Defense Ventures Blog Feedhttp://defense-ventures.com/blog/Defense Ventures is about the business of the defense industry. Major players, policy, M&A, VC, PE, strategy, technology, and the stories & people shaping the defense, Government services, homeland security, and aerospace markets.tryen-US2010-03-14T10:52:02ZSquarespace Site Server v5.9.2 (http://www.squarespace.com/)Northrop Drops Out of KC-X Acquisitionhttp://defense-ventures.com/blog/2010/3/9/northrop-drops-out-of-kc-x-acquisition.htmlDPM2010-03-09T09:44:22ZGovernment Northrop Grumman Players StocksPolitics matter.

The WSJ reports that Northrop Grumman will withdraw from competition for the Air Force's $40B contract to build a new KC-X fuel tanker.

It's been a long and twisted battle to this point. Boeing originally won the contract in 2002, but Sen John McCain then complained that the Air Force would get a better deal buying the planes versus leasing. By 2003 two senior executives at Boeing (including a former Air Force acquisitions official) headed to prison on charges of illegal job negotiations. The acquisition restarted in 2006 and resulted in a win for Northrop Grumman and partner EADS. Boeing quickly protested. The latest solicitation has been out since Feb 2008, and Northrop has complained that the new scope greatly favors Boeing.

From WSJ:

"We are disappointed by Northrop's decision not to submit a bid for the...program," Deputy Defense Secretary William Lynn said. "We strongly believe that the current competition is structured fairly and that both companies could compete effectively."

The decision also dismayed many lawmakers from regions that stood to benefit from a Northrop win. "I am deeply disappointed that Northrop Grumman was unable to submit a bid for the KC-X tanker program. Frankly, I am outraged at the Defense Department's bungling of this contract for what is now the third time," Rep. Jo Bonner (R., Ala.) said in a statement. Northrop had planned to build an assembly plant in Alabama.

Normally the reader comments on an article like this are unbearably moronic, but in this case there is some decent & substantial discussion if you click over to that. A couple operators that seem to know what they are talking about and some comments on what this bungled acquisition means in terms of larger strategic priorities. Good stuff.

]]>Debate on Pentagon Review Panelhttp://defense-ventures.com/blog/2010/3/8/debate-on-pentagon-review-panel.htmlDPM2010-03-08T14:35:28ZGovernment JF Lehman PlayersAn article in USA Today covers the debate over whether members of a 20-person panel appointed to review long term defense strategy should be allowed to participate if they have ties to the defense industry. Pretty much boils down the following exchange as described in that article:

"Could you find anybody who knows anything about defense who doesn't have some potential conflict of interest?" he asked.

Some experts say the answer is yes. "There are retired military officers or Defense officials who don't have defense industry ties. If you wanted to find these people, you could," said Jordan Tama, an American University professor and expert on government commissions.

Good question. I suggest identifying 20 alternative (and willing) panel members of the type Professor Tama describes and let them review the panel's findings for potential ethics violations or at least for quality of their input. 

The first quote in the exchange above belongs to John Lehman, a former Navy Secretary and chairman of J.F. Lehman & Company, a private equity firm focused on investments in the defense industry (mentioned here on Defense Ventures). Lehman has been recused from reviewing a consideration by the panel to relocate some shipbuilding from Norfolk to Mayport, FL, where Lehman portfolio company Atlantic Marine Holding Co, is located and who could potentially benefit from increased Naval spending there.

]]>New fund by FedCap Partnershttp://defense-ventures.com/blog/2010/3/4/new-fund-by-fedcap-partners.htmlDPM2010-03-04T12:03:03ZBuyout Fedcap PlayersFedCap Partners LLC has closed a new $20M private equity fund targeted at small Federal contractors in the defense and intel sectors. From their press release, FedCap describes their strategy as follows:

Two primary factors have disproportionately adversely affected small and medium sized Federal contractors in recent years. First, the continuing "capital crunch" has impacted Federal contractors under $50 million in revenue and minority equity capital is in short supply. Secondly, the Small Business Administration's ("SBA") recertification rule has made it much more difficult for companies with 20% or more in "set-aside" revenue to sell and receive fair market value for their businesses. FedCap expects to partner with owners of companies impacted by these issues and provide capital and advice to transition contracts and accelerate growth.

The fund managers/owners are Rick Knop and Leslee Belluchie. Knop previously founded the defense investment banking specialists Windsor Group (now part of BB&T Capital Markets). Belluchie is a former Executive VP for SI International, by way of business development posts at CSC. A board of advisors with 7 members is also listed on their work-in-progress website.

We'll be looking forward to info about their first deals. From the description above it is hard to judge exactly what they are trying to do. Minority stakes in small businesses? I can't see the exit there, but FedCap maybe has something figured out.

]]>Defense Technology Profiles from SCLaunchhttp://defense-ventures.com/blog/2010/2/24/defense-technology-profiles-from-sclaunch.htmlDPM2010-02-24T12:17:52ZPlayers SCLaunch TechWe are happy to announce that Defense Ventures will begin featuring content from a South Carolina organization called SCLaunch. A brief overview:
  • SCLaunch is the commercialization vehicle for SCRA, an applied research and commercialization services corporation. 
  • SCLaunch supports companies in the targeted technology sectors of life sciences, advanced materials, alternative energy, defense technology, cyber security, automotive, chemical,  and aerospace engineering. 
  • SCLaunch was created to facilitate applied research, product development and commercialization programs, and to strengthen South Carolina's Knowledge Economy by creating high wage-earning jobs. 
  • The SCLaunch program provides entrepreneurs with key tools for success to help build technology startups and equity in the future for South Carolina. 
For a more detailed description, here is their latest brochure available for download.
Defense Ventures will be featuring profiles of some of SCLaunch's defense-tech portfolio companies and related technology sectors. We plan to publish the first profile soon and will follow up based on interest in a particular company or its sector. More to follow --- we'd like extend thanks in advance to Derek Willis and Jill Hersekorn at SC Launch for providing this valuable new content for Defense Ventures.

 

]]>Oshkosh keeps $3B FMTV contracthttp://defense-ventures.com/blog/2010/2/15/oshkosh-keeps-3b-fmtv-contract.htmlDPM2010-02-15T07:45:44ZGovernment Oshkosh PlayersFollowing another review of competing proposals for the Family of Medium Tactical Vehicles (FMTV) program, the Army has decided to stand by its earlier decision to award the $3B contract to Oshkosh. BAE Systems (former incumbent) and Navistar had both filed protests late last year.

From DoD Buzz:

“We are very pleased the Army affirmed its original decision that Oshkosh Corporation’s FMTV bid clearly represents the best overall value for the Army, the taxpayers and the Warfighter,” said Robert G. Bohn, Oshkosh Corporation chairman and CEO in the press release. “We are delighted that the Army has yet again concluded that Oshkosh was the right choice. Our focus has always been on the Warfighter and making sure we deliver high-​​quality, high-​​performing vehicles on time.”

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