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 AIA UPDATE: August 2006, Volume 11, No. 1
Senate Moves to Modernize Berry Amendment Through Exemptions The U.S. Senate in June adopted an amendment to the fiscal 2007 defense authorization bill that would update the decades-old statute that imposes burdensome administrative requirements on defense contractors and their suppliers. Preference for the use of domestic specialty metals in military hardware was first introduced in the Berry Amendment in the early 1970s. It is a relic of a time before the interdependence of the global economy and the defense department's move to commercial items that are much less expensive than their military-unique counterparts. The Senate amendment, offered by Sen. John Warner (R-Va.), chairman of the Senate Armed Services Committee and floor manager of the bill, would provide three exemptions from the Berry Amendment's specialty metals provision — one for commercial items, another for dual-use items to facilitate civil-military integration, and a de minimis standard below which the provision would not apply. The exemptions would provide a balanced approach to protecting the important domestic specialty metals industry while allowing the aerospace and defense industry to operate efficiently in today's economic environment. Without the exemptions the aerospace and defense industry would be forced to return to the use of military-unique items, a practice abandoned over the past 20 years to reduce the cost of military equipment. That would cost taxpayers billions of dollars annually to protect a small percentage of the U.S. military market for the domestic specialty metals industry at a time when it is enjoying record sales and profits. The aerospace and defense industry is informing all House members of the need for the exemptions in the Senate bill before the two bodies meet in conference. Emphasis is aimed at the House Armed Services Committee, which has rejected past attempts to modernize the Berry Amendment in a well-intentioned effort to protect the specialty metals industry. AIA's goal is to demonstrate that the Senate bill will create a more balanced approach to protecting both the specialty metals industry and the aerospace and defense industry at a lower cost to taxpayers. AIA Source: terry.marlow@aia-aerospace.org AEROSPACE FOCUS  Industry Initiative Exploring Alternative Aviation Fuels Concerns over rising fuel costs, energy supply security, and the need to reduce aviation emissions have created opportunities for industry to again explore the use of alternative fuels for aviation. Representatives of FAA, the Defense and Energy departments, NASA, and the fuel supply, aircraft and engine manufacturing, and airline industries met in May at a one-day workshop to discuss alternative fuels for aviation. The workshop was sponsored by FAA, the Air Transport Association of America, and AIA with support from The Boeing Company and The Port of Seattle. Participants agreed that government and the commercial sector should work together to promote alternative fuels to secure supply availability, minimize price volatility, improve aircraft operational performance, reduce aviation's impact on the environment, and promote environmentally beneficial production. Expedito Parente, founder of TecBio, a bio-fuels producer in Brazil, shared his company's experience with production and testing of bio-fuels, concluding that long-term commitments from government and the private sector were important to Brazil's success in adopting alternative fuels. DoD representatives discussed that agency's program to develop alternative military fuels for aviation and ground equipment. Overall, the workshop identified the following and formed working groups for each:
Workshop attendees expressed potential for progress on alternative aviation fuels but cautioned that lessons should be remembered from the 1970s and 80s when market forces were allowed to undercut development of domestic alternative fuels. AIA Source: howard.aylesworth@aia-aerospace.org Association Briefs Reporters on Troubling Acquisition Provisions There are a number of troubling acquisition provisions in this year's defense authorization bills, including Section 807 in the Senate authorization bill (S. 2766) that would establish a preference for fixed-price contracts in development programs. At a press briefing in July, AIA President and CEO John Douglass discussed the provisions while explaining to reporters some basics of contract management, including the ABCs of fixed-price versus cost reimbursement contracts. Douglass pointed out that there are times when it makes sense to use fixed-price contracts — when acquiring supplies, conducting studies, or for production of a mature program. Cost reimbursement contracts, on the other hand, are more appropriate for projects where the technology is immature, the risk is high, and the government is encouraging innovation, he noted. Douglass explained that selecting a contract type is often part of the contract negotiation process and involves consideration of a number of complex factors, including the risk to contractors, risk to government, cash flow, progress payments, administration, and fee/profit. On the issue of profits, he said, it is important to note that the aerospace and defense industry is the lowest of all U.S. manufacturing sectors, including the utilities industry. He also cautioned reporters that interchanging the words "bonus" and "profit" can be misleading when discussing award and incentive fee contracts. Concern over escalating costs of weapons systems, especially with the continued cost of the war in Iraq, is believed to have been the impetus for the introduction of Section 807 of S. 2766. AIA, however, is urging lawmakers to recall the experiences of the 1980s when widespread use of fixed-price development contracts resulted in a number of high-profile program failures. Douglass urged lawmakers to consider other tools to control costs such as multiyear contracting and total program cost caps. AIA Source: terry.marlow@aia-aerospace.org WASHINGTON PIPELINE: NGATS Momentum Needed to Ensure Clear Skies for Air Travel By John W. Douglass, AIA President and Chief Executive Officer The summer travel season is in full swing, and experts have predicted one of the busiest on record. Amid the forecast of more passengers, fewer available seats, and higher fares, an important bit of news came out early this summer. FAA has a new software tool to help air traffic controllers deal with foul weather, and preliminary reports show it is helping cut the number of delayed flights in half on stormy days. There is a lesson in this news. The number of air travelers is surging, reaching levels attained before the 2001 terrorist attacks, and that trend is only going to continue. Some estimates have air travel capacity needs tripling by 2025. However, to handle the projected surge in air travel, we need more than incrementally upgraded technology added to the current system. We need an entirely new system that will address security, safety, and efficiency for passenger, cargo, and aircraft operations curb-to-curb. The system will rely on satellites and other technologies to provide advanced information with enhanced cockpit, navigation, and landing capabilities as well as far better data on real-time weather and traffic conditions. Such a system will reshape air traffic management as we know it. Fortunately, there is a vision for the new system. In its final report in November 2002, the Commission on the Future of the U.S. Aerospace Industry laid the groundwork for the Next Generation Air Transportation System (NGATS) with a recommendation that resulted in the creation of the Joint Planning and Development Office. The seven-agency JPDO is tasked with providing the leadership, organization, and planning needed to achieve the new system's goals. The JPDO is an unprecedented collaboration among the Transportation, Commerce, Defense, and Homeland Security departments along with NASA, FAA, and the president's Office of Science and Technology Policy. Industry stands as a partner in the process through the AIA-supported NGATS Institute, an organization providing direct industry input into the development and planning of the future air transportation system. The structure is in place — but the real challenge lies ahead. The JPDO has to deliver on two important products in the very near term to ensure that Congress and other stakeholders' support remains firm: an executable plan that is supported by both government and industry and a funding outline of projected costs to build the system. The plan should allay congressional concerns that the JPDO has the technical talent and leadership in place to achieve the vision first laid out by the Aerospace Commission. That support is vital because one of the greatest challenges to the effort is funding, a key that Congress controls. Funding for NGATS remains a concern. While some work is being done, estimates show that there is at least a $250-$300 million a year gap in the research needed to develop and implement NGATS. This is compounded by the erosion of funding for NASA aeronautics, vital transitional research needed to take NGATS from the drawing board to the skies. When Congress has a better picture of the total cost, along with the detailed plan, I believe it will be more likely to make a long-term commitment to the new system. A lot is at stake for America: a full 10 percent of the gross domestic product and the nation's international competitiveness, both of which impact our quality of life. For these reasons it is imperative that Congress, the administration, and industry work together to create an advanced air transportation system that stays ahead of the crowds. WASHINGTON WATCH: First Certified Design Organization Aviation Rulemaking Body Meets The first plenary meeting of the Certified Design Organization (CDO) Aviation Rulemaking Committee (ARC) took place in May. A CDO is a body that has been examined and certified by the FAA administrator to have adequate engineering, design, and testing capabilities, standards, and safeguards. The organization ensures that a product is properly designed, meets regulatory standards, and continues to operate safely. CDO, like the soon-to-be-implemented Organization Delegation Authorization, is a robust organizational certification approach that uses certificate management rather than delegation and requires enhanced processes, such as self-audit and enforcement, for ensuring compliance on the part of the holder. The method of FAA investigation of a proposed type design would shift from reliance on FAA designees to certification of compliance by the CDO. The ARC, jointly comprised of industry and government representatives, will enable FAA to respond effectively in developing a CDO program. The committee is co-chaired by Tom McSweeny of Boeing and Scott Geddie of FAA. It will make its recommendations, which could include proposals for rulemaking, suggested processes, policies, and guidance that will serve as the foundation of the program and offer actions the agency might take in support of the program. Though advisory only, the ARC's input will form the foundation of the CDO program. AIA Source: michael.romanowski@aia-aerospace.org WASHINGTON WATCH: AIA Rotorcraft Group Discusses Defense Helicopter Losses AIA's Rotor Wing Revitalization Project Working Group recently discussed safety and survivability improvements for defense rotorcraft, sharing ideas on ways to reduce the number of helicopters lost during combat operations in Iraq and Afghanistan. Since the start of the Global War on Terror, the Defense Department has experienced a sharp rise in the rate of fatal helicopter mishaps. In light of this and at the request of the undersecretary of defense for acquisition, technology, and logistics, AIA convened leaders from the rotorcraft sector of industry to develop recommendations on reducing military helicopter losses. The project is set to conclude at the end of fiscal 2006, culminating in recommendations to DoD. AIA Source: michael.vanzummeren@aia-aerospace.org WASHINGTON WATCH: AIA Expresses Support for National Research & Development Policy Representatives of AIA and aerospace companies testified in June at an Aerospace States Association hearing on the administration's developing research and development policy scheduled to be released later this year as part of a new National Aeronautics Policy. The association was represented by John Kopecky, former Washington director of space and aero propulsion programs for United Technologies' Pratt and Whitney, who is president of the Kopecky Group, a consulting firm specializing in aerospace program and public policy issues. AIA supports a new national aeronautics policy to guide the nation's aeronautics programs through 2020, Kopecky said in his testimony, adding that it must be consistent with the government's historic role of promoting U.S. leadership and competitiveness in both military and civil aeronautics. The full text of AIA's testimony can be read on the association's Web site at aia-aerospace.org. Others from the aerospace industry who testified were John Borghese, vice president of Rockwell Collins' Advanced Technology Center; Preston A. Henne, senior vice president of programs, engineering, and test for Gulfstream Aerospace; and Jack J. Pelton, chairman and CEO of Cessna Aircraft Company. The Aerospace States Association is made up of lieutenant governors and state-appointed delegates, including science advisors, industry experts, educators, and others with an interest in enhancing education outreach, economic development opportunities, and global competitiveness. AIA Source: jana.denning@aia-aerospace.org Acquisition Issues Discussed at 2nd Executive Space Industry Roundtable The second Executive Space Industry Roundtable took place at AIA's Board of Governors meeting in Williamsburg in May. Chaired by Jim Albaugh, Boeing executive vice president and president and chief executive officer of the company's Integrated Defense System, the session was attended by more than 50 chief executive officers and senior space executives. Citing problems in the national security space arena, participants discussed acquisition reform issues and endorsed AIA Space Council plans for a forum on cost estimating. Several industry CEOs and high-level DoD officials are expected to participate. "In our preliminary conversations with the government in setting up this forum, it's been generally agreed that industry and government tend to talk past each other on the subject of cost estimating," said J.P. Stevens, AIA's vice president of space systems. "Our goal is to improve dialogue between both parties and to encourage clearer terminology and common assumptions on new national security projects." Roundtable attendees expressed hope that the forum will lead to a series of similar meetings that will cover other subjects in space acquisition. Participants also approved plans for a Space Education Initiative for Congress, beginning with a space history presentation designed to tie lessons learned from the past into the space issues faced on Capitol Hill today. In addition, the Space Council was asked to investigate approaches to advocate a cohesive space architecture roadmap, develop space platform planks for the 2008 presidential election, and seek government outreach to entrepreneurial business practices. AIA's Executive Space Industry Roundtable, held twice a year at AIA Board of Governors' meetings, is designed to report to and receive direction from member companies. The next Roundtable will take place in Phoenix November 15 and will be chaired again by Albaugh. AIA Source: andrew.barber@aia-aerospace.org Workforce Key to Competitiveness, Douglass Testifies AIA President and CEO John Douglass testified in June before the House Science Commit-tee's Space and Aeronautics Subcommittee on NASA's current and future human capital needs. "In workforce planning," Douglass told the panel, "NASA must remain aware that a healthy aerospace workforce holds the key to America's economic competitiveness. "Douglass also identified a series of critical workforce skills that NASA must continue to cultivate for successful U.S. space exploration operations. The skills include systems engineering, project management, manufacturing technology for human space flight, and aerodynamics. He also appealed to NASA to enlist industry more aggressively in aeronautics research. "Private sector work in the realm of aeronautics will ensure that federal research has relevance to engines and aircraft planned for public use," Douglass said. The subcommittee, chaired by Rep. Ken Calvert (R-Calif.), has jurisdiction over NASA and certain research programs managed by the National Oceanic and Atmospheric Administration. AIA Source: patrick.mccartan@aia-aerospace.org SUPPLIER MANAGEMENT COUNCIL: Summer, Fall Meetings to Concentrate on Identifying Business Opportunities One of the most difficult goals for associate members to achieve as suppliers today is reaching a balance between business sectors of the aerospace and defense industry and knowing where future business will be located. The focus of the next two Supplier Management Council meetings will give associate members insights into distinct business areas and identification of prospective customers. An August 15-18 meeting in Seattle will focus on the civil aviation market from the perspective of The Boeing Company and on aspects of aerospace globalization. A tour of Boeing's 737 production line is also planned. The SMC will meet again in Cocoa Beach, Fla., October 24-26, to look at national security and NASA space business, including manned missions to the moon, Mars, and beyond. To participate, contact Bill Lewandowski, AIA vice president of supplier management. AIA Source: bill.lewandowski@aia-aerospace.org Anne Ellis Joins AIA Space Division Anne M. Ellis has joined the association as manager of space systems. AIA Vice President for Space Systems J.P. Stevens said Ellis' background in non-profit organizations and civil and military space policy made her a perfect fit for the new position. "Anne will be the lead staffer facilitating interaction among the members of AIA's National Security Space Committee," Stevens said. "She will be a valuable asset to AIA, the Space Council, and members of the Executive Space Industry Roundtable." Before coming to AIA, Ellis was government relations representative for the American Institute of Aeronautics and Astronautics where her responsibilities included tracking and analyzing space legislation and policy, serving as liaison to its Public Policy Committee, and developing workshops and panel discussions for members of Congress and the administration. Earlier in her career she was on the staff of Rep. C.L. "Butch" Otter (R-Idaho) and a consultant with Veritas Advisors, LLP. Ellis earned a bachelor's degree in political science from the University of Idaho with minors in economics and German. She also completed advanced studies in Austria at the Vienna University of Business and Economics. AIA Source: jp.stevens@aia-aerospace.org Goodrich Sensor Systems Hosts Regional Meeting Goodrich Corporation hosted AIA's Midwestern Regional Meeting in June at its Sensor Systems facility in Burnsville, Minn. Attendees toured the plant, which designs and manufactures aircraft and engine sensors that provide critical measurements for flight control, cockpit information, and engine control systems. Jerry Witowski, segment president of Goodrich Electronic Systems, welcomed AIA members and told how the Burnsville facility supports today's commercial, regional, business, and military aircraft worldwide. In addition, Brian Gora, president of Goodrich Sensor Systems, discussed several current and future programs that use Goodrich technologies. AIA President and CEO John Douglass discussed the association's forecast for industry sales and profits in coming years and summarized major legislative issues being tackled by the association. Civil Aviation Vice President Michael Romanowski's presentation gave insight on aeronautics research and its impact on U.S. industry. AIA Source: trish.ward@aia-aerospace.org Aerospace Industry Performance Continues Positive Trend Like New Year's Day morning, aerospace industry first quarter results usually suffer from the revelry of the fourth quarter. Not so this year as the 2005 order boom continued into the first quarter of 2006. Orders in the 2006 first quarter totaled $62 billion — the second highest quarter on record, though coming in 28 percent below the record quarter reported for last year's fourth quarter. Similarly, aerospace corporations posted record profits despite a 6.6 percent decline in overall sales. Export sales in the quarter rose 7.6 percent to a record $20 billion Employment, meanwhile, continued to grow, pacing the backlog of unfilled orders. For more information and to subscribe to free AIA statistical updates» AIA Source: david.napier@aia-aerospace.org |
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