Vector Strategy, Inc,
SOUTHERN PINES, N.C: Vector Strategy has published a new release of their Armor Procurement Forecast for US Military Ground Vehicles. According to Marcia Price, president of Vector Strategy, “Due to the uncertain funding environment facing the US military armored vehicle market, we present two forecast scenarios in the newest release of our armor procurement forecast. We believe this will provide our clients with a more complete assessment of the market they face.”
These two forecast scenarios are driven by different assumptions in the following key areas: US troop deployment in Iraq and Afghanistan, emphasis on investment in conventional versus irregular warfare, tradeoff between investing in current force versus future force equipment, size of DoD budget inclusive of supplementals through FY15, equipment needs for Grow-The-Force and modular transformation, and outcome of the US presidential elections.
Vector Strategy projects that between $15 billion and $22 billion of armor for US military ground vehicles will be procured by the Department of Defense for US military forces between 2009 and 2015 (seven years inclusive). The $22 billion reflects a steady-state or stable DoD budget environment (Scenario A) and the $15 billion reflects a more austere or retrenched DoD budget environment (Scenario B).
Scenario A is close to a “best case” scenario, but not quite. It does not present a DoD budget environment of total unconstraint, nor does it fund everything on the DoD’s wish list. But it does assume a continued period of supplemental funding that moves the DoD, and especially the US Army, to a fully recovered and equipped position by the end of the forecast period.
Scenario B is not a true “worst case” scenario, but it approaches that position. Scenario B does not depend solely on the DoD’s base budget. It assumes some continued supplemental funding or additional funding above the current base budget. It supports reset and replacement of equipment due to the GWOT, but at a slower recovery rate than Scenario A. It funds future vehicle platforms, but relies more heavily on procurement of “bridge” vehicles and recapitalized vehicles to approach fielding of future brigade combat teams in an incremental manner. And it requires the DoD to make difficult choices in procurement priorities.
According to Ms. Price, “The likelihood is that future armor procurement will fall somewhere between Scenario A and Scenario B, coming in perhaps closer to Scenario B.”
FY09 armor procurement in Scenario B is about 15% lower than armor procurement using Scenario A assumptions. Factors contributing to the FY09 decline from Scenario A to Scenario B include a reduction in funding for new HMMWV, FMTV, and FHTV procurement; fewer new HMMWVs being up-armored on the production line; and a reduction in the number of upgraded Abrams and Bradleys.
Both scenarios show a trough in armor procurement in the FY12 to FY13 timeframe from peak armor procurement in FY07 to FY09. However, the delta between Scenario A and Scenario B becomes more evident as one moves forward in the forecast horizon and causes the trough in Scenario B to be more severe. In Scenario A, FY13 represents 45% of the armor procurement the industry experienced in FY08. In Scenario B, FY13 represents only 30% of the armor procurement the industry experienced in FY08.
Both scenarios show increasing armor procurement in FY14 and FY15, although Scenario A’s increase is more robust. The increase in both scenarios is driven by low rate initial production for new vehicle platforms such as the JLTV, FCS MGV, MPC, and EFV.
Vector Strategy provides forecasts and services that advise companies in the military armor industry of technology trends, government procurement, market size and growth, industry players, and supply chain issues.
