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A small number of states dominate defense spending

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A huge portion of U.S. defense spending is going to contractors and military personnel based in just a handful of states, according to data recently released by the Pentagon.

Defense Department contract obligations and payroll spending in the 50 states and the District of Columbia totaled $550.9 billion in fiscal year 2019.  Of those outlays, 73 percent was spent on contracts for products and services, while the remaining 27 percent paid the salaries of department personnel, according to the Office of Local Defense Community Cooperation’s latest report on defense spending by state.

“California, Virginia and Texas topped the list of recipients for overall defense spending,” said a press release accompanying the study.  They received $181.3 billion, about one-third of the total allotted to all 50 states plus D.C.

The top five, which also included Florida and Maryland, received about 43 percent of the total, while the top 10 received approximately 59 percent, according to the data.

Continue reading at:  National Defense Magazine

M&A pre-flight check: avoiding common issues in aerospace and defense acquisitions

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As anyone who follows the industry can tell you, mergers and acquisitions activity in the aerospace and defense industry has remained robust over the past decade.  In 2019 alone, there were 460 corporate acquisitions in this sector.  And while a slowdown in 2020 deal activity is certainly expected as a result of the COVID-19 pandemic, results for at least the second quarter remained strong, with 84 deal closings.  Further, analysts project that activity in certain subsegments of the industry, including defense, space technology, and cybersecurity, will remain vigorous for the foreseeable future, at least partially offsetting any declines in commercial aerospace transactions.

But much like the machines they produce, acquiring an A&D company is complex and requires a significant investment of both time and money to be done properly.  So just as a pilot would perform a pre-flight check before takeoff, there are steps that a savvy buyer or seller of an A&D company can take to give themselves the best chance of a successful and smooth closing.  This article aims to provide you a primer on some of these steps by examining some of the most common issues that arise in A&D transactions to give you a leg up on your transaction.

Continue reading at:  National Law Review

Holding government contractors responsible for cybersecurity is trickier than it sounds

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The federal government wants to hold defense contractors accountable for the cybersecurity of their supply chains but that’s no easy feat, experts said recently.

On March 26th, industry representatives told lawmakers on the Senate Armed Services Committee about attempting to tackle cyber threats as a federal contractor. Much of the hearing was focused on one specific issue: increasingly complex levels of supply chains make it difficult for prime contractor to ensure all subcontractors are upholding cybersecurity protections. And that ever-lengthening chain increases the possibility of compromised information or cyberattacks.

“I don’t know why we don’t hold the larger contractors who are responsible for the contract to make sure the subcontractors they are hiring have protections,” Sen. Joe Manchin, D-W.V., said. “Somebody has to be held accountable.”

Keep reading this article at: https://www.nextgov.com/cybersecurity/2019/03/holding-government-contractors-responsible-cybersecurity-trickier-it-sounds/155862/

Strict notification and disclosure requirements apply to defense contractors

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Businesses that seek to obtain and preserve contracts with the United States government, or to deal in certain enumerated defense articles and services, are subject to strict privacy regulations imposed by the U.S. government.

For those under contract (or subcontract) with the U.S. Department of Defense (DoD), the Defense Federal Acquisition Regulation Supplements (DFARS) place stringent minimum security requirements and reporting obligations that must be met, otherwise a business could face financial penalties or termination of its contract.

Businesses that export and import defense articles or services and related technical data must comply with the International Traffic in Arms Regulations (ITAR), which comprise approval, registration and records maintenance requirements. If a violation of ITAR is voluntarily reported, the penalties imposed by the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) can be reduced.

Businesses subject to DFARS and ITAR should have a compliance program in place that includes an appropriate response to any security incident.

Keep reading this article at: https://www.lexology.com/library/detail.aspx?g=d5fda8c7-68e4-4a1c-a4f5-7e387e51741d

Pentagon tells leaders to talk more with contractors — and less to the public and press

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Even as Pentagon leaders restrain military officials’ contacts with the public and the press, they are pushing for more engagement with defense contractors.

On March 1, U.S. Air Force leaders suspended all interviews, embeds, and base visits for media organizations “until further notice.” The following day, Deputy Defense Secretary Patrick Shanahan — a former Boeing executive — sent a memo to the Pentagon’s civilian and military leadership encouraging wider communication with defense contractors.

“Cultivating a competitive mindset requires that we optimize our relationships with industry to drive higher performance while always remaining within the letter and spirit of ethics and procurement regulations,” Shanahan wrote in the March 2 memo, entitled “Engaging With Industry.” “Leaders must talk with personnel about the importance of having dialogue with industry and help them understand the parameters for doing so.”

Keep reading this article at: http://www.defenseone.com/business/2018/03/pentagon-official-directed-leaders-speak-more-contractors-just-one-day-after-ban-press/146679

DoD reports spike in contractors in Iraq

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The number of civilian contractors supporting U.S. and coalition operations in Iraq against the Islamic State is on the rise, even as major military operations there have ceased, according to new figures released by U.S. Central Command,

From January 2017 to January 2018 the number of Defense Department contractors in Iraq rose 37 percent, from 3,592 to 4,927, according to statistics CENTCOM released last week.

The numbers are reported quarterly and have risen steadily over the last year. For example, contractors supporting base operations rose from 564 contractors in January 2017 to 827 contractors in January 2018. The number of contracted translators rose from 377 in 2017 to 805 in 2018 and the number of contractors supporting logistics and maintenance rose from 1,156 to 1,480.

Keep reading this article at: https://www.federaltimes.com/flashpoints/2018/01/16/dod-reports-spike-in-contractors-in-iraq/

Why are government contractors cutting their cybersecurity budgets?

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Government contractors reduced their spending on cybersecurity in the past year, despite several high-profile data breaches, a new survey shows.

American Flag 2About 52 percent of businesses reported a slight decrease in cyber spending in the past year. About 17 percent said their cyber spending increased dramatically, while 31 percent said it increased slightly, according to a new survey from contracting analysis firm Deltek.

“We’re surprised that over half of the companies . . . had experienced decreased spending in cybersecurity,” Deltek Vice President Kevin Plexico said during a call discussing the results. “Our best guess is that the ones that are decreasing are probably not the ones that have had breaches.”

Keep reading this article at: http://www.nextgov.com/cybersecurity/2015/07/government-contractors-not-waiting-around-federal-spending-new-survey-shows/117877/

Contractors brace for possible government shutdown

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The threat of a federal government shutdown is even more bad news for a  defense industry struggling to weather sequestration.

Following a summer of Pentagon furloughs and with other sequestration cuts  starting to sink in, the government — caught between a gridlocked Congress and a  dug-in White House — is marching to the brink of a complete halt, which industry  sources say could do irreparable damage to defense firms.

“A shutdown means that there’s no additional funding that is  made available for contracts,” said Elizabeth Ferrell, a partner at McKenna Long & Aldridge who’s worked in government contracts law for more than 30 years.  “So with very limited exceptions, there are no new contract awards, no  additional funding obligated to existing contracts, contractors are faced with  performing when there are no government people around, government people will be  furloughed.”

Defense contractors would have to work in a vacuum, she said, when normally  they rely on give-and-take with government employees. “The government will cease  to function, except for a very limited number of essential people,” she  predicted.

Keep reading this article at: http://www.politico.com/story/2013/09/defense-firms-brace-for-hard-hit-of-a-shutdown-97179.html.

 

Bipartisan letter suggests Pentagon include contractors in staff cuts

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A bipartisan pair of lawmakers has asked the Defense Department to rethink its plan to cut staff by 20 percent at top headquarters offices, asking for the Pentagon to exhaust all other options before taking negative personnel actions.

Reps. Bill Young, R-Fla., and Pete Visclosky, D-Ind., chairman and ranking member of the House Appropriations Defense Subcommittee, said in a letter to Defense Secretary Chuck Hagel that department cuts should be made after careful analysis, and not based on “arbitrary goals.” Hagel announced the planned workforce reductions in July.

The appropriators called for an organizational review that “considers recommendations to eliminate certain functions and certain contracts entirely, rather than across-the-board cuts to all functions.”

Young and Visclosky emphasized the Pentagon’s legal obligation to conduct a cost comparison before replacing any civilian employees with contract workers.  In trimming the workforce, they said the “total workforce should be considered,” including contractors, and that the review should identify any contractors that are “illegally performing inherently governmental functions.”

Keep reading this article at: http://www.govexec.com/contracting/2013/09/bipartisan-proposal-suggests-pentagon-include-contractors-staff-cuts/70336/?oref=govexec_today_nl 

Who are the top federal contractors?

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Each year, Washington Technology magazine ranks the top 100 federal contractors based on sales of IT, systems integration, communications, engineering and other high-tech products and services.  They analyze and profile these firms by factors such as industry sector, those who are newcomers, those who are publicly traded or privately held, small business status, participation in Defense Department and civilian agency contracts, and many other factors.   To access this list click here: http://washingtontechnology.com/toplists/top-100-lists/2013.aspx.

Washington Technology also ranks the 50 fastest growing small businesses in the government contracting market, based on their compound annual growth rate from 2007 through 2011.  You can view the “Fast 50” list at: http://washingtontechnology.com/fast50lists/fast-50-lists/2012.aspx.

The fastest growing 8(a) firms are ranked at: http://washingtontechnology.com/top25lists/top-25-lists/2012.aspx.

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