DoD Contract Awards Down Again

Morning Coffee is a robust blend of links to news around the internet concerning the Naval Air Station Patuxent River economic community. The opinions expressed here do not necessarily reflect those of the Leader’s owners or staff.

DoD contract awards fell 29 percent in May from a year earlier, the fifth drop in the past six months, driven in part by sequestration-defined automatic budget cuts, reports Bloomberg Businessweek. The DoD announced awarded contracts with a maximum value of $13.7 billion last month, down from $19.4 billion in May 2013.  Mackenzie Eaglen, a defense analyst, said, “There will be fits and starts, but the general trend line will continue to fall. May’s prime, or direct, contracts were less than half the $35 billion awarded a month earlier.” She said she expected defense spending to decline through 2017 and perhaps beyond if Congress and the White House extend the federal cuts.

An imminent contract with the Pentagon for 43 more F-35 Joint Strike Fighters (JSF), along with multiplying international sales, should bring the per-jet price down to levels that have long been promised but never delivered, Lockheed’s JSF program chief said Monday.  National Defense Magazine reported that Lorraine Martin said Lockheed is in the process of negotiating low-rate initial production lot eight with the US government and that each contract is supposed to be less expensive per aircraft than the previous deal. She promised that by 2019, Lockheed can produce an F-35 for less than a fourth-generation fighter such as the F-16.

Senator Barbara Mikulski (D-Md.) told the Naval Academy Board of Visitors this week that legislation that includes $120 million for a planned Center for Cyber Security Studies at the Naval Academy could reach the Senate floor for a vote within the next month, according to CapitalGazette.com. If approved by the Senate, the House must then agree with any Senate alterations. Another version of the bill passed the House on April 30 by a 416 to 1 vote.

The first drone authorized by the FAA to perform commercial services over land is now operating at the BP Exploration Inc.’s Prudhoe Bay oil field in Alaska, reports The Los Angeles Times. Drone maker AeroVironment Inc.’s Puma AE has been flying since Sunday above the largest oil field in North America using high-tech sensors to create 3-D computerized models of roads, pads and pipelines for industrial applications. The five-year contract opens a window on the future as drone technology becomes more advanced and demand increases from public and private organizations for using drones.

The Northrop RQ-4 Global Hawk unmanned surveillance aircraft still needs nearly $2 billion in upgrades to be able to execute the missions performed by the manned U-2 spy plane, which is scheduled for retirement, reports IHS Jane’s 360. The required work consists of upgrades to ground stations, communications and imagery capability.

The Military Times considers the thorny issue of reducing military retiree benefits following publication of a retired officer’s Washington Post opinion piece that said a “very small decrease in pay” for military retirees would be reasonable. Retired Army Lt. Col. Slear believes his retirement benefits are extremely generous, considering he was never deployed to a combat zone. For example, he pays $550 a year for family medical insurance under Tricare, while the average family paid $4,565 in 2013 for private health insurance.

House lawmakers are again attempting to give troops a pay raise next year, reports the Military Times. The House Appropriations Committee defense panel’s draft of the 2015 defense appropriations bill funded a 1.8 percent pay raise for troops for 2015, which would keep military pay in line with the most recent increase in private-sector wages. However, the House and Senate Armed Services committee’s versions of the bill passed last month reflected the Pentagon’s request to cap next year’s raise at 1 percent, which defense officials said would save about $12 billion over five years.

Lockheed Martin offered the Navy a low-risk, affordable option for a new small surface combatant by using already designed modifications to its Freedom-class littoral combat ship (LCS), according to SEAPOWER Magazine. The ship could be under construction by 2018 when the current multiyear buy of original LCSs ends. However, Lockheed shipbuilding official Joe North warned that breaking the current multiyear contract for the defense giant to build 10 of its LCSs would cost the Navy more money. He elaborated, “We have a fixed-price contract for 10. If we only get nine . . . there are cost consequences. [The Navy is] well aware of it. And I believe the Hill is as well.”