Industry Week in Review – April 18, 2014
According to a new Department of Defense report this week, the price tag for Lockheed Martin’s F-35 Joint Strike Fighter, the Pentagon’s most expensive weapons acquisition program, increased by $7.4 billion in 2013. Officials have stated the primary reason for the increase is due to the decreased number of jets the Pentagon plans to buy in the coming years as a result of federal spending caps. Officials have also noted an $89.4 billion decrease in estimated sustainment costs over the life of the program as an indicator of recent improved cost control efforts. Pratt & Whitney’s F135 engine was the most significant driver behind the price increase, accounting for $4.3 billion of the total. Two additional factors pushing costs were higher labor rates from prime contractors and their respective subcontractors, as well as delays from purchasers seeking to shift deliveries to the right into later years, leading to lower production and higher per-unit costs per lost scale efficiencies. Moving forward, Lockheed Martin and the Pentagon will continue to work with the F-35 Joint Program Office to implement further cost saving measures, as officials are confident that as the program continues to grow and mature, costs will continue to decrease.
Director of National Intelligence, James Clapper, announced the Intelligence Community (“IC”) is ready to start deploying the Intelligence Community Information Technology Enterprise (“ICITE”) project, a shared IT system environment meant to consolidate and reduce duplication. Although ICITE was originally intended as a cost-savings measure, it is also meant to bring other benefits such as increased security and sharing, a continuous evaluation clearance system, and heightened insider threat detection capabilities. Additionally, the ICITE project is expected to provide new opportunities in cloud computing and encryption / decryption research for IC contractors. Deployment of the project will be complete within the NGA and DIA by the end of 2014 and will begin at other IC agencies towards the beginning of next year.
Big Movers
TASER International, Inc. (Up 6.8%) – Shares were up this week after the Company announced it has entered into an agreement to provide the London Metropolitan Police Service with 500 units of its AXON on-officer cameras and its video storage service, EVIDENCE.com.
Relevant Transactions
Google Inc. acquired Titan Aerospace, a manufacturer of high-altitude drones and solar-powered atmospheric satellites. Terms of the deal were not disclosed.
Public Consulting Group to acquire Hubbert Consulting Group, a provider of strategic and operational management consulting services for the U.S. Department of Human Health Services. Terms of the deal were not disclosed.
