Industry Week in Review – February 20, 2015
Aerospace & Defense Update
Earlier this week, the U.S. State Department announced that it will begin to allow the sale of armed unmanned aircraft systems (“UAS”) to foreign militaries. The new policy comes as the Obama administration has embraced a strategy of training and equipping its international allies. Although the new rules remain classified, it was announced that foreign governments’ requests for UAS will be considered on a case-by-case basis, with strict conditions that include safeguards against improper use through end-use monitoring. Today, the U.S. has only exported armed UAS to the United Kingdom, but has provided unarmed systems to ally nations such as France and Italy. Ultimately, the move is expected to benefit U.S. defense firms as they continue to focus on capturing more of the global UAS market, estimated to be worth over $6 billion a year.
Meanwhile, the Department of Transportation’s Federal Aviation Administration (“FAA”) set forth an initial framework of proposed regulations pertaining to small UAS. The FAA proposal lays out safety rules for the non-recreational use of UAS weighing less than 55 pounds. Notably, the proposed regulation addresses time-of-day, visual-line-of-sight, height, and speed restrictions, as well as operator certification, aircraft registration and marking, and operational limits. Specifically, the rules mandate that an operator must always maintain constant visual (unaided) contact with the aircraft, the aircraft may not exceed 500 feet in altitude or speeds of 100 mph, the aircraft may not fly over people, and the aircraft must stay out of airport flight paths and restricted airspace areas. Moreover, the proposal requires an operator to be at least 17 years old, pass an aeronautical knowledge test, and obtain an FAA UAS operator certificate. Historically, the FAA had struggled to develop a cohesive set of rules to govern UAS use. However, the aforementioned proposal, which is considered relatively flexible amongst most industry advocates, represents a meaningful step towards promoting the safe integration and proliferation of UAS in the face of an industry characterized by policy that is attempting to play catch-up with technology.
Government Technology Solutions Update
The General Services Administration (“GSA”) and National Oceanic and Atmospheric Administration (“NOAA”) are preparing to release Request for Proposals (“RFP”) for large Federal IT contracts. The GSA will be releasing both small business and full and open versions of Alliant 2, the second generation of a government-wide IT services contract. The contract currently includes more than 100 vendors and facilitated more than $3.7 billion in IT spending in GFY2014. Alliant 2 will look to standardize labor categories to institutionalize base line prices and will incorporate a more objective evaluation strategy than its predecessor. Simultaneously, the NOAA is drafting an RFP for its $3.0 billion, five year Pro-TECH contract for professional and technical services in the realms of ocean, fisheries, weather, satellite technology, and enterprise / back office functions. The domain driven contract seeks to create a more specialized and industrial base of contractors for the NOAA. The Pro-TECH RFP is expected to be released in summer 2015.
The Office of Management and Budget (“OMB”) is encouraging agencies to only use the Invoice Processing Platform (“IPP”), for electronic transactions. Developed by the Treasury Department, the IPP provides electronic purchase order, payment notification, electronic invoice, intra-governmental transaction, and automated workflow services. This OMB initiative increases efficiency and provides better data to reduce improper payments. It is part of a larger plan in GFY2015 to direct agencies towards the use of shared services. A circulated draft memo within the OMB currently does not require the use of the IPP, but requires justification when agencies chose a different platform.
Big Movers
Boeing Co (Up 5.7%) – Shares were up this week after CEO Jim McNerney announced that the Company intends to keep returning roughly 80% of free cash flow to investors and will not cut production rates of wide-body 777 jetliners as it shifts to a new model later this decade.
Astronics Corp. (Up 16.8%) – Shares were up this week after the Company announced fourth quarter earnings per share of $0.81, compared to $0.29 in the prior year period and analysts’ estimates of $0.64.
Transactions
Michael Baker International acquired Pacific Municipal Consultants (“PMC”), a provider of planning, environmental, and municipal services. Terms of the deal were not disclosed.
