WATERVLIET ARSENAL, N.Y. (Feb. 18, 2014) -- The Watervliet Arsenal announced today that it received nine contracts worth more than $10.9 million to provide various weapon system components for the U.S. Army's TACOM Life Cycle Management Command. These items will go to sustain U.S. troop units in the field.
These orders add to the arsenal's current workload more than 19,000 direct labor hours for fiscal years 2014 and 2015, said Ray Gaston, the arsenal's chief of the Production Planning and Control Division.
"This is huge for us," Gaston said. "Although these orders will not make up for all the workload we have lost the past 12 months due to sequestration, they represent the most significant amount of new work that we have seen in the last six months."
When sequestration took effect in March 2013, weapon program managers became hesitant to award new contracts because of the fiscal uncertainty that sequestration caused within the defense budget, Gaston said. Large multimillion dollar contracts for various weapon systems were not showing up in future workload projections for the arsenal, which in turn affects cost rates.
Cost rates go up when workload declines because there is less revenue to cover the fixed and variable costs associated with maintaining the arsenal's 2.1 million square feet of manufacturing and administrative space. Higher cost rates may then drive potential customers, the U.S. Defense Department and or defense contractors, away from considering the arsenal as a manufacturing source.
But why would an Army arsenal need to worry about workload and cost rates?
Although the arsenal is an Army-owned and operated manufacturing center, U.S. defense manufacturing work does not automatically flow to the arsenal. The arsenal must compete not only against a handful of other Army manufacturing centers, it also must compete with private industry. And with the war in Iraq having ended and combat operation in Afghanistan soon to end, this is a very competitive time for those companies that supply the defense industrial base.
The bottom line is that whatever the arsenal can do to hold the line on its operating expenses helps it to remain competitive. But there is only so much cost containment that can be done without causing irreversible damage to its infrastructure and skill base and therefore, the best way to reduce its cost of production is by having a healthy workload.
Nevertheless, the arsenal has been doing all that it can to slow down potential hikes to its cost rates. For the fiscal year that ended last September, the arsenal reduced its cost of operations by more than $12 million by implementing such actions as eliminating planned maintenance and repair projects and by reducing its workforce numbers from about 600 to 560. Arsenal leaders are currently implementing other methods to reduce this year's cost of operation by several more millions of dollars.
Funny how time and fiscal uncertainty changes the dynamics of the Army's industrial base because just two years ago a $1 million contract would not have raised any eyebrows at the arsenal. But last month, the arsenal's eyes were not only wide open when it celebrated a $1 million order for clamps for the 81 mm mortar system, the story also made headlines in the Army.
The arsenal is also looking at how to make up some of the potential workload fallout by seeking public-private partnerships and by tapping into foreign military sales. In the meantime, the arsenal is celebrating all contracts, no matter how small.
The orders, which range from manufacturing cannon tubes and bore evacuators for Abrams tanks to breechblock parts for the M777 155 mm lightweight howitzer system, will begin shipping in August 2014.
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