Army Contractors See Greater Risks in Military R&D Programs

By Eric Beidel

FORT LAUDERDALE - Despite some modest increases planned in the near term for defense budgets, Army contractors anticipate that the marketplace will get tougher. It is no longer business as usual, industry executives said this week at the Association of the U.S. Army’s annual winter convention in Fort Lauderdale.
Companies, for instance, are re-examining their research-and-development budgets and weighing risks in what they see as an uncertain market.
“There is a lot less [science and technology] money out there,” said Robert Birmingham, senior vice president of Army programs for L-3 Communications’ sensors and simulations group. “If we want to stay in the game, we’re going to have to make the investment. So we’re going to have to take the money out of profit.”
Industry is having to take more risks, Birmingham said. That means companies have to invest in prototype systems with no guarantees of a program of record to follow. There are also concerns about industry protests becoming more commonplace. As more military contract awards are protested by losing bidders, companies might as well factor in another 100 days to any contract timeline, Birmingham said. “Protest has become a part of the process,” he said. “It doesn’t do soldiers any good at all.”
Many small businesses, meanwhile, are seeing more hurdles as they seek to break into the defense market, said Constance McKee, president and CEO of Manzanita Pharmaceuticals.
Her small California company is trying to develop a non-opiate drug to treat chronic pain in wounded soldiers. The daughter of a former naval officer, McKee said she has seen the effects of traumatic brain injury, alcoholism and homelessness on veterans. Recent estimates show it could cost as much as $950 billion to care for wounded soldiers from recent conflicts, she said. McKee pitched a concept to the Army to treat chronic pain and TBI. So far she has been unable to secure any Army funding for the research that would be needed. Too often small businesses are crowded out of the picture by lobbyists for big corporations, she said.
But the market can also be tough for large contractors. BAE Systems, which provides nearly half of the military’s protective and load-carrying equipment, has found that the Army’s piecemeal approach to buying body armor is not helpful to industry or to the soldiers who need protection. The Army needs a procurement system that produces integrated systems for soldiers, said Joseph Coltman, vice president of protection systems for BAE.
Soldier protection has become a commodity’s market that brings about incremental changes but not revolutionary change, he said. There are no incentives to innovate beyond already established military requirements, while battlefield threats change faster than the Army can field new equipment, Coltman said.
“Maybe more critically for us is that there is no program of record for protective equipment,” he said. “There may be reasons why that’s important to the Army, but there is a downside for industry.” With a lack of visibility of upcoming procurements, it is very difficult for companies to make the sizeable investment needed to shape the marketplace, Coltman said.
BAE recently signed a cooperative research and development agreement with the Army’s Natick Soldier Systems Center to come up with next-generation soldier equipment. But before the agreement, the two entities were working on a vision for the future independently and sometimes at odds, Coltman said.

Topics: Business Trends, Doing Business with the Government, Partnering, Health Affairs, Combat Medicine, Procurement, Acquisition Reform, Defense Department, Science and Engineering Technology, Defense Contracting, Land Forces

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