Aerospace & Defense Update
Boeing, which is facing competitive pricing pressure from Airbus’ increasing market share, announced it will consolidate its 747 and 767 jet programs as part of a broader cost cutting initiative. Elizabeth Lund, who is the general manager of the 777 program, will head the newly combined programs in addition to the 777 program. As part of the cost cutting initiative, the company is seeking to reduce layers of executive management to both reduce costs and provide a more direct reporting structure. Boeing recently announced a series of promotions and retirements and as a result, the general managers for Boeing’s five commercial jet programs will now directly report to Ray Conner, Boeing’s Commercial Airplane Chief Executive. This leadership realignment provides a more streamlined reporting structure, which will strengthen the bonds between the operations and manufacturing aspects of the business.
Under new owner Lockheed Martin, Sikorsky announced it will be developing a weapons package for its Black Hawk helicopter series, signifying a cultural change for the firm. The specifics on the weapons package is still being determined, but the company believes its application spans across a wide international user base. The idea was originated shortly after the acquisition in a meeting between Sikorsky’s Defense Systems & Services unit and Lockheed’s Missiles and Fire Control office. Under previous owners United Technologies, which is not as focused on the defense industry, the two organizations did not have as many complimentary activities between them. However, under new ownership, Sikorsky is now part of Lockheed’s extensive presence in the defense industry, providing complementary capabilities and strong growth prospects moving forward.
Government Technology Solutions Update
The National Institute of Health IT Acquisition and Assessment Center (“NITAAC”) plans to add additional small businesses to its CIO-Solutions and Partners 3 (“CIO-SP3”) Small Business (“SB”) acquisitions vehicle as the program reaches year five of its 10-year life. At the halfway mark of the vehicle’s period of performance, companies are required to recertify their status, with the expectation that a number of companies will no longer be classified as SB. While these companies can remain on the vehicle through 2022, the additions are meant to maintain CIO-SP3 SB’s status as an SB resource across the Federal government. There are currently 94 SB contract holders and NITAAC plans to make an additional 20 to 35 awards during the on-ramp period, with the intent to increase participation from underrepresented set-aside categories, primarily SDVOSB and HUBZone. As noted by NITACC Director Robert Coen, “We’re doing this now to ensure we have sufficient competition in all of the socio-economic categories” as companies outgrow their SB classification. Bids are due April 18, with an award announcement expected in January 2017.
The Department of Veteran Affairs (“VA”) received another low score this week on its cybersecurity procedures per a report issued by the VA Office of the Inspector General. The report noted “material weakness” in the VA’s information security, particularly in incident response, security logs, and identity and access management. VA Chief Information Office (“CIO”) LaVerne Council agreed with the report’s findings. To address these issues, the VA is requesting $370 million for cybersecurity-related initiatives in GFY2017, an increase of more than 100% from $180 million in GFY2016. The money would support the Council’s plan to reboot the VA’s information security procedures and policies.
Bombardier (Up 13.0%) – Shares were up this week after it was announced the Canadian government finished reviewing a request for aid for the CSeries jet and will make an announcement within weeks
Vectrus (Up 10.0%) – Shares were up this week after the Company announced strong Q1 2016 earnings
CTS Corporation to acquire CTG Advanced Materials, LLC, a provider of high-performance piezoelectric single crystals for defense and ultrasonic industries. Terms of the deal were not disclosed.
IBM Corporation acquired Optevia, a provider of SaaS CRM solutions. Terms of the deal were not disclosed.
KKR to acquire Airbus Groups’ Defense Electronics Business, a provider of mission-critical sensors, integrated systems, and services for premium defense and security applications. The deal is worth an estimated $1.2 billion.
Liberty Hall Capital Partners acquired Bromford Industries Limited, a provider of precision machining and specialist fabrications for civil and military aerospace, and marine gas turbine applications. Terms of the deal were not disclosed.
Tetra Tech, Inc. acquired Indus Corporation, a provider of IT solutions focused on data analytics, geospatial analysis, secure infrastructure, and software applications. Terms of the deal were not disclosed.