Iraq a Proving Ground for Defense Firms

Defense contractors are working behind the scenes to figure out how their weapons are performing in Iraq, knowing that future Pentagon contracts will flow to the companies with the best military hardware.

The stakes are huge for defense firms in Southern California, the nation’s center for new weapons development. After the war, the Pentagon is sure to redefine which technologies are likely to get more funding and which may fall by the wayside.

If the high-tech weapons don’t match expectations or aren’t as decisive in battle as foot soldiers and tanks, funding priorities could shift.

“Much has been made in the initial days of the war that the U.S. campaign in Iraq represented an entirely new form of warfare. We think this is only partially true,” said Byron K. Callan, an analyst with Merrill Lynch, Pierce, Fenner & Smith. “Arguably, some of the combat scenes shown on TV look more like they are from 1943, not 2003.”

Defense contractors aren’t talking publicly about the performance of their equipment, not wanting to stir up criticism that they are profiting from death and destruction.

But in weapons laboratories and boardrooms, engineers and executives have been intensely analyzing the war to see how their products are faring. They also are looking for signs of what the next “big weapon” may be: the system, not necessarily their own, that does especially well and could be the source of future contracting dollars.

Several defense industry engineers and executives acknowledged that they have been closely monitoring developments in Iraq. The bulk of their intelligence comes from Pentagon officials as well as from their own company observers in the field. Industry executives also are keeping an eye on news reports.

But some of the best assessments have come in the form of complaints filed by military personnel, one engineer conceded.

It’s too early in the war to say which weapons and technologies are winners and which are losers, but eventually those assessments will affect corporate futures.

“Companies are always shifting business strategy after the war. You saw that with Afghanistan and with the last Gulf War,” said Richard Phillips, a defense analyst with investment bank Houlihan, Lokey, Howard & Zukin. “So this is a critical time for them as they try to understand what technologies are important and what are not.”

Precision-guided bombs, such as the joint direct attack munitions developed by Boeing Co. engineers in Anaheim, have gotten considerable use, but officials cannot yet say with certainty how precise and effective they have been.

Moreover, many of the new technologies are being deployed outside public view. It may take months or even years after the war for the Pentagon and the defense industry to make a full assessment of their value.

“Less than a third of the fighting has been completed, and the lessons learned from looking at the war through the soda straw of embedded media are not necessarily the lessons being learned by the war fighters or the decision makers,” said Chuck DeVore, vice president for research at SM&A;, a Newport Beach defense research firm. “There are a lot of things we aren’t seeing.”

The weapons being monitored closely by the Southern California defense industry include unmanned aircraft, precision bombs and computerized warfare systems.

The 2001-02 military operations in Afghanistan showcased the utility of pilotless airplanes, which not only could keep an eye on potential targets for up to 24 hours, but also strike them with missiles when the right opportunity arose.

In Iraq, a small armada of unmanned aircraft is flying missions alongside traditional fighter jets and bombers -- conducting surveillance and even attacking radar and communication installations.

One of these pilotless aircraft, the Predator, was developed by Rancho Bernardo, Calif.-based General Atomics Aeronautical Systems Inc. Its success in Afghanistan prompted the nation’s largest defense contractors, including Boeing, to refocus military aircraft development to unmanned aircraft.

The Southland’s defense industry also had a major hand in developing “network-centric” warfare, in which troops, tanks, aircraft, ships and command centers are linked via an Internet-like communication system. A nascent version was first tried in Afghanistan, in which special operation forces were able to summon fighter and bomber pilots directly for airstrikes.

In the past, ground troops would first contact the Army operations center, which would relay the request to Central Command for review. If it approved, Central Command would then forward the request to an Air Force operations center, which would scramble the pilot.

In the 1991 Persian Gulf War, the process sometimes took days. In Bosnia and Kosovo, enemy forces were able to easily move about the country and evade airstrikes -- and military strategists began pushing for greater and faster coordination.

Defense contractors have spent hundreds of millions of dollars setting up special facilities to test the new communications technology. Northrop Grumman Corp. has one of those facilities in El Segundo, and Boeing has a similar operation in Anaheim. Both feature massive theater-like screens and dozens of computers, resembling a modern-day version of NASA’s mission control center.

Pentagon officials envision one day instantly coordinating the activities of all four services -- Air Force, Army, Navy and the Marines -- from a single command and control center, all with the hope of being able to destroy a target within a few minutes.

Another example of network-centric warfare is the battlefield computer.

For the first time, some U.S. troops have been equipped with a laptop-like system that gives an infantry squad or a tank crew the capability to see exactly where they are, where other U.S. units are and where the enemy may be. The system was developed by engineers at Northrop Grumman’s Carson facility.

If the technology works as intended, Pentagon planners hope to eventually extend the capability to an individual soldier holding a hand-held device -- a decision that could mean a fortune for Northrop.

Chicago-based Boeing, meanwhile, is closely monitoring the performance of the precision-guided bombs developed at its Integrated Defense Systems’ plant in Anaheim.

Analysts believe that more than 90% of the bombs and missiles will be precision-guided, up from barely 10% in 1991. Developing the technology is paying off for Boeing, whose revenue from the precision bombs are helping offset losses from its commercial aircraft business.