Month: February 2013

By Tom Gerbe – Defense Information Analyst – BidLink.net

Ahead of the sequester, the Defense Department has already implemented significant cuts in defense spending. Defense spending dropped $15.1 Billion from FY 2011 to 2012 and this is before the eight percent across the board cuts are implemented starting March 1.  Unlike the sequester, the reduction of spending in 2012 was not evenly distributed through the top four major procurement agencies.  Data from the procurement history database at BidLink.net shows that the departments of the Army and Navy saw a reduction of $ 18.5 billion and $ 9.9 Billion respectively, while the Air Force and Defense Logistics Agency saw increases of $4.1 Billion and $7 Billion.

A significant increase in spending for airframe structural components (Federal Supply Class 1560) was noticed, rising $3.3 Billion, $4.8B and $5.5B for 2010, 2011 and 2012.  Many large contracts were awarded to prime contractors including Boeing (NYSE: BA), Lockheed Martin (NYSE: LMT), EADS North America, McDonNell Douglass, Northrop Grumman (NYSE: NOC) and MD Helicopter.  Boeing received the largest contract for this supply class in 2012, through a modification to contract number N0001909C0022 for the purchase of eleven P-8A Multi-Mission Maritime Aircraft.  This modification for $1.9 Billion was issued in September of 2012 to be completed by May 2015.  Eighty Six percent of this contract will be executed in the United States in areas including Seattle, Washington; Baltimore, Maryland;  McKinney, Texas; Greenlawn and North Amityville, New York.

There was a surge of spending in the third quarter of 2012, followed by a twenty two percent drop in the fourth quarter according to the Bureau of Economic Analysis.  Some of the quarterly decline is a cyclical drop due to the fiscal year ending in September, but much of the annual drop is a decrease in spending.  This reduction in defense spending is primary cause of the almost 1.3% decline in GDP.

BidLink.net is a provider of defense industry information for contractors worldwide. This data includes millions of defense contracts, procurement history, part numbers and vendor details. This unique combination of resources allows BidLink to monitor and extract important information for the defense contracting industry. BidLink.net, based in Washington, D.C., provides bid search and notification services, competition analysis  as well as part number (NSN) lookup to many military activities and thousands of private companies around the world.

For the news and tools to compete in the defense industry, go to www.bidlink.net.

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By Tom Gerbe – Defense Information Analyst – BidLink.net

I have spent the last year sifting through about sixty million records of Government contract data from hundreds of different sources in an attempt to build a more comprehensive database of Defense Department buying activity.  At BidLink, we consolidate information from many sources because often times a single source does not offer a complete picture.  In some cases agencies will refuse to disclose pricing, some Government sources are missing huge swaths of data and some provide inaccurate information. By comparing data from many sources we are able to paint a more accurate picture of Government buying activity.

This data overhaul was finished just in time for the Top 10 Fastener Defense contractors of 2012.  Looking at fastener buying activity by the Defense Department over the past four years we can clearly see a significant decline.  This is due to  the Government’s reduction in overall defense spending which started in 2009.  According to the Bureau of Economic Analysis, the Pentagon cut defense spending by a staggering 22% in the fourth quarter of 2012.  Some of the quarterly decline is a cyclical drop due to the fiscal year ending in September, but much of the annual drop is a decrease in spending.  This reduction in defense spending is primary cause of the almost 1.3% decline in GDP.

 

An analysis of the competitive climate reveals that Herndon Products, Inc. is still the top fastener supplier to the Department of Defense (DOD) with a significant lead over the second place contender.  Herndon Products based in O’Fallon Missouri generates $42 Million in revenue with approximately 85 employees.  The Small Business Size Standard for Hardware Merchant Wholesalers, naics code 423710 is 100 employees.  This is the threshold for small business designation which provides a competitive advantage over large companies.  

The largest fastener contract won by Herndon Products is long term contract # SPM5AZ09D0004, which was awarded on 10/20/2008; It covers an array of bolts, screws, rings, nuts and washers.  There were fourteen competitive bids for this contract.  Not unexpectedly, many of the top companies are aerospace suppliers including Raytheon, a new addition to the top 10 list.

Examining total sales,  Herndon Products (CAGE code: 3G1W3) is in the number one spot with almost $12 Million in contracts to the Defense Logistics Agency (DLA). Columbia Nut and Bolt has been displaced by Wesco Aircraft Hardware as the second place winner with just over $7 Million in sales.

Adept Fasteners moved up four spaces to the #6 position from last year.  New to the list for 2012 are Goodrich Corporation, Dialogic Fasteners and Sikorsky Aircraft.  In 2011, the top contractor sold $13.8 Million in fasteners to DOD while the #10 position earned $3.6 million, as compared to $11.8 Million and $2.7 Million in 2012.

Although the decline in defense spending is dramatic, some of this is in preparation for the upcoming sequester which was supposed to take effect in January 2013.  This could mean stabilization in defense spending going forward. While discussing the Pentagon’s effect on GDP in an e-mail release, Paul Ashworth from Capital Economics called it “The best-looking contraction in US GDP you’ll ever see”, expecting that this may be a one-time blip due to the impending belt tightening.

Another reason according to Michael O’Hanlon at the Brookings Institution is that Congress was late in setting the defense budget for 2012.  The budget was finally pieced together through continuing resolutions passed in the winter.  For a significant part of the year, the Pentagon did not know exactly how much it could spend.  

BidLink.net is a provider of defense industry information for contractors worldwide. This data includes millions of defense contracts, procurement history, part numbers and vendor details. This unique combination of resources allows BidLink to monitor and extract important information for the defense contracting industry. BidLink.net, based in Washington, D.C., provides bid search and notification services, procurement history as well as part number (NSN) lookup to many military activities and thousands of private companies around the world.

This article was written exclusively for Fastener Journal.  Comments? Send them to news@bidlink.net.

 

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