Are DoD Budget Cuts Ever Coming?

We reported in June that new administration’s defense budget includes major cuts to big spending programs.  But overall, will the DoD’s bottom line really shrink?  Counterinsurgency expert David Kilcullen, senior advisor to Afghanistan theatre commander Gen. Stanley McChrystal, sees “about two more years of heavy fighting” ahead of us in Afghanistan, and the Washington Post reports that costs of the Afghan war could “eclipse” the costs of the Iraq war. 

The rapidly-escalating conflict in Afghanistan presents a major opportunity for government contractors like DynCorp and Fluor, who each won $7.5 billion contracts in Afghanistan.  For perspective, according to the Washington Post, the U.S. spent a total of only $982 million on the Afghan conflict in 2003, and those awards have nowhere to go but up.

Strangely, what seems more at risk than Defense spending is the organized opposition that was forcefully advocating peace over the past few years.  Perhaps there are two questions: “Where’s the money?” and “Where’s the Peace Movement?”

Billable Hour Assault: Is Government Contracting Next?

What do pharmaceutical giant Pfizer, IT player Cisco Systems and credit powerhouse American Express have in common?  They’ve ditched the traditional hourly model for legal fees to cut costs. Pfizer, which spends over $500 million annually on legal fees, says it will cut legal costs by up to 20%, mostly through flat-fee arrangements, according to the Wall Street Journal.  Cisco Systems has shifted 80% of its legal work to flat-fee arrangements.

Since the White House Office of Management and Budget upped its ten-year deficit prediction to $9 trillion from its may estimate of $7 trillion, could the federal government be the next customer to ditch the billable-hour model?  Our prediction: keep an eye out for more fixed-price work in Government Contracting.

Creigh Deeds and Bob McDonnell to Address Potomac Officers’ Club

The Virginia gubernatorial candidates will address the group at a luncheon event on September 10th.  Click here to register.

Brad Antle’s New Brainchild: Salient Solutions LLC

Brad Antle
Brad Antle

Brad Antle, former CEO of SI International, has formed a new company Salient Solutions LLC with the backing of Frontenac, a private equity company in Chicago.  Joining Brad will be Ray Oleson as the Chairman, Ted Dunn as an EVP and CFO, and Tom Lloyd VP, Corporate Development.  It looks like the former SI Leadership team back on the field.  Frontenac was the same company that backed SI International in 1998 with their CEO1st program.  It was a successful formula before and we expect it will be again. We believe that Brad and the team are on the hunt for a platform company.

IBM: New Microprocessors Built by…DNA?

IBM researchers, working with Paul W. K . Rothemund of Cal Tech are working on a new way of building chips: arranging DNA origami structures on microprocessors that are compatible with semiconductor manufacturing equipment.

Their research looks to preserve Moore’s Law, which says that every two years the number of transistors that can be placed on an integrated circuit doubles. For four decades, Moore’s Law (named for Intel’s founder, Gordon Moore) has held true, but with chip geometries shrinking to 22 nanometers by 2014, the rising costs will “[alter] the fundamental economics of the industry” according to a June report by iSuppli.

By combining existing assembly technology and self-assembling DNA nanotechnology, IBM believes that major savings could be realized in what is historically the most expensive phase of chip manufacture.

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