DTN News: India, The New Land Of Opportunity For Defense Contractors

DTN News: India, The New Land Of Opportunity For Defense Contractors Source: BNet By Matthew Potter Government Analysis (NSI News Source Info) TORONTO, Canada - March 18, 2010: Traditionally a reliable Russian customer, India is also looking further west for its new fighter and attack aircraft; proposals from the U.S., France and Sweden are on the table. The first step of the process is a “fly off” to make sure the proposed aircraft meet the basic requirements. With domestic sales stalling, the contract with India will be one of the most important of the next ten years. Lockheed Martin (LMT) has proposed the F-16 while Boeing (BA) has entered the F/A-18 into the competition. France’s Dassualt has its Rafael and Sweden has its SAAB-manufactured Grypen. Russia is proposing an updated version of the venerable MiG-29, known as the MiG-35. Most of these aircraft fall into the same size range and are twin-engined with modern avionics and sophisticated weapon suites. The winner will be a significant upgrade for India from its current mix of MiG-27, 29 and Su-27 aircraft. India wants to make the first cut by early summer. The plan is to use the fly-off to cull the field; the remaining companies will then submit a financial proposal. The planned budget is about $11 billion for 126 aircraft. India has signed several deals lately with American and Israeli companies to provide hardware. They have also kept buying Russian equipment such as a planned purchase of MiG fighters for their new aircraft carriers. Two contracts that stand out are the P-8I maritime patrol aircraft from Boeing and an airborne radar and control system (AWACS) from Israel, plus a contract to construct ammunition factories. The contract reflects two Indian realities. One is its concern about its neighbors - a restive Pakistan and an emboldened China. The other is India’s increasing economic openness. In the past, domestic requirements were so onerous that making a profit was impossible. Joint ventures were difficult to set up and Delhi limited which domestic companies could participate. Not surprisingly, foreign companies were not eager to enter the market. In the last couple of years, though, India has eased its regulations and expanded joint-venture opportunities. These changes will help India attract better and more proposals which in the long run should reduce costs.

Matthew Potter

Matthew Potter is a resident of Huntsville, Ala., where he works supporting U.S. Army aviation programs. After serving in the U.S. Navy, he began work as a defense contractor in Washington D.C. specializing in program management and budget development and execution. In the last 15 years Matthew has worked for several companies, large and small, involved in all aspects of government contracting and procurement. He holds two degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, DefenseProcurementNews.com.

*This article is being posted from Toronto, Canada By DTN News ~ Defense-Technology News, contact: dtnnews@ymail.com

DTN News: Congress's Crystal Ball: Something Has To Give On The Budget

DTN News: Congress's Crystal Ball: Something Has To Give On The Budget Source: BNet By Matthew Potter Government Analysis (NSI News Source Info) TORONTO, Canada - March 10, 2010: The Congressional Budget Office (CBO) and the Executive Branch’s Office of Management and Budget (OMB) don’t always see the future the same way. This time is no different. In its recent analysis of the budget, the CBO reckoned that the Obama Administration has seriously underestimated U.S. budget deficits over the the next ten years. The initial estimate of the deficits in 2010 and 2011 are: “the federal government would record deficits of $1.5 trillion in 2010 and $1.3 trillion in 2011. Those deficits would amount to 10.3 percent and 8.9 percent of gross domestic product (GDP), respectively. By comparison, the deficit in 2009 totaled 9.9 percent of GDP.” By 2020, the CBO figures the total debt of the U.S. will be $20.3 trillion or 90 percent of the GDP. (By comparison, the debt of troubled Greece is 113% of GDP, and it has been running annual deficits of six to fourteen percent since 2000. The U.S. is not Greece, but as its deficit grows the debt service also grows. This means as the CBO reports that “net interest would more than quadruple between 2010 and 2020 in nominal dollars (without an adjustment for inflation); it would expand from 1.4 percent of GDP in 2010 to 4.1 percent in 2020.” This means that if it does not increase revenues, the federal government is going to have to cut spending. The big difference between the OMB’s projections and the CBO’s is revenue: The CBO is much more pessimistic, estimating revenues will be $1.2 trillion less then the OMB is planning. What this all means is that the interest on U.S. debt will begin to eat into the U.S. budget unless revenue grows significantly. If not, spending will have to be cut even more. Whatever numbers you believe, those of the OMB or the CBO, the situation does not look pretty. Matthew Potter Matthew Potter is a resident of Huntsville, Ala., where he works supporting U.S. Army aviation programs. After serving in the U.S. Navy, he began work as a defense contractor in Washington D.C. specializing in program management and budget development and execution. In the last 15 years Matthew has worked for several companies, large and small, involved in all aspects of government contracting and procurement. He holds two degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, DefenseProcurementNews.com. *This article is being posted from Toronto, Canada By DTN News ~ Defense-Technology News, contact: dtnnews@ymail.com

DTN News: Navy Reversal Turns Partners Into Competitors

DTN News: Navy Reversal Turns Partners Into Competitors Source: BNet By Matthew Potter Government Analysis (NSI News Source Info) TORONTO, Canada - March 8, 2010: The U.S. Navy had originally intended to buy the Littoral Combat Ship (LCS), a new small warship, from two builders, Lockheed Martin (LMT) and General Dynamics (GD). The two different designs would meet the same requirements; the idea was that splitting the order would allow the Navy could take delivery faster. Things didn’t work out that way. Both companies ran into significant delays and cost overruns with their first ships, a sign that the estimates were incorrect. The Navy cancelled part of the deal because it couldn’t work out a deal with the companies to cover the costs. As part of the Obama Administration’s review of defense spending, last fall the Navy came up with a revised acquisition strategy for the LCS program. The new plan was to have a competition where one builder would win a contract to build ten ships between 2010 and 2014. Further competitions would be held for later lots; all told, the Navy intends to buy 55 of the versatile platforms. On March 4th, GD and its partner, Austal USA, in whose yard the LCS-2 was built, announced that they were ending their joint venture for the LCS program. The parting was reportedly amicable but it sets the stage for Austal USA to bid for the next batch of ships. Austal is an Australian company known for building ferries. It has a yard in Mobile, AL where the GD-designed ship was completed. GD has its own shipyard in Maine that makes destroyers and cruisers; it could certainly take on the LCS. The bottom line: The former partners are likely to be rivals. http://www.flickr.com/photos/macprohawaii/ / CC BY-ND 2.0 Matthew Potter

Matthew Potter is a resident of Huntsville, Ala., where he works supporting U.S. Army aviation programs. After serving in the U.S. Navy, he began work as a defense contractor in Washington D.C. specializing in program management and budget development and execution. In the last 15 years Matthew has worked for several companies, large and small, involved in all aspects of government contracting and procurement. He holds two degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, DefenseProcurementNews.com.

*This article is being posted from Toronto, Canada By DTN News ~ Defense-Technology News, contact: dtnnews@ymail.com

DTN News: Northrop Might Wish It Had Not Won This Contract

DTN News: Northrop Might Wish It Had Not Won This Contract Source: BNet By Matthew Potter Government Analysis (NSI News Source Info) TORONTO, Canada - March 5, 2010: Several years ago Senator Mark Warner (D-VA), who was governor at the time, decided to out-source the majority of the state’s IT system. The goal was to save money and provide up-to-date equipment with little investment. Northrop Grumman (NOC) got the contract. Among other things, the company was supposed to integrate the many different systems, databases and physical plants across state government. The contract was structured in such a way that most of the state’s IT workers would have to leave civil service and move to Northrop Grumman. Last October it was reported that the contract was facing serious problems: It was behind schedule and IT costs were rising, rather than falling. The state was in of bind as terminating the contract would have cost close to $300 million. Right now, the contract is managed by a committee, appointed by the Governor and Legislature. This means that it is hard to get a consensus on what to do. Now the Virginia House and Senate are working on legislation to move control to the Governor. The idea is that direct executive control will allow the state to work more closely with Northrop Grumman to get things back on track. This contract was a very aggressive attempt at out-sourcing. Not only did Virginia trust Northrop to integrate various computer systems, but also to manage the help desk and equipment as well. Normally services like this are broken up into smaller, more manageable contracts. It will have to be seen if the change in structure of the contract will help it get back on track. The state will also have a decision to make in 2015 or so when the contract ends and they either need to award another one or bring the work back into the government. Matthew Potter Matthew Potter is a resident of Huntsville, Ala., where he works supporting U.S. Army aviation programs. After serving in the U.S. Navy, he began work as a defense contractor in Washington D.C. specializing in program management and budget development and execution. In the last 15 years Matthew has worked for several companies, large and small, involved in all aspects of government contracting and procurement. He holds two degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, DefenseProcurementNews.com. *This article is being posted from Toronto, Canada By DTN News ~ Defense-Technology News, contact: dtnnews@ymail.com