The US Air Force has exercised a second option year on a $90 million 5-year contract (FA8224-07-D-0001) for Mainstream GS in Bethesda, MD, to provide continuous process improvement (CPI) services. CPI is intended to improve the efficiency of how the USAF works as an organization.

A main portion of Mainstream’s work involves support for the Air Force Smart Operations 21 (AFSO21) program, which is based on both Lean and Six Sigma business process improvement tools.

In an interview, Mainstream President Alan Horowitz told DID that his company is supplying the USAF a number of CPI services, include Lean and Six Sigma consulting, training, facilitation, and planning…

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International consulting firm Alix Partner recently released their 2009 Global Aerospace & Defense Review(SM), which investigated virtually all segments of the global aerospace industry, its key customers, and key issues. Their conclusion? After 5 years of strong, profitable growth, financials for virtually all segments of the aerospace industry globally are deteriorating rapidly – and the situation is likely to worsen in 2010. Extracting cash from operations will be key. Or, as Alix Managing Partner Phillip Toy puts it: “In times like these, cash is king, queen, pilot and co-pilot.”

Alix believes that the ways in which the industry is changing, and underlying business fundamentals for industry firms, are at least as important as the overall trend. Overall, industry financial-distress indicators have deteriorated by 24% since 2008. The debt/capital ratio of North American airlines in particular is a concerning statistic, and the financial state of European supplier firms also bears watching. On the defense front, continued cuts are expected past 2010, with a possible counter-trend in Asia. The biggest change, however, concerns Tier 1 and 2 suppliers, whose EBIT margins have exceeded their customers’ by an average of over 30% over the last 2 years. That power relationship is changing, and the change has important implications for industry firms up and down the supply chain.

DID is working with Alix Partners on a guest article that will discuss some of this research, and flesh out some of the study’s insights and implications for our readers (July 22/09: The article is up).

Battelle Memorial Institute in Columbus, OH received the fourth option, worth $6.9 million, under a previously awarded indefinite-delivery/ indefinite-quantity contract (N62473-07-D-4013) to provide environmental services and technology to U.S. Navy and U.S. Marine Corps installations and commands worldwide. Battelle will provide engineering and incidental services for research, development, testing, evaluation, and implementation of environmental technologies, strategies and techniques; operation of sites and systems, including maintenance and monitoring; and technical consultation.

The total estimated contract amount after exercise of this final option is $30 million. Battelle will perform the work at various Navy, Marine Corps, and other federal locations worldwide. It expects to complete the work by June 2010. The Naval Facilities Engineering Command, Specialty Center Acquisitions in Port Hueneme, CA manages the contract.

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Guest article by Ian Cookson & Grant Thornton Corporate Finance LLC

Aerospace component M&A activity remained strong in 2008, and was one of the best performing sectors, with the same number of transactions as the record set in 2007. Activity was again weighted toward the first half of the year (in a 60/40 split), with a similar number of transactions in the second half of 2008 as 2007. Although 40% of transactions were led by private equity groups, this masks a shift in the second half where strategic buyers proved more successful in winning bids (by a factor of 3:1). Private equity buyers found it harder to raise the levels of debt that supported prices of previous acquisitions.

The strong level of aerospace component activity is in stark contrast to U.S. M&A activity as a whole, which declined by a third in volume terms from the prior year (and substantially more by value). However, the number of smaller deals across all industries (under $50 million) remained remarkably constant. It is this category of smaller deals that is more reflective of aerospace component transactions.

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USS Osprey,
shock test
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During the Cold War, NATO countries had a strong incentive to invest in minesweeper fleets, in order to keep their ports open to American reinforcements and cover key chokepoints that might be mined by Soviet submarines. With the demise of the Soviet Union, and the rise of remote-controlled UUVs and USVs that can be mounted on any ship, the perceived need for minesweeper ships has declined. The US Navy, for instance, will decommission all 12 of its 893 ton, fiberglass MHC-51 Osprey Class minesweepers by the end of FY 2008. So far, 8 of them have been sold to the Egyptian (MHC 60 & 61), Greek (MHC 52 & 53), Lithuanian (MHC 56 & 57), and Turkish (MHC 58 & 62) navies, even though the first ship was only christened in 1991.

With piracy rising sharply in the early 21st century, however, and land mines showing themselves to be the preferred tactic of islamists and other terrorists on land, some countries are connecting the dots and reassessing their post Cold War needs…

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A proper send-off
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On Dec 25th, UK servicemen and women posted overseas in countries such as Iraq, Afghanistan, the Balkans and the Falkland Islands receive a Christmas box filled with gifts. Inspired by a tradition that dates back to the First World War, the Christmas box program was established 3 years ago by charity UK4U; this year, they distributed gifts to more than 25,000 British troops. The final send off for the items took place on Dec 22/07 this year, and the UK MoD has a feature describing their receipt.

What a fine idea. This worthy program is made possible by industry sponsors, including:

Angliss
BAE Systems
Cooneen Watts & Stone
DBC Foodservice
Deloitte
EADS (UK)
Farside Marketing
Finmeccanica (UK)
Fleet Air Arm Association
Fra Angelico
Fretwell Downing Hospitality
Gifts by Design
J C Bamford Excavators
KBR Halliburton
Lockheed Martin Corporation
Marks and Spencer
Northrup Grumman
NP Aerospace (England)

Afghanistan, 2007
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Nuffield Trust for Forces of the Crown
PA Consulting Group
PRA Architects
Purple Food Service Solutions
QinetiQ Group
Right Management
Rolls Royce
Royal Photographic Society
Sodexho Defence Service
Supreme FoodService
Thistle Garments
Twinings of London
Web-Tex
Wilkinson Sword
Yellow Ribbon Foundation

MTTC
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Innovative Productivity Incorporated (IPI) in Louisville, KY received a $28.7 million cost-plus-fixed-fee, level of effort contract for the operation and management of the McConnell Technology and Training Center (MTTC). The focus of the work will be to identify and/or develop innovative technologies, processes and concepts, with a focus on reducing operating costs and increasing product quality. MTTC will enhance selected technologies and technology transfers between DOD and private industry, and/or develop them where appropriate.

IPI is a partner in the US Navy’s Fleet Maintenance Reduction Program (FMRP), which helps the Navy resolve nagging and costly shipboard problems by inserting innovative products and technologies; the US Navy estimates that the MTTC projects will save approximately $1 Billion over the next 15 years. IPI also runs the National Surface Treatment Center which works with the Navy on corrosion issues, and the firm offers Quality Management and Business & Industrial Skills Programs that include Six Sigma, Lean strategies, and ISO certification.

Work will be performed in Louisville, KY and is expected to be completed by September 2012. Contract funds in the amount of $10.4 million will expire at the end of the current fiscal year. The contract was not competitively procured by the Naval Surface Warfare Center, Carderock Division in Carderock, MD (N00167-07-C-0008)

Back in March 2005, DID noted that the US Army had narrowed the field for its $20 billion ITES-2 IT contract to 17 potential prime contractors. At the time, we also noted the Army’s plan to issue the formal RFP in May 2005. Later, in April 2005, DID covered Kevin Carroll, “the $36 billion man” who leads the office in charge of ITES and ITES-2 as the Army pursued its vision of a major long-term contract vehicle for a wide range of information technology and computing services.

In September 2005, The U.S. Army has released its RFP for its $20 billion Information Technology Enterprise Solutions-2 Services program via the Army Small Computer Program, the Army Contracting Agency, and the Information Technology, E-Commerce, and Commercial Contracting Center. After that, things didn’t go as well. A major kerfuffle and 2 rounds of GAO protests followed the award, which led to a revised list of winners in November 2006.

This happened a while back, by DID hadn’t updated our ITES-2 RFP coverage, and the whole episode is instructive in some ways. See below for DID’s spotlight article and timeline re: ITES-2 – which doesn’t end in November 2006…

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DE&S HQ
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As anyone who has ever dealt with them knows, national defense organizations aren’t exactly paperless. Over in Britain,
Ministry of Defense officials in Defence Equipment & Support (DE&S) realized that several MoD office supplies contracts were due to end in September 2007. They decided to combine all the planned purchases to maximize leverage with suppliers, whereupon the Office of Government Commerce saw an opportunity for wider collaboration. While other departments were added, the DE&S team commissioned Group Supplies Ltd. to help structure a commercial tender process; the company advised MoD to split the contract and undertake 4 auctions on sequential days, with the GBP 110 million stationery supplies requirement held the 1st day.

The result was a reverse auction contract involving 9 government departments, with winning bids totalling GBP 132 million in an outcome expected to save the MoD GBP 50 million over 4 years, and save all participants GBP 100 million overall. As of October 1/07, stationery will be supplied by Lyreco Uk Ltd, paper will be supplied by Office Depot UK Ltd., and Westcoast Ltd DBA Orion Media Marketing will supply magnetic media and electronic office supplies. Deliveries will take place to the UK MoD, and to Her Majesty’s Revenue and Customs, Home Office, Dept. of Constitutional Affairs, Metropolitan Police, Foreign and Commonwealth Office, Treasury, Office of Government Commerce, and Prison Service. MoD release.

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Seaport-Enhanced (Seaport-e) is a $5.3 billion multiple-award umbrella contract that lets the US Navy use an integrated approach to contracting for support services. Most requests involve engineering, financial, and program management support. Receiving an award makes a firm eligible to big on jobs under a pre-set contract vehicle, and the SeaPort-e portal provides a standardized means of soliciting bids and awarding task orders.

In 2005, the US Navy issued 503 Seaport-e contracts. In 2006, another 251 were issued. In 2007, there were 391 winners, adding to the existing 892 contracts previously awarded under this program…

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