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Defense Contractor Engineering Change

By Michael Flagg
Washington Post Staff Writer
Thursday, November 25, 2004; Page PW01

In a windowless room, two men work on a box that can detect even minuscule bits of anthrax in the air. Down the hall, workers stack computer servers into big metal cabinets to go aboard submarines.

This is the Underseas Systems unit of Maritime Systems & Sensors, itself just a small part of Bethesda's Lockheed Martin Corp., the nation's largest defense contractor.

Bill Herman inserts a server into a cabinet destined for the USS Pittsburgh. Lockheed Martin buys the servers instead of making them, as it did in the past, a process that is easier, more efficient and less expensive. (Margaret Thomas -- The Washington Post)

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On the outskirts of the small city of Manassas, with the wind sighing in the trees that shelter this tranquil campus, engineers plan for a chemical attack on a U.S. city while others prepare for some country's cheap diesel submarine to fire a torpedo at one of the Navy's multibillion-dollar aircraft carriers.

The threats aren't new, but the way Underseas Systems operates these days is. It's a good example of how defense contractors have changed in the last decade.

Consider the refrigerator-size steel cabinet the company prepares for submarines, its insides stacked with computer servers like sleek black CD players. Cables spill out like entrails. In the old days, Lockheed Martin would have designed the servers -- small computers linked to make a big, powerful system -- from the ground up and then manufactured them. Now it buys them from a computer maker "commercial off the shelf" or, in industry parlance, COTS. It's easier, more efficient and cheaper.

Because computers are constantly getting more powerful, the Navy likes to replace its hardware every few years. That kind of off-the-shelf system makes doing so easier and cheaper. A sailor just slides the old servers out and slides the new ones in.

These days, Underseas Systems' entire manufacturing operation in Manassas fits into a room smaller than a basketball court and employs only 21 people. Instead of building systems, the employees do jobs such as designing the steel cabinets and stacking the servers.

"We reengineered how we work," said John W. O'Neill, president of Underseas Systems, which is headquartered in Manassas. "Our business has grown, but we need less floor space because we're an integrator of technologies now instead of a manufacturer."

Using off-the-shelf components is common in Northern Virginia's defense industry, of which Underseas Systems is the largest outpost this far south. Lockheed Martin is Prince William County's largest employer, with 1,500 people on the campus.

What would become Underseas Systems started in 1969 as an International Business Machines Corp. operation that made microchips for computers and ran part of IBM's defense contracting business. The unit's history of mergers and acquisitions mirrors the defense industry, where bigger companies have gobbled up smaller ones, trying to beat the tough times after the Cold War by diversifying. California missile-maker Loral Corp. acquired the IBM defense business in 1994, and Lockheed Martin, itself the result of a 1995 merger, bought Loral a year later.

Now, Underseas Systems makes submarine navigating systems, underwater mine detectors and machines that help sailors quickly identify what their radar signals are picking up, among other things. Many of their products are secret.

The campus is vast. Amid the trees and football-field-size parking lots sprawl low-slung sand-colored buildings of a million square feet, so vast that one hall is a quarter-mile long and people use bicycles to get around.

Big as it is, Underseas Systems is too small to disclose revenue or operating profit separately from its parent company. But it says sales have risen modestly in most of the past five years. Its products aren't, after all, the national security gizmos the government has been spending so much money on since the Sept. 11 terrorist attacks or munitions and tanks for Iraq, where defense dollars are also concentrated. They are things such as sonar -- submarine detectors -- for which there was much less need after the old Soviet Union dropped out of the arms race.

Now, though, sales could be on the verge of picking up.

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