Foreign Defense and Aerospace Companies Struggle to Crack U.S. Military MarketJanuary 13, 2012

 

Foreign defense and aerospace contractors consider the U.S. defense market the ultimate prize. But winning contracts from the Pentagon is difficult, even for countries with strong relations with the United States, according to an article in The Wall Street Journal.

Receiving a contract from the Pentagon, however, is often a major win for foreign companies because it signals that their product has met a high quality threshold. “If the United States is buying it, other people want to buy it,” said Michael Herson, president of the lobbying firm American Defense International told the Journal. “It's the Good Housekeeping Seal of Approval, because the U.S. military only buys the best.”

Yet, even if a foreign product is of the highest quality, the Pentagon throws up many hurdles before selecting it. “The U.S. market isn't easy” to break into, said Richard Aboulafia, an analyst with the consulting firm Teal Group, according to the Journal. Foreign companies face many disadvantages, especially when classified work is involved, the Journal noted.

Not only do foreign companies often lose out when the entry barrier is too high, but purchasing restrictions can also hurt the Pentagon, David Berteau, an expert with the Center for Strategic and International Studies, told the Journal. The Pentagon, he says, “suffers from less competition and less access to potentially relevant technology, skills or experience.”

In addition to the Pentagon’s reluctance to buy foreign goods, there is another challenge facing overseas suppliers: American companies are increasingly prone to litigation when the Pentagon ends up choosing a foreign company to produce weapons systems. The best-known case is the decade-long wrangling between Boeing and EADS to build the aerial refueling tankers for the U.S. Air Force. In the end, Boeing prevailed by pressing the importance of using an American company for this critical work.

In the most recent high-profile case, Brazil's Embraer SA was selected late last year by the Air Force to provide 20 single-engine, turboprop planes for the Afghanistan's military. Hawker Beechcraft Corp., however, pushed the decision into court, saying the Air Force excluded its aircraft from the bidding. The court is now reviewing the case, according to the Journal.