Industry Week in Review – September 28, 2018
KippsDeSanto & Co. Industry Week in Review – September 28, 2018
Summary
Boeing has been awarded a $9.2 billion contract from the Air Force to supply next-generation training jets. Furthermore, commercial technology companies continue to penetrate into the government contracting market. This week the Air Force announced it will award AT&T and Microsoft cloud Other Transaction Authority (“OTA”) contracts worth up to $121.7 million.
Aerospace & Defense Update
The Air Force announced that it had selected a bid by a Boeing-Saab partnership for the award of a $9.2 billion contract to supply next-generation training jets. This is expected to be the Air Force’s last major aircraft procurement opportunity for the foreseeable future. The Air Force plans to purchase 351 T-X aircraft, 46 simulators, and associated ground equipment with an option to buy up to 475 aircraft and 120 simulators. The new aircraft will provide Air Force pilots with critical training capabilities required to increase operational efficiency. Boeing’s award is its third major contract victory since August, following an $805 million Navy contract to build four MQ-25 unmanned tankers and a $2.38 billion Air Force contract to manufacture Huey replacement helicopters.
Boeing and Lockheed Martin’s joint venture, United Launch Alliance (“ULA”), has chosen Jeff Bezos’ space industry startup, Blue Origin, to provide its BE-4 engine for ULA’s upcoming Vulcan rocket. The first launch of ULA’s Vulcan is tentatively scheduled for 2020, but testing and final certification may push back that date. ULA estimates the project will create over 20,000 direct and indirect jobs. The potential billion-dollar agreement is an important stepping stone for Blue Origin as it seeks to become a major military launch provider. Blue Origin’s penetration into the military launch systems market comes amid significant military and commercial activity in the space industry. The Air Force is seeking to procure a wider range of lower-cost, more diverse launch systems, providing private sector billionaires such as Bezos and Elon Musk an opportunity to expand their presence in the growing space launch markets.
Government Technology Solutions
Commercial technology players continue the push to gain significant presence in the government contracting market, a strategy reinforced by Amazon CEO Jeff Bezos’ presence at Wednesday’s annual Air, Space and Cyber Conference. Mr. Bezos used the platform to encourage the government to leverage more commercial technology, which tends to provide a broad range of solutions to a diverse population of customers, rather than buying what he views as more narrow, costly solutions from traditional federal contractors. The main discriminator for commercial entities, according to the Amazon CEO, is the number of co-customers and strong ecosystem of users they serve that constantly drive innovation and the product forward. The recent wave of large federal contract wins by commercial companies suggests agencies recognize the benefits Bezos alluded and are increasingly becoming more open to adopting commercial technology for their modernization requirements. Amazon is not the only successful commercial player in the federal contracting space, however; the Air Force announced this week it will award AT&T and Microsoft $121.7 million in cloud Other Transaction Authority (OTA) contracts in an effort to modernize IT infrastructure and create a more efficient workforce within the department. Furthermore, commercial contractors are not only winning awards but also beginning to exert influence and earn meaningful seats at the industry table. This week, White House officials announced they will host representatives from IBM, Alphabet Inc., and AT&T on Monday for a quantum information science (“QIS”) summit as agencies continue to look towards NextGen solutions to improve overall efficiency and mission delivery. As the 2018 government fiscal year draws to a close, commercial companies should expect to see the uptick in market share continue moving into 2019.
Transactions
A portfolio company of H.I.G. Capital has acquired Iron Bow Technologies, LLC, a provider of information technology solutions worldwide that serves clients in the government, healthcare, higher education, legal, and non-profit industries. Terms of the deal were not disclosed.
L3 Technologies has acquired ASV Global, a provider of unmanned surface vessel and autonomous vessel control systems
