Suppliers meet the needs of transforming customers. (Defence Industry Report).

In many ways, the United States defence industry is undergoing a transformation that mirrors the US Department of Defense's own reshuffling. Just as these are volatile times for many Department of Defense component programmes, manufacturers are grappling with the current climate of cancellations or alterations, accelerated timelines, the urgencies of the ongoing war on terrorism and so forth--all this against its own unique background of mergers, teaming agreements and generally unfavourable stock market conditions.

Although the recipe could spell disaster, it appears that most aspects of the American defence industry are rising to the challenges of operating in a constant state of turmoil. While a complete presentation of the ongoing situation is obviously impossible due to space limitations, the following pages will provide a small number of representative examples of these 21st century military industrial challenges and the responses they continue to garner from manufacturers.

The Environment

Even prior to the terrorist attacks of September 2001 and the subsequent war on terrorism, American defence manufacturers have been involved in a range of land, sea and air programmes.

Perhaps the most noteworthy example is the F-35 Joint Strike Fighter (JSF), potentially the largest military contract ever awarded with a possible value of $ 200 billion. The contract, which was awarded in October 2001 on a `best value' basis to the team led by Lockheed Martin (partnered with Northrop Grumman along with BAE Systems), typifies the transformation activities taking place within the US Department of Defence.

Specifically, the F-35 will be a family of three variations designed to replace very different aircraft currently used by the Air Force, Navy, Marine Corps and the British Royal Navy and Royal Air Force (significant additional international interest has also been identified subsequent to programme award). According to Department of Defence representatives, plans call for the F-35 to be the world's premier strike aircraft through 2040. The F-35A (Air Force) version of the craft is a conventional takeoff and landing aeroplane to replace both the F-16 and the A-10 Thunderbolt II. It will partner with the F/A-22 Raptor. The F-35B (Navy) version of the plane is a carrier-based strike fighter to complement the F/A-18E/F Super Hornet. It will replace earlier versions of the F/A-18 as well as the A-6 Intruder, which already has left the inventory. The Marine Corps, Royal Navy and Royal Air Force need and want the short takeoff and vertical landing variant, called the F-35C, to replace Marine Corps AV-8B Harriers and F/A-18 Hornets as well as British Sea Harriers and GR.7 Tornado fighters.

Another example of how the ongoing transformation of the US military is having an impact on the industry can be seen in the Stryker Brigade Combat Teams (SBCT) now beginning to take shape within the US Army. The cornerstone of the SBCT concept is the recently named Stryker Interim Armored Vehicle (IAV) family now being produced by a joint venture between General Motors and General Dynamics Land Systems. The Stryker designation, which was officially announced on 27 February 2002, honours two enlisted US Army Medal of Honour recipients--one from World War II and one from Vietnam--who share the Stryker last name.

The Stryker line includes two primary design variants an Infantry Carrier Vehicle (ICV) and a Mobile Gun System (MGS) that will incorporate a 105 mm turreted gun. In addition to its basic role as infantry carrier, the ICV will have eight additional configurations: Commander's Vehicle (CV), Reconnaissance Vehicle (RV), Fire Support Vehicle (FSV), Mortar Carrier (MC), Anti Tank Guided Missile (ATGM) vehicle, Engineer Squad Vehicle (ESV), Medical Evacuation Vehicle (MEV) and Nuclear, Biological and Chemical Reconnaissance Vehicle (NBC RV). At the time of writing, small quantities of Stryker vehicles had already been fielded with the initial SBCT at Fort Lewis, Washington.

Cancellations and Alterations

Programme cancellations and mutations are certainly nothing new within the Department of Defence, but what marks the current acquisition environment seems to be the speed and scope of those processes.

The US Navy's much-vaunted DD-21 destroyer provides an excellent case in point. The ship class, also known as the Land Attack Destroyer, was praised by its supporters as the first surface combatant built from the keel up to achieve the Navy and Marine Corps 21st Century land attack and joint war fighting concepts as enunciated in "... From the Sea," "Operational Manoeuvre From the Sea," and "Joint Vision 2010." The DD-21 was to have been optimised for land attack and power projection, supporting joint forces ashore while continuing to maintain maritime dominance.

After the targeted winning selection announcement was postponed by the Department of Defence, late 2001 saw the Navy and the Department drop plans for the DD-21 in favour of a new DD-X ship, a new attack design adaptable to both missile defence as well as shore attacks. The design change was reportedly driven by the arrival of a new presidential administration with the widely articulated goals of transforming the military services to meet newly identified 21st Century needs.

Both teams worked to adjust to the changing political sea states. In late April 2002, the DD-X programme was awarded to the Northrop Grumman team. The General Dynamics team lost its subsequent General Accounting Office protest of the award, although its Bath Iron Works subsidiary is likely to see considerable subcontract work under the programme.

Just as the DD-21 foundered in the rough seas of a new administration's view on the world, another representative victim of the ongoing political mandates of service transformation was the Crusader field artillery system that was developed by an industry team led by United Defense.

After weeks of leaks and innuendoes, Secretary of Defense Donald Rumsfeld made his position clear during his testimony before the Defense Subcommittee of the Senate Appropriations Committee on 21 May 2002.

"After counting the costs of keeping the department moving on a straight line, the costs of the war, there is really not a great deal that is left," Rumsfeld said. "In the 2003 budget request, we have made $ 9.3 billion available, in part by terminating a number of programs, such as the DD-21, the Navy Area Missile' Defenses and 18 Army legacy programs".

The 18 Army Legacy Programs noted by the Defense Secretary included nine systems identified for termination in FY03 (see box "Army Legacy"). The budget decisions also had direct impact on nine additional programmes. Seven were identified for termination after achieving various acquisition milestones during the FY03 to FY07 Program Objective Memorandum cycle: the Improved Recovery Vehicle (IRV), the Armoured Security Vehicle (ASV), Airborne Reconnaissance Low modifications, Hydra rockets, selected non-tactical vehicles, the Bradley Fire Support Team (Fist) vehicle and the UC-35 aircraft. In addition, advocacy for the Advanced Threat Infrared Countermeasure was transferred to United States Special Operations Command while the Rapid Acquisition Prototyping for Transformation project had FY03 funds placed against the approved FY02 programme prior to termination.

Ironically, at the same time that these legacy assets were identified for termination, other legacy enhancement programmes were shifting into high gear. In fact, just two weeks prior to Rumsfeld's testimony, DRS Technologies received a twelve million dollar contract option to enter the second phase of the United States Marine Corps Abrams Main Battle Tank Firepower Enhancement Program. The programme removes the first generation thermal imaging systems used in Marine Corps M1A1 and M1A2 tanks and replaces it with updated electronics and a second-generation thermal imaging system similar to the one used in the M1A2 Sep (System Enhancement Program) tank (title picture).

Funding Versus Strategy

One of the most significant aspects of many of the termination decisions outlined by administration representatives is that they seem to have been based as much on the availability of funding as they were on strategic operational or contingency planning. As Secretary Rumsfeld went on to explain, "In February of this year [2002], we began developing the Defence Planning Guidance for fiscal year `04. In the fiscal years 2004 to 2009 programme, the senior civilian and military leadership had to focus on the looming problem of a sizable procurement bow wave beyond fiscal year 2007. This is shorthand for describing the cost of the procurement of systems that would be ready for fielding later in this decade. If all were funded, they would crowd out all other areas of investment and thereby cause a repetition of the same heartaches and headaches that we still suffer from today as a result of the procurement holiday in the 1990s".

Just as General Dynamics' Bath Iron Works will likely see benefits from the DD-X programme, United Defense remains the Department of Defense's obvious source for design expertise for any non line-of-sight variant of the evolving US Army Future Combat Systems programme.

Along with the fact that programmes tend to span multiple administrations and, hence, may be forced to deal with drastically different world views on the part of its changing civilian leadership, another complicating factor involves the fact that cancellations not always meet with an easy-to-identify finite termination point. One of the messier examples can be seen in the long-running battles over the Navy A-12 fighter jet programme which was terminated in 1991.

US Department of Defense and industry representatives are still haggling over contract payments in a court case that sees General Dynamics and Boeing attempting to recoup some of their own expenses incurred under the programme.

Mergers and Acquisitions

An increasing tempo of mergers is another apparent characteristic of the current environment. The most significant recent example of this trend can be seen in the agreement between TRW and Northrop Grumman. Under the agreement announced on 1 July 2002, Northrop Grumman would buy the defence and auto parts group of TRW. Earlier suitors for TRW's defence assets had included companies like BAE Systems.

Estimated to be worth approximately $ 7.8 billion, Northrop's acquisition of TRW represents the largest deal undertaken by a company, transforming Northrop into the second largest American defence manufacturer, behind Lockheed Martin. The merger is being identified for a range of corporate programme synergies including satellite communications, military communications and systems and missile systems. In particular, many analysts have pointed to TRW's strengths in the Army tactical arena as representing a number of very positive contributions to Northrop's programme menu. Finalisation of the acquisition is expected by the end of the year.

Other examples of the ongoing trend toward acquisitions can be seen in the recent actions of L-3 Communications, a leading merchant supplier of intelligence, surveillance and reconnaissance products (known as ISR), secure communications systems and products, avionics and ocean products, training products, microwave components and telemetry, instrumentation, space and wireless products.

On 18 September 2002, L-3 announced its acquisition of Wescam. The acquisition, which is expected to be completed by the end of 2002, brings the strengths of Wescam's product lines that include high magnification low light, daylight and forward looking infrared sensors, laser rangefinders, illuminators and designators as well as digital and wireless communication systems.

Less than a week later, L-3 expanded its involvement with US Navy programmes through the acquisition of Technology, Management and Analysis (TMA) Corporation. Working in the areas of engineering, logistics, ship test and trials and network engineering and support, TMA brings its involvement with a range of Navy programmes like the Aegis, Standard Missile, strategic sealift, vertical launch systems and amphibious warfare.

Many observers feel that the trend toward acquisition and consolidation within the American defence industry is likely to continue. In spite of a rocky overall US stock market, defence stocks have tended to increase in value since 9-11 (the September 11th attack of the World Trade Towers in New York City), paving the way for additional stock-leveraged acquisitions and consolidations in the future.

Joint Service

As seen in programmes like the JSF previously mentioned, industry is also being forced to mirror an increasing number of multiple-service/joint service acquisition programmes.

One recent award that promises key advantages in future joint service operations involves the Joint Tactical Radio System (JTRS). The JTRS will result in a family of related communications platforms designed to support joint operations by providing the capability to transmit, receive; bridge and provide a gateway between similar and diverse waveforms and network protocols used within the radio frequency spectrum and across service boundaries.

Industry involvement in JTRS can be traced back to three separate JTRS Step 1 contracts, awarded in early 1999 to a consortium led by Raytheon, Motorola and Boeing. Following several iterations of contracts focused on specific technical hurdles, June of this year saw the award of the Cluster 1 (formerly Step 3) contract award to a Boeing-led team that included TRW Tactical Systems Division, Rockwell Collins Government Systems Division and BAE Systems Communications, partnered with Harris Corporation RF Communications Division. The 44-month Cluster' 1 procurement covers the design and integration of JTRS architecture, integration of new and legacy waveforms, development of a new wideband networking waveform and qualification of two production sources for up to 10,000 vehicular and airborne radio systems.

Another joint programme that has worked wonders is the Northrop Grumman Joint Stars. Amazingly, the idea did not exactly spark off an outrageously wild enthusiasm in the late 1980s, but the shoestring non-solicited development suddenly became all the rage during Desert Storm in 1990, to the extent that the prototype had to be rushed out there to survey Mr. Saddam's pawn moves. It even recorded the final "mother of all retreats". The cost-trimming idea of using recycled B707s remained in spite of the old bird's shortcomings in terms of operational altitude, but it probably had the final seductive eyelid bat effect on the green banknote holders; the Jstars went into production to become the mother of all peace-keeping tools in Kosovo.

In the airliner-based sensor sector, we also now have the MMA-MPA issue. Quite like the F-35, the proposed solutions are aiming at replacing philosophies of a quite different nature, in other words, turboprops with high bypass ratio turbines. Some 751 P-3 Orions have been built since 1964 with the last new builds rolled out in 1994, meaning that there will soon be a huge potential for replacement if one adds other designs into the equation such as the Atlantics, Fokkers, Nimrods, Vikings and so forth. The Europeans are offering an Airbus A320-based design (see Armada 5/2002, page 112), while America, which has a similar requirement and would thus like to turn it into an international venture, is thrusting a B.737 platform. The shorter term target is the joint Germano-Italian requirement (10 and 14 aircraft respectively). In the current American parlance, the future US Navy aircraft are known as the MMA SA (Search and Attack) and SI (Signals Intelligence), the export SA variant is offered for Foreign Military Sales to countries such as Taiwan, while the international MMA commercial sales export SA variant is the one that targets countries such as Germany and Italy. The CFM56-7B engine for its part, offers the necessary `bite' but also the higher operational cruise altitude (41,000ft versus the Orion's 29,000) and Mach .8 speed, which should perhaps not be overlooked considering the sort of tasks Western forces now have to cope with. In terms of weapons, the aircraft would have six under-wing hardpoints--all outboard in respect of the engines nacelles (some scaled models may still feature a weapon station between the engine and the fuselage, but this has been found to be a rather turbulent area).

Typically, an ASW MPA could carry four MU-90 torpedoes, eight MS500 depth charges as well as 50 A sized and 100 F-G sized sonobuoys; alternatively, the aircraft may carry six short-range anti-ship missiles or six long-range missiles of the Harpoon or Penguin class. The MMA would naturally receive a more American-oriented complement of weapons such as Mk 50s and Slams, but would also be capable of in-flight refuelling and of controlling drones (although such amenities are still open to Germany and Italy). A European decision was originally expected in early 2003, but there is every reason to believe that this will slip by several months. The Paris Air Show perhaps? At stake is the fact-that the US Navy would really like to see its new aircraft land on its lap by 2007, which also matches the European's desiderata. International MMA orders, on the other hand, are not expected to see the light of day before 2011. Lockheed Martin, in the meantime, is offering newly built Orions.

New Bidding and Award Structures

The desire to incorporate and introduce the latest technological developments into defence hardware systems is also spawning a metamorphosis in the industry bidding and award processes. As an example, along with its receipt of the JTRS Cluster 1 award, Boeing has also scored recent successes as part of a lead systems integrator (LSI) team in another pivotal Department of Defense transformation programme, the US Army's Future Combat Systems.

In early March 2002, the Darpa and US Army announced the selection of the team of the Boeing and Science Applications International (SAIC) as the lead systems integrator for the concept and technology development phase of the Future Combat Systems programme. The 16-month effort is valued at approximately $154 million with a target of fielding initial capabilities in the 2008 time frame.

Another recent programme example shows a similar approach being adopted on another vital Department transformation effort. Known as the Objective Force Warrior (OFW), the programme takes a system-of-systems approach in equipping the individual soldier who will be fighting from and supported by the Future Combat Systems platforms.

On 29 August 2002, US Army representatives announced the selection of General Dynamics' Eagle Enterprise and Exponent to serve as the two lead technology integrators for the concept development phase of the Objective Force Warrior Science and Technology programme (Exponent is lead for its own enterprise team known as the Wolfpack Enterprise.)

"The award of these agreements marks a major milestone for Army Science and Technology. The Objective Force Warrior programme really steps up to the plate. It raises the bar for getting the most advanced technologies into the hands of our soldiers," said A. Michael Andrews, deputy assistant secretary (Research and Technology) and Army Chief Scientist. "Our challenge is to help them be the most survivable and lethal soldiers in the world; to complete their missions with a goal of a 40pound fighting load in all terrain and weather conditions--with a long term goal of getting the soldiers' fighting load to 15 pounds".

The Challenges Remain

As noted, American military industrial manufacturers are negotiating some of the most challenging terrain imaginable and are forced to conduct a critical balancing act between a transforming military, political priorities of changing administrations, funding availability, global terrorism and the mandates of introducing the latest in available technologies into their defence hardware. The companies cited serve to provide representative profiles of the myriad manufacturers achieving similar results across the spectrum of US armed service requirements.

The only certainty is the continued transformation of the US military to meet 21st Century challenges. From all indications, American defence manufacturers are following the trend, adapting the way they do business to insure that they can continue to meet the needs of their customers.

Army Legacy

The 18 "Army legacy programmes" included nine systems identified for termination in FY03:

* Wolverine 

* Armoured Combat Earthmover (Ace)

* M113A3

* Tank Extended Range Munitions (Term)

* Linebacker

* Remote Area Denial Artillery Munitions (Radam)

* Avenger modifications

* Battlefield Combat Identification System (BCIS)

* Tow Fire & Forget missile.