this Forbes article, EADS’ Vision 2020 aims to have 20% of the firm’s employees and 40% of its sourcing outside Europe by 2020, with defense and homeland security revenues rising in proportion to Airbus revenues, and service revenues rising from 10% to 25%.

Dutch F-16, Kandahar
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Raytheon recently announced a competitive contract win in The Netherlands for 200 of their Enhanced Paveway II dual-guidance GPS/laser-guided bomb kits. The contract is a direct commercial sale rather than a Foreign Military Sale, and the kits will fit 500 pound bombs, turning them into precision-guided GBU-49s. Cost was not disclosed.

The GBU-49 has been used extensively in Iraq, and will not be blocked by haze, sandstorms, and other weather conditions. Adding it to the Dutch arsenal will give their F-16s potent options for close air support in Afghanistan. Dual-guidance precision bombs are becoming more popular; France and Britain have recently taken similar steps.

In late September 2007, US Air Mobility Command at Scott Air Force Base, IL issued a slew of indefinite-delivery/ indefinite-quantity, firm-fixed-price contracts for “International Airlift Services” to various commercial carriers. The total value of these contracts has a higher ceiling of just over $3 billion in 2007, compared to $2.32 billion in 2006 and $2.29 billion in 2005.

The 2007 contract also appeared to bring far more consortia into the fold, as opposed to the 2006 and 2005 awards. The way these awards work is that each contractor submits a bid, and the US military allocates awards according to each bid’s scope and competitiveness.

Recent developments include an additional award to Lynden…

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Sunset at NB Kitsap
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Naval Base Kitsap is one of the homes for the USA’s fleet of Trident nuclear missile submarines; the Strategic Weapons Facility Pacific stores both propellant and nuclear warheads. One report claims that this location has the highest concentration of nuclear warheads in the USA with more than 2,300 warheads, about half of which are sailing aboard America’s Pacific fleet of ballistic-missile submarines at any given time.

A set of contracts begun in 2008 aim to make improvements to this facility. They aren’t cheap, but one can argue that they’re worth it…

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Excalibur 155mm
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The GPS-guided M982 Excalibur artillery shell is not an anti-tank round, unlike the SMArt 155 shells Australia bought in October 2007. Excalibur’s accuracy brings its own capabilities, however, including precise counter-fire at enemy artillery and mortars located via projectile-tracking radars. Its shells can also target a particular building near troops under fire, providing a much faster, cheaper, and more reliable alternative to close air support fighters with precision-guided bombs. Both of these capabilities are important on the front-lines, where Australian troops are engaged.

DID readers will recall Australia’s LAND 17 artillery replacement contract, currently underway, aimed at purchasing a new set of towed and mobile 155mm howitzers capable of firing shells like SMArt 155 and the M982 Excalibur. In the mean time, however, a secondary solution is available – and Australia appears to have submitted a modified request…

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