WASHINGTON — In the two weeks since the White House submitted its pre-sequester fiscal 2014 budget request to Congress, defense giants BAE Systems and General Dynamics have organized large groups of their suppliers to storm Capitol Hill to put a human face on the potential cuts to acquisition accounts that the defense industry most fears.
It’s a grassroots strategy that highlights the effects of budget cuts on small second and third-tier suppliers to the prime contractors. And it does so by bringing these small business owners straight to the source: the offices of their elected representatives.
But it’s not just industry that is worried about the supplier base. The concern expressed by industry groups was borne out by the Pentagon’s chief of industrial base policy Brett Lambert during an April 25 speech in Washington, DC.
Just ten years ago, most of the money that the DoD spent would stay with the prime contractor Lambert said, but today 65 to 70 cents of every dollar the DoD spends with a prime contractor leaves that prime by going to a host of smaller, specialty suppliers.
The multi-faceted industry that has grown up around the major defense contractors to supply them with the increasingly precise technologies they need to build modern armaments is a complex world of interdependent businesses that are very specific, and operate on small margins. Today’s industrial base, Lambert said, “is more global, is much more commercial, and it is more complex,” than it has been in previous defense spending drawdowns, he said.
Given the array of small, somewhat fragile companies spread around the county means that the prime contractors—and Pentagon weapons buyers—are very much “dependent on a global supply chain,” particularly when it comes to second and third tier suppliers.
The decrease in defense spending coupled with continued uncertainty over the size and schedule of cuts mandated under sequestration is putting the entire defense industry on edge, Lambert said. He admitted to worrying over how many of these smaller specialty suppliers will leave the defense sector because of it. “You have people who just say ‘I’m not gonna do this anymore’” and move on to more secure opportunities.
Just days before Lambert’s speech, BAE Systems organized a two-day event in Washington that included a meeting of about 70 industry representatives from several dozen suppliers who heard speeches by Erwin Beiber, President of BAE Systems’ Land & Armaments business, and Pennsylvania Senator Robert Casey. BAE’s plant that builds its ground vehicles is located in York, Pa.
On April 25, approximately 30 execs trudged up to Capitol Hill to speak with their members of Congress to lay out how many jobs they might lose in their states and districts should the Army stop work on the Bradley Fighting Vehicle line between 2015 and 2017, as current plans demand.
BAE spokeswoman Stephanie Serkhoshian said that the plan was for the suppliers to “urge their senators and representatives to direct the U.S. Army to move forward FY 2015 and 2016 requirements to perform conversions on 93 Bradley Fighting vehicles” in 2013, since this would allow BAE to continue “providing work to the suppliers so they can retain their skilled workforce and continue to devote a portion of their business to the production and maintenance of Bradleys.”
The year-long continuing resolution passed by Congress in March added $140 million to the $148 million requested by the Army for Bradley work, bringing the total up to $288 million for 2013. According to documents provided by BAE, the Army has identified a requirement for approximately 200 fully modernized Bradleys from the M3-M2 configuration to newer variants, of which 139 have yet to receive funding in the years 2014-2016.
Of the 93 vehicles that the company wants moved up to this year, BAE said that is wants to convert excess Bradley M3 Cavalry vehicles to the M2 Infantry Fighting Vehicle configuration for $73 million, while new transmissions, software upgrades, and fielding and testing would account for the rest of the $140 million granted by Congress.
Sen. Robert Casey (D-Pa.) said in a statement released to Defense News that halting the Bradley line at York, Pa. between 2014-2017 “could cost the military more money and critical capabilities in the long run by eroding the well-skilled and experienced industrial base,” since “the skills and capabilities of the individuals who make this equipment are not easily replicated or quickly generated.”
General Dynamics has also been busy bringing its suppliers to Capitol Hill in an effort to ensure that Congress doesn’t try and take another bite out of a multi-billion program that has found itself in the bean counters corsshairs.
The company hosted about 300 representatives from 90 small companies spread out across 27 states in DC on April 17-18. A group also went to the Hill to meet with lawmakers.
Chris Marzilli, president of General Dynamics C4 Systems said that “we did a similar event this time last year timed around the budget coming out, and we just want to educate our delegation and frankly the full legislature for where the programs are and what they bring to the soldier.”
Specifically, Marzilli meant the Warfighter Information-Tactical (WIN-T) battlefield communications network that the Army is readying to deploy to Afghanistan later this year. The suppliers “met with their delegations up close and personal” Marzilli said, “and put together a very compelling case that brings it down to earth and the grassroots.”
While WIN-T is funded to the tune of $973 million in the FY14 request, the program came in for a haircut last year in a June reprogramming that initially sought to chop $500 million out of a billion-dollar budget, to help fund operations in Afghanistan.
That reprogramming ended up being whittled down to only about 10 percent of the funding line after GD and its supplier base raised concerns on the Hill, but Marzilli and his supplier base aren’t taking any chances.
“There are other demands on ’13 money,” he said, “so we want to make sure we’re front and center in educating our lawmakers on the readiness of this program and the urgency in getting it into the hands of soldiers and making sure we protect ’13 against any potential threat that it might become a bill payer.”