Industry Week in Review – May 5, 2017
Aerospace & Defense Update
After the GFY17 budget cleared the house on Wednesday with a 309 to 118 vote, the U.S. Senate on Thursday voted 79 to 18 on a $1.1 trillion spending bill to fund the government through September; the bill now goes to President Trump’s desk for final approval. Of the total $1.1 trillion, the measure contains $593 billion for defense spending, an increase of ~$20 billion over GFY16 enacted levels and ~$16 billion more than President Obama’s budget request. When combined with $5.8 billion in supplemental funding passed in the December Continuing Resolution (“CR”), total defense funding for GFY17 is $598.5 billion.
Large portions of the $593 billion defense bill include ~$223 billion allocated for operations and maintenance (compared to ~$214 billion in GFY16), ~$123 billion for equipment procurement (~$119 billion in GFY16), and ~$74 billion for research and development (~$69 billion in GFY16). Review of the bill calls for major platform procurements across the DoD, including $21.2 billion for 13 Navy ships (including three Littoral Combat Ships and three guided missile destroyers), $8.2 billion for 74 F-35 aircraft, $2.6 billion for 15 KC-46A tanker aircraft, $1.8 billion for 11 P-8A Poseidon aircraft, $1.3 billion for 17 130J aircraft, and $1.2 billion for 62 UH-60 Blackhawk helicopters.
Government Technology Solutions Update
Mary Davie, assistant commissioner for the Office of Information Technology in the General Services Administration’s (“GSA”) Federal Acquisition Service recently met with Federal IT industry partners to discuss ways in which the GSA might work to streamline the acquisition process. According to Ms. Davie, her discussions led to the identification of several common acquisition practices that industry leaders felt generated unnecessary friction in the acquisition process. For example, one common complaint in the industry has been that Federal customers tend to issue prescriptive statements of work rather than statements of objectives. The former detail exactly how the customer wants the work to be done, which places constraints vendors. A statement of objective, created in conjunction with customers and industry representatives alike, could lead to more tailored and innovative solutions. Other points of emphasis in Ms. Davie’s discussions were that of creating a more centralized repository for vendors to access information relevant to new opportunities, increasing the responsiveness and availability of Federal program management personnel, and placing an emphasis on reducing schedule slips and procurement delays. While it remains to be seen what solutions will be proposed for these issues, Ms. Davie believes that her meeting with the industry gave greater clarity as to where the government could focus its efforts in improving the efficiency of the acquisition process.
On Monday, President Trump issued an executive order creating the American Technology Council, which will focus on the goal of improving and modernizing Federal IT. Outside of naming which positions in the Federal government would have seats on the council, the order does not mention much in terms of its specific goals. Former Federal Chief Information Officer (“CIO”) Tony Scott was supportive of the council’s creation, saying that similar organizations under the Obama Administration were an effective way to develop policy. The creation of the council highlights the continued emphasis on Federal technology modernization under the Trump administration, coming roughly a week after Representative Will Hurd reintroduced his Modernizing Government Technology Act to the House of Representatives, and just over one month after the creation of the Office of American Innovation. The American Technology Council will first meet in June, where it is expected to invite several prominent tech industry leaders to discuss how technology could be more effectively utilized and implemented throughout the Federal government.
ManTech (up 11.8%) – Share prices were up this week after the company beat earnings estimates.
Wesco Aircraft (down 24.7%) – Share prices were down this week after the company appointed a new CEO Monday.
Applied Research Associates, Inc. has acquired Neya Systems, LLC, a provider of unmanned systems for defense, homeland security, and commercial users. Terms of the deal were not disclosed.
Atlantic Street Capita has acquired GAT Airline Ground Support, Inc., a provider of outsourced airline services at airports across the United States. Terms of the deal were not disclosed.
Belden Inc. has agreed to acquire Thinklogical, Inc., a provider of uncompressed, high-bandwidth signal stream and flexible switching options. The deal is worth an estimated $160 million.
Charlesbank Capital Partners has acquired Tecomet, Inc., a provider of contract manufacturing for orthopedic implants, as well as critical components for the cardiovascular, medical imaging, and aerospace markets. Terms of the deal were not disclosed.
Digital Power Corp. has acquired Microphase Corp., a provider of standard and customized state-of-the-art RF, microwave, and millimeter-wave components, devices, subsystems and integrated modules. Terms of the deal were not disclosed.
J.F. Lehman & Co. has acquired BEI Precision Systems & Space Co., a provider of precision positioning sensor technologies, including scanners, optical encoders, and accelerometers, for programs of record and enduring platforms across space, defense, and critical infrastructure markets. KippsDeSanto & Co. acted as exclusive financial advisor to BEI Precision Systems & Space Co. Terms of the deal were not disclosed.
Harlow Aerostructures, LLC has acquired Aerospace Holdings, a provider of aerospace components and assemblies, servicing military and civilian fixed wing and helicopter markets for over 30 years. Terms of the deal were not disclosed.
Infinite Electronics, Inc has acquired Smiths Interconnect Microwave Companies Kaelus, PolyPhaser, Transtector Systems, and Radio Waves, Inc.; these companies provide RF and microwave solutions, RF lighting protection, surge suppression solutions, and microwave antennas, respectively. Terms of the deal were not disclosed.
Point Blank Enterprises, Inc. has acquired Gould & Goodrich, Inc., a provider of leather, ballistic nylon, and synthetic duty belts, holsters, and accessories. Terms of the deal were not disclosed.
Trescal S.A. has acquired Acucal, Inc., a provider of calibration services. Terms of the deal were not disclosed.