When Bill Lynn joined DRS in 2012, the heavily army-oriented firm was so troubled by bloated overhead and plunging revenues\u00a0\u2014\u00a0driven largely by drawdowns in Afghanistan and Iraq\u00a0\u2014\u00a0that its parent company, Finmeccanica (now Leonardo) had plans to divest from the business it had acquired just four years earlier.
So tell us about your focus on Israeli technology and how significant it is to DRS business development plans.<\/b><\/p>\n\n\n\n
Israel is unique for us. It\u2019s an important market in and of itself, where we\u2019ve supplied all three military services over the years. We\u2019re now working on behalf of Leonardo with the Israel Navy to supply the Otto Melara 76mm gun for a number of their sea platforms.<\/p>\n\n\n\n
But beyond that, it\u2019s an important partner in terms of having terrific, battle-proven technology that we can pull into the US market to the benefit of the US military. So far, it\u2019s been very rewarding to team with Israeli companies and mate their technology with our market leadership in various defense sectors. It has allowed us to win some important programs and has allowed the American military to get some key capabilities much quicker and at far less cost.<\/p>\n\n\n\n
DRS recently scored a big win with Israel Military Industries (IMI), beating out General Dynamics Land Systems. That was a big deal for you, right?<\/b><\/p>\n\n\n\n
Absolutely, and our partnership with IMI is a great example of this strategy. We\u2019re talking more than $400 million, if all options are exercised, to provide M1A2-based assault bridging systems to the US Army. In this case, we married IMI\u2019s technology with our leadership position in the market, and it allowed us to beat a very strong incumbent and bring that technology over to the United States. We\u2019re responsible for integration and we\u2019ll perform production work in Missouri at our Sustainment Systems division.<\/p>\n\n\n\n
And you’re in a strong position with Israel’s Rafael to provide the Trophy active protection system (APS) on M1 main battle tanks.<\/b><\/p>\n\n\n\n
Yes. We\u2019re working to insert this operationally mature, battle-proven APS system immediately into the American military, first on M1 tanks and later, other ground vehicles. It\u2019s another example of how DRS is helping the government avoid the need for an expensive development program and get this needed capability to the troops much faster.<\/p>\n\n\n\n
The Army is talking on the order of a brigade or two with the Trophy, and similar-sized orders with other technologies for Strykers and Bradleys. Then I think they\u2019ll evaluate where they are and decide where they want to go in terms of more vehicles and if they want to down-select on a single technology or continue with multiple technologies. If they decide to down-select to one, we believe we\u2019re in an extremely advantageous position, given the combat-proven nature of this Israeli life-saving system.<\/p>\n\n\n\n
When do you expect your first contract and what is the anticipated value?<\/b><\/p>\n\n\n\n
We expect it to start in 2017 for the first couple brigades. We\u2019re initially looking at a contract on the order of $100 million, which would take a couple of years, at least. Then we\u2019ll see where the Army is willing to go from there.<\/p>\n\n\n\n
You’re also in the running for another major US Army contract, valued at about $400 million, with another combat-proven Israeli system. Tell us about that.<\/b><\/p>\n\n\n\n
Our partner Roboteam has already won a US Air Force order, and now we\u2019re in a very strong position to capture a program called CRS-I (Common Robotics System-I). It\u2019s a small, man-carried robot that people are very excited about. We expect to see the request for proposals come out in the spring of 2017, and normally there would be a 60-day response and then another few months until selection. So we\u2019re looking at late 2017 or early the following year, and we\u2019re very optimistic.<\/p>\n\n\n\n
Any other Israeli firms you’ve teamed up with for the US market?<\/b><\/p>\n\n\n\n
We\u2019re teamed with Rada [Electronic Industries], where we think there\u2019s real potential in the US with their tactical radar. We\u2019re now in the middle stages of trying to navigate into an opportunity that would be good [for both of us] to bring this impressive technology to the US military.<\/p>\n\n\n\n
We\u2019re also teamed with Beit-el Industries to bring their filtration systems to the US market, and we\u2019ve been exploring a number of opportunities with Elbit [Systems], where they have a strong presence in Italy and, of course, in the US and the international market. I\u2019m not ready to talk specifics on that yet.<\/p>\n\n\n\n
With so much focus on Israeli technology, you’re not concerned about the “not made here” mentality that has been an obstacle in the past to major non-US procurements?<\/b><\/p>\n\n\n\n
In all these cases, DRS will have to be the prime, and we\u2019ll have to license the [intellectual property]. We\u2019ll have to build a good part of it in the US in order to qualify for US budget support or in cases where the Israeli government wants to acquire these systems with US Foreign Military Financing aid.<\/p>\n\n\n\n
But to answer your question, I think that mentality is a thing of the past. If you look at all the defense companies now, they all have global supply bases. And at the prime level, you\u2019ll see more and more international competitions. In some sectors, it\u2019s hard to have competitions if you don\u2019t have international content. So I think it\u2019s inevitable that you\u2019ll see a more international defense industrial base, which is a good thing ultimately for the US taxpayer.<\/p>\n\n\n\n\n\n
Finally, you’ve served in the Pentagon under two presidents, as comptroller under Bill Clinton and, more recently, as deputy defense secretary in the Obama administration. From your previous work in the Senate, in the think tank community and in industry, you’ve closely followed the program, planning and budgeting process. What changes do you expect under a Trump administration?<\/b><\/p>\n\n\n\n
Well, the budgets are already heading up and I think it\u2019s possible that the increase will accelerate. With an entirely Republican leadership in both houses of Congress and in the White House, prospects are high for eliminating the sequester permanently, rather than doing the two-year deals we\u2019ve been doing. And that\u2019s important in terms of predictability and stability. It will be a good thing for [the Department of Defense], which, as you know, lives according to a five year plan. So there\u2019s potentially room for improvement in the period ahead of us.<\/p>\n\n\n\n