At Army conference, contractors sell their ability to cut down on Pentagon's costs

By Marjorie Censer
Monday, November 1, 2010

The Pentagon may be calling for contractors to be more efficient, reduce overhead costs and lower equipment prices, but the sprawling convention floor at the annual Army conference last week showed few signs of contraction.

If anything, the conference appeared bigger than ever, with the National Guard booth boasting a realistic fort complete with faux brick facade and contractors laying out a massive array of Army trucks, tents, aircraft and complex electronic equipment. On the exhibition floor, visitors had their pick of giveaways, from pens to stress balls to candy.

Yet, attendees said this year's meeting had a different tone -- one in which companies spent less time flaunting gee-whiz gadgets in favor of pitching things that might save the service money.

At BAE Systems' expansive booth, the theme was affordable solutions, said Linda Hudson, president of the company's Arlington-based U.S. business.

"That's not something we would have emphasized in the past," she said. "That is a different flavor."

For instance, BAE displayed its "recapitalization" program for Humvees, an effort centered on fixing and updating the Army's sizable fleet of light vehicles as an alternative to buying new.

At Harris Corp.'s exhibit just a few blocks down, the company -- which is based in Melbourne, Fla., but has about 1,700 employees in the D.C. area -- was touting its commercially developed radios. Because the company designs the radios using its own money, they're a cheaper buy for the Army than paying for a program from inception to manufacture.

And at Textron's spacious booth, the company was showing military officials its ability to link existing communications equipment to make it more useful.

Price and value has always been important, said Fred Strader, president and chief executive of Wilmington, Mass.-based Textron Systems. But now, Army officials know they are facing a constrained budget.

"They're asking the tough questions," he said of officials who visited Textron's booth. They wanted to know the real pricing and whether using existing Army-owned depots might cut down on costs, Strader added.

Army officials addressing the crowd at the event made it clear they're looking to save dollars. Army Secretary John McHugh in his opening address Monday morning said the service should look to the private sector for ways to be more efficient.

"We can learn from the private sector, without replicating," he said. "We can change. And I believe we have to, and I believe we will."

Top defense contracting officials have already begun to absorb that message. For now, though, the largest companies seem to be taking the looming slowdown in stride. General Dynamics, Northrop Grumman and CACI International all posted strong quarterly financial results last week.

Indeed, the Association of the U.S. Army, the convention's sponsor, said more than 35,000 people attended the three-day event, at least 2,000 more than in 2009. Companies paid $1,900 per 100 square feet on the exhibit floor just to get a concrete square they could outfit with displays of heavy vehicles and fancy electronics.

For Strader, the packed days began around 7 a.m. with breakfast meetings and ended with evening receptions, including one Monday at the Swedish Embassy. Textron had more than one reason to show up. The company is partnered with Swedish firm Saab and is seeking to sell an unmanned vehicle to Sweden.

"By the end of three days, I will have basically done six months worth of meetings," Strader said.

The key, said Roger Krone, president of Boeing's Arlington-based network and space systems business, is the interaction with top Army officials. Krone said chances are the Army's chief of staff will visit the company booth and check out a few of its technologies every year at the event.

That kind of one-on-one interaction is generally prevented by strict procurement regulations, but is allowed at a "widely-attended event."

"You can actually bring something here and show it to customers," Krone said. "That's why you see contractors willing to spend the money for large booths."

Strader said Textron hosted a range of Army officials, many of whom stayed longer than their allotted time. One four-star general was slated to spend five minutes at the booth and ended up staying almost 30 and requesting a follow-up meeting, Strader said.

With the Army as its single largest customer, Hudson said it's important for BAE to show up.

"You don't sell things at a trade show," she said. But companies have an opportunity to advance their brands, see what their competitors are doing and interact with top Army officials.

"It's an important part of building the relationship with the customer," Hudson added.

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