Industry Week in Review – November 6, 2015

Aerospace & Defense Update

The Boeing-Lockheed Martin team has filed a formal protest against the Air Force’s award of the $80 billion LRS-B contract to Northrop Grumman. The protest process will likely take a minimum of three months to play out, further delaying the start of one of the highest-priority Air Force programs.  Northrop Grumman issued a statement saying that the company “is disappointed that its former LRS-B competitors have decided to disrupt a program that is so vital to national security.”

Lawmakers reduced the 2016 defense policy bill by $5 billion in order to satisfy the requirements of the two-year budget deal between Congress and the President. Under the new plan, fiscal 2016 spending would be increased to $607 billion, compared to the $612 billion top-line authorizers budgeted before the deal.  The reduction includes $2.6 billion in “adjustments” to acquisition programs.  The new budget deal will provide stability and increase the likelihood of finalizing a budget agreement before the end of the Continuing Resolution (“CR”), avoiding a government shutdown.  The cuts were imposed across several dozen line items, including a $230 million decrease in funds for the Long Range Strike-Bomber (“LRS-B”) due to repeated delays in the contract award, and several other aircraft programs, such as the unmanned MQ-9 Reaper, C-130, and H-1 helicopter.  The source of the savings were found in negotiations between the House and Senate authorizers, and defense appropriators, according to House Armed Services Committee Chairman Rep. William “Mac” Thornberry.  Apart from programs, the largest source of savings was ~$1 billion from fuel costs that were lower than previous projections.

Government Technology Solutions Update

Under the new budget deal, the $5 billion spending reduction to the defense policy bill would affect few IT programs and would only require modest budget cuts in IT logistics, Army intelligence, and electronic warfare. The revised plan trims approximately $10 million from the Army’s Distributed Common Ground System, a multibillion-dollar program for sharing and analyzing intelligence.  Other notable programs receiving cuts include $12.5 million less for the Defense Contract Management Agency’s IT development program and $6.5 million less for the Joint Electronic Advanced Technology Program.  Many contractors are generally pleased due to the relatively small magnitude of the cuts and the increased visibility for agencies to plan their budgets accordingly.  Though the bill would require slight reprioritization within the Department of Defense (“DoD”), members of the IT Alliance for Public Sector as well as Paul Brubaker, former DoD deputy CIO, agreed that the budget deal, currently passed in the House, sends a positive signal to the defense contracting base.

The Defense Information Systems Agency (“DISA”) held its industry day on November 2nd in Washington, D.C. The event served as a platform for DISA to outline forthcoming contracts covering programs ranging from enterprise resource planning (“ERP”) to cybersecurity analytics.  One of the major contracts unveiled, Telecommunication Services and Enterprise Acquisition Services (“TSEAS”), aims to support DISA’s back-office needs through a comprehensive ERP solution with the Request for Proposal (“RFP”) expected to be released in 2Q16.  Additionally, DISA used the event to showcase the overhaul it underwent in January to be more responsive to industry demands and an increased emphasis on transitioning to automated processes.  An estimated 80% of all emails received by DoD accounts are comprised of spam, phishing, or other forms of junk mail.  As part of their response, the agency is looking to evolve from manually intensive tools to automated capabilities, particularly for cybersecurity needs and will soon release an RFP for an Enterprise Email Security Gateway Solution.

Big Movers

DigitalGlobe (Up 14.5%) – Shares were up this week in response to an announcement of an increase in the Company’s share repurchase program of $130 million

Leidos (Up 4.9%) – Shares were up this week in response to a $662 million award to upgrade the Army’s Airborne Reconnaissance Low-Enhanced (“ARL-E”) fleet


Point Blank Enterprises acquired The Protective Group, a provider of ballistic armor and system integration. The terms of the deal were not disclosed 

PAS Technologies acquired Bolton Aerospace, a supplier of precision machined products to commercial, aerospace, and defense manufacturers. The terms of the deal were not disclosed

Resonetics acquired Mound Laser & Photonics Center, a laser micro / nano fabrication center, which provides laser machining services. The terms of the deal were not disclosed

IAP Worldwide Services acquired the Aviation and Logistics Business of DRS Technologies, a provider of aircraft repair management, logistics, and mission support services. The terms of the deal were not disclosed

IAP Worldwide Services acquired the Tactical Communications & Network Solutions Business of DRS Technologies, a provider of engineering, information technology, and communications support solutions to the U.S. Department of Defense and other agencies

Honeywell to acquire Satellite Equipment business of COM DEV International, an international provider of space-based wireless communications products and subsystems. The deal is worth an estimated $345 million

Rift Valley Equity partners acquired Arlington Machine and Tool Co., a provider of CNC machining services to the aerospace, defense, industrial, semiconductor, and healthcare sectors. The terms of the deal were not disclosed

Aerospace Turbine Rotables to acquire the Aircraft Battery and Power Supply Repair divisions of Foxtronics, Inc., an FAA and EASA 145 certified repair station and battery services center, which provides service, new product sales, and support throughout the U.S. The terms of the deal were not disclosed.

Booz Allen Hamilton acquired the Software Services Business of SPARC, LLC, a provider of software development services for Federal and commercial sectors, including the Space and Naval Warfare Systems Command (“SPAWAR”) and Veterans Affairs (“VA”), among others. Terms of the deal were not disclosed.

Preferred Systems Solutions acquired GSM Consulting, Inc., a provider of innovative software and IT solutions for the Federal Government and Fortune 500 companies. Terms of the deal were not disclosed.

Oasis Systems acquired MAR, Incorporated, a provider of systems engineering and integration, IT / cybersecurity, specialized facilities management, and intelligence and special programs. Terms of the deal were not disclosed.

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