Intelligence Research & Development Outsourced

NeverSleepsAfter the terrorist attacks on September 11, 2011, Congress opened up the check book and the intelligence community suddenly found itself able to get everything that had been on its wish list for years. Now the budget constraints on the intelligence community have forced the outsourcing of research and developments, which some in the community do not think will achieve the desired results:

Experts said the shift reflects a larger issue in the defense contracting community: Companies are less willing to take risks, and the government doesn’t have the money to fund all the innovation it needs.

“I think there’s an acknowledgment that the system is broken,” a senior industry executive said. But the executive was skeptical that the commercial sector will or can make up for the R&D deficit.

“We’ve seen this before. For a period of time there’s been a big call on using commercial capabilities in the space area, and it just hasn’t worked. They haven’t achieved the kinds of engineering feats that are required in defense.”

That the federal government would turn toward commercial space makes sense given differing perceptions of risk, said Peter Singer, director of the Center for 21st Century Security and Intelligence at the Brookings Institution.

“One of the major shifts is how the civilian side is accelerating not just ahead, but in some case well past the innovation from the traditional firms,” he wrote in an email. “And a large part of that is due to a business model that looks at risk as not something to be pushed on the government, but part of the very act of being in business.”

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State Department Cancels Billion Dollar Drone Competition

ShadowHawkThe Department of Defense has made the vast majority of purchases of unmanned aerial vehicles, otherwise known as drones, more than any other government agency. However, in September of 2011 the State Department solicited bids from defense contractors for drones that could be used “achieve and maintain situational awareness, automatically generate and disseminate high quality video imaging, respond to a security incident at locations remote from the core of operations, disseminate threat information for use in route planning, receive, view, and analyze in route activity.” Apparently none of the bids could meet the State Department’s standards:

The U.S. State Department canceled its $1 billion surveillance drone competition, saying none of the proposals met its requirements, according to the U.S. government’s Federal Business Opportunities website.

The competition had called for companies to operate small-scale unmanned aircraft that would supply real-time video of convoy routes and buildings. It was an opportunity for companies such as Aerovironment Inc. (AVAV) and Vanguard Defense Industries LLC to boost sales outside the Department of Defense, the biggest U.S. buyer of unmanned aircraft.

The State Department “plans to examine closely the requirements stipulated in the solicitation with the intent of developing and releasing a new” request for drone proposals, according to the notice.

Photo: Vanguard Defense Industries Shadowhawk drone.

Pentagon Places Half a Billion Dollar Drone Order With Northrop Grumman

RQ-4 Global Hawk/Operation New DawnThe Department of Defense has place a half billion order of drones with Northrop Grumman. Reuters reports that the $555 million contract is for Northrop’s Global Hawk drones:

Northrop Grumman Corp has won a contract worth up to $555.6 million for modernization of the high-altitude Global Hawk unmanned plane, the Pentagon announced on Monday.

The company’s contract with the Air Force runs through May 14, 2015, the department said in its daily digest of big weapons deals.

The contract covers a wide range of activities, including management, engineering efforts, reliability, availability and diminishing manufacturing sources.

Photo: A U.S. Air Force RQ-4 Global Hawk aircraft assigned to the 99th Expeditionary Reconnaissance Squadron, has its pre-flight checks accomplished by maintenance technicians prior to a flying mission Nov. 23, 2010, while deployed at an undisclosed location in Southwest Asia. (U.S. Air Force photo by Staff Sgt. Andy M. Kin)

Defense Contractor Agrees to Multi-Million Dollar Fine

RaytheonThe defense giant and weapons manufacture Raytheon has reached an agreement with the State Department to pay millions in fines for violating US arms export control laws. Reuters reports that the $8 million fine will resolves hundreds of violations that the State Department characterized as “numerous violations demonstrated a recurring, corporate-wide weakness” in maintaining effective compliance controls:

Under the terms of the agreement, Raytheon neither admitted nor denied the allegations. However, the company voluntarily reported many — if not most — of the alleged violations to the government.

Half of the fine will be suspended on the condition that Raytheon will use the money for government-approved remedial compliance measures, including increased training and oversight. The company also agreed to hire an independent special compliance official to oversee the four-year consent decree.

Raytheon, which prides itself on generating more revenues overseas than its rivals, expects international sales to account for 27 percent to 29 percent of its total revenue in 2013.

The company said in a statement it would continue to work closely with the State Department “to achieve its goal of full compliance and industry-leading practices.”

The department said it would not debar Raytheon from further exports since the company voluntarily disclosed nearly all the violations covered by the settlement over the past decade.

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Defense Contractors Shifting Markets to Make Up for Lost War Profits

Defense ContractorDefense industry contractors that made billions of dollars off the wars in Iraq and Afghanistan now have to shift focus and find new markets as one war has ended and another war is winding down. As deployed troop levels overseas drop from 66,000 to 32,000 in Afghanistan by next year and to 15,000 by 2014, contractors are looking for new civilian applications for their wartime technologies:

Skydex, makers of blast-absorbing floor decking in mine-resistant personnel carriers, relies on military contracts for about 90 percent of its income and the commercial market for the remaining 10 percent. By mid-2014, the company projects a 50-50 split. Its new shoe, designed for bootcamp-style workouts is the first step in this evolution.

The company created its trademark twin-hemisphere padding in the late 1970s for sporting goods but was immediately solicited by the military. Skydex then licensed its plastic cushion system to Nike, which the well-known shoe company used for its Nike Air technology. Now, the 31-employee company is feverishly innovating and testing new uses for its technology.

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Photo: Mike Buchen, President and CEO SKYDEX Technologies, accepts an ward from Colonel Chris Petty, Commander, 89th Troop Command, Colorado Army National Guard at Buckley Air Force Base.