Retired veterans beat Textron for nearly $1 billion military drone contract

December 18, 2012

Battlespace was founded in 1993 by two former Navy captains who had been passed over for promotion. Two decades later, the closely held company is beating much larger contractors such as Textron in a corner of the military’s unmanned-aircraft market.

Battlespace last month won a five-year award from the Air Force potentially valued at $950 million to maintain Predator and Reaper drones, the workhorses of the wars in Iraq and Afghanistan. The deal may more than double the company’s annual revenue of about $100 million and will boost its staff of about 540.

Jerry Norris, 71, the firm’s co-founder and president, is a former flight officer who flew in the type of F-14 Tomcat jets that were featured in the 1986 movie “Top Gun.” After retiring from the service, Norris and Robin Battaglini started the Arlington-based company with less than $10,000.

“You come to a crossroads, and you take it,” Norris said in a telephone interview. “If there’s no risk, it’s not very exciting.’’

The Air Force selected Battlespace using the “lowest price, technically acceptable’’ standard, Kelly Sanders, a USAF spokeswoman, said by e-mail. The work includes refueling and ordering parts for drones at military installations in the United States, Europe and the Asia-Pacific region.

Drone service provider may double sales (The Washington Post/Sources: Data compiled by Bloomberg; Federal procurement data)

Norris and Battaglini, the company’s chairman, met at the Pentagon, where they both worked, and hatched the idea for the drone business in 1992 over dinner and drinks at Battaglini’s home in Clifton, Norris said.

At the time, Norris was retiring. Battaglini, who once commanded a destroyer squadron, had retired and was working at ITT.

After winning contracts to develop training manuals and conduct flight tests for the Predator, they created a subsidiary, Battlespace Flight Services, to go after the maintenance work, Norris said. The unit won a contract in 2006, taking work previously done by San Diego-based General Atomics, which makes the MQ-1 Predator and the MQ-9 Reaper.

“That took us from being just a little, small company and put us on another scale,” Norris said.

About three-quarters of the company’s employees are military veterans, some of them disabled. “We are looking to place more of them as we grow the contract,” Norris said.

While Battlespace held the contract to maintain the Predators, General Atomics tended to its Reapers. In last month’s contract, the Air Force consolidated the work for both drones into one agreement that went to Battlespace.

When Norris learned of November’s award, he said: “I called my wife and said, ‘Honey, you can plan another vacation.’ ’’

The business isn’t very profitable, offering single-digit margins instead of the double-digit margins common in weapons production, Norris said. His company was forced to make a competitive offer on the recent contract because of the push by the military to cut costs, he said.

At the same time, it was easier for Battlespace to make an attractive bid because it doesn’t operate costly production lines, Norris said. “I don’t have that overhead,’’ he said. “I have people who can service that product at a much lower cost.’’

More than 40 companies expressed interest in the Air Force work, but only three submitted offers, including AAI, a subsidiary of Providence, R.I.-based Textron.

Textron had a partnership with DynCorp International, part of New York-based Cerberus Capital Management, for the competition, Stephen Greene, a Textron spokesman, said in an e-mail.

Kimberly Kasitz, a spokeswoman for General Atomics, declined to comment on the bidding.

The Defense Department over the next decade plans to increase its fleet of armed and long-haul surveillance drones, including Predators and Reapers, by at least 45 percent to about 645 in fiscal 2022 from about 445 in the fiscal year that began Oct. 1.

Although no defense program is immune to reductions, Norris says his piece of the market will be one of the last to be cut.

“It will be near the bottom of the barrel,” he said.

— Bloomberg Government

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