Vendors Face New Realities Selling Products to the Army

By Stew Magnuson
The talk of the Association of the United States Army annual conference in Washington, D.C., this week were the missing personnel in green uniforms.
With two sprawling floors in the massive convention center, and a cap of 400 service members allowed to travel there, the paucity of “customers” was apparent to many of the vendors who paid thousands of dollars to set up booths.
With the military entering an age of austerity — and a General Services Administration scandal in Las Vegas that gave Congress and the general public the mistaken impression that industry trade shows are taxpayer funded parties — defense industry conferences have become a barometer for the downturn.
The Association for Unmanned Vehicle Systems International’s conference in August had the misfortune of being booked in Las Vegas prior to the scandal. The lack of military personnel there was manifest. Next week in Orlando, Fla., is Milcom, the military communications sector’s biggest show of the year. The last time it was in that city in 2007, participants were bused to a private show with the Beach Boys at the Hard Rock Café. This year, conference attendees will stay put in the hosting hotel and be treated to the relatively obscure band Keni Thomas and Cornbred.    
None of the vendors interviewed at the AUSA show this week said they were going to stop attending conferences. For some, the glass is half full. Army Chief of Staff Gen. Ray Odierno spent a solid 20 minutes in the FLIR Systems Inc. booth checking out the company’s latest offerings, said Roy Keeler, vice president of U.S. business development surveillance. The fact that he spent a half a day viewing the exhibit halls’ offerings says a lot, he added.
“I think that’s a testament that the chief is not bowing to political pressure,” Keeler said. He was keenly interested in how FLIR’s sensors could help protect troops.  “He is a soldier’s soldier. … And I think he proved that by showing up on the first day.”  
The biggest problem with doing business with the Army now is uncertainty, said Mark Grablin, director of airborne reconnaissance for Lockheed Martin. That some $487 billion in cuts spread out over the next 10 years are coming is certain. The threat of sequestration is the great unknown. Army decision makers are frozen.
Meanwhile, the acquisition communities are in a state of transition. After years of rapidly fielding equipment in reaction to needs in Afghanistan and Iraq, ‘’All the services are trying to get back to normal processes,” he said. On the other hand, they don’t want to go back to 15-year development cycles. “The uncertainty is how do we then acquire in this new reality,” Grablin said.
John Beck, manager of transformation programs at Lockheed Martin, said it is a matter of finding a happy medium. “Everyone on all sides wants a system that is flexible with an appropriate speed to need, not late to need.”
The Army is asking companies to do more internal research and development, Beck said. The problem now is figuring out what they want if the lines of communication are shut down at trade shows.
“I almost sense a risk aversion on the part of the services. It is not just the Army,” Beck said. The service is wrapped up in the legalese of not telling individual companies what they need to invest their R&D dollars in, for fear of giving one a competitive edge over the other.
When it comes to information technology, for example, there are so many potential vendors. The Army can’t talk to everybody, so they decide to talk to nobody. “That doesn’t help,” Beck said.
Grablin said communication, as long as it is above the board and given to all, is necessary if industry is to understand what the military wants. “It cannot help but make the acquisition process better.” Conferences are one venue where this happens.
Honeywell, over the last 18 months, has refocused its efforts on repairs, upgrades and modernization programs, said Tom Davis, the company’s vice president of U.S. Army programs. Safety and fuel efficiency are now selling points, especially when it comes to its line of aircraft engines.
“The real value that we are promoting in our strategy is to show the Army how much more range they are going to get out of the engine, how many more packs they can carry, how much fuel they are going to save, how much longer their aircraft is going to stay out before coming back for an overhaul,” he said. The drop-in engine that is being placed in the Kiowa Warrior scout helicopter is one example.
Honeywell wants to expand into the ground vehicle field. It held meetings with all three of the truck makers working on the joint light tactical wheeled vehicle program to see if some of its aviation technology could be incorporated. Condition-based monitoring, which can give maintenance personnel better ideas of when parts are wearing out, is one example. That has the potential to improve safety, reliability and costs, he said.  
Honeywell is not a major prime contractor, but its components and subsystems are spread throughout military hardware programs. Its parts rarely constitute more than 5 percent of any platform, so its exposure is lessened if a big program is canceled.  
FLIR is also compensating for the downturn by looking toward unfamiliar markets. It benefited greatly over the past decade from rapid fielding initiatives, which drew on overseas contingency operations money. That funding stream will dry up by 2015, the company predicts.
Dave Strong, marketing vice president at FLIR, said the acquisition of ICX two years ago, a company that has a strong background in data management, is going to help FLIR not only sell sensors, but help the military with its need to process massive amounts of data it is collecting.
“We are targeting the programs of record, because if you are not on a program of record, you’re not going to get funded. R&D is going down. Procurement is going down,” Keeler said. Maintaining existing hardware will also be a source of revenue, he added.
As far as the absence of Army personnel at conferences, “I think it is a short-term blip,” Keeler said. “Where else can you get exposure to tens of thousands of service members to new technologies — to new ideas all at one time?”
“The Army speculated that they would spend $10 million to come here. My gosh, they throw that much away in a day on lost inventory, so it is really a false savings,” he added.
Photo Credit: Association of the United States Army

Topics: Business Trends, Business Development, Doing Business with the Government

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