The New Military Industrial Complex To arm for digital-age war, the Pentagon has turned to a new generation of defense contractors. The hardware is impressive. It's also deadly.
By Ian Mount, Matthew Maier, and David H. Freedman

(Business 2.0) – The next time American armed forces go to war--if they're not already fighting in Iraq as you read this--the nature of the battle will be unlike anything the world has ever known. Afghanistan provided a glimpse of the latest generation of high-tech weaponry, but it was only a glimpse. A major assault by combined American forces will provide a full demonstration of the military's new doctrine of faster, lighter, smarter warfare--combat in which cutting-edge technology becomes U.S. troops' deadliest weapon. The Pentagon calls this new doctrine RMA, for "revolution in military affairs," and it's made possible not just by fresh thinking in the Pentagon but also by a subtle shift in the ranks of U.S. defense contractors. In building its new high-tech arsenal, the United States has also created a new military-industrial complex.

The old one hasn't disappeared, of course. Following a round of consolidation during the 1990s, traditional contractors like General Dynamics, Lockheed Martin, Northrop Grumman, and Raytheon still command large chunks of the funds budgeted for new weapons, which amount to $69 billion in 2003 alone. But the innovation that underpins high-tech warfare comes increasingly from companies that aren't widely known for defense work--or widely known at all. One was originally founded to build nuclear power plants. Another is best known for having once made Mason jars. Brand-name technology companies like IBM and Hewlett-Packard have ramped up their defense businesses to provide electronics for some of the military's most sophisticated systems. In a dangerous world, the newcomers' weapons serve a grim, if necessary, purpose. But they also offer further proof of technology's power to change even the most hidebound institutions.

Land

The transformation of the U.S. military has triggered an identity crisis for American ground troops. Though still the first to hit the beaches, the heavily armored forces fielded by the Army and the Marines were largely left on the sidelines during several recent conflicts, as strategists placed greater emphasis on precision-guided munitions and unmanned planes. As speed and stealth take precedence over size and weight, U.S. land forces are modifying their arsenal accordingly.

Tactical High-Energy Laser

One of the biggest duds of the Gulf War was the Patriot anti-missile system, which failed to destroy many of the Scuds that Saddam Hussein lobbed at Israel and at U.S. troops. The Pentagon has since teamed up with Israel to try a different approach to disabling missiles: Frying them. The tactical high-energy laser (THEL) locks onto missiles with a swiveling laser projector that looks like a giant spotlight; the heat-generating laser beam causes incoming missiles to self-destruct. In tests, the THEL has brought down more than 25 missiles and even halted an artillery shell. Subcontractor Ball Aerospace & Technologies, a $491 million division of container manufacturer and former canning-jar maker Ball Corp., built the system that keeps the laser locked on targets closing in at 1,000 mph. --D.H.F.

TOTAL COST: $250 million per installation COMPANY TO WATCH: Ball Aerospace & Technologies WHAT IT MAKES: Target acquisition system

SoldierVision

Sci-fi's X-ray vision now has a real-world equivalent. The handheld SoldierVision device emits low-power radio pulses that penetrate walls up to 30 feet away, emitting unique patterns as they bounce off concrete, wood, and human skin. SoldierVision analyzes the patterns to create a color-coded "picture" of a room's contents--unarmed civilians or an ambush, for instance. Built by Time Domain, a Huntsville, Ala., firm that holds patents on several ultra-wideband technologies, the first SoldierVision units were delivered to the Army in October. --M.M.

COST: $29,500 per handheld COMPANY TO WATCH: Time Domain HAT IT MAKES: Handheld surveillance devices

Stryker Interim Armored Vehicle

The Army's M1 Abrams main battle tank weighs almost 70 tons. But to meet its goal of being able to move a brigade of 3,500 soldiers and their armor anywhere in the world within 96 hours, the Army needs a leaner machine. The Stryker interim armored vehicle will get the job done--for now, at least. At 19 tons, it fits in a standard transport plane. Stryker comes in two main variants: a mobile gun system with a 105mm cannon, and a troop carrier that can move 11 soldiers at 60 mph for 300 miles. Contractors General Motors and General Dynamics turned to Kongsberg Protech, a small Norwegian defense-technology firm, for the vehicle's weapons station. Kongsberg's system allows troops to fire the Stryker's machine guns and grenade launchers and repair common breakdowns without ever leaving the armored interior. --M.M.

COST: $1.5 million per vehicle COMPANY TO WATCH: Kongsberg Protech WHAT IT MAKES: Weapon control system

Air

The joystick warrior has come of age. The videogame-style air campaigns that dazzled CNN viewers during the 1991 Gulf War were a prelude to the dramatic innovations in precision-guided munitions, stealth technology, and unmanned drones that have come since. The ability to drop smart weapons on enemy forces from the air has now become a signature element of U.S. strategy. For the foreseeable future, it's also likely to provide American forces with a decisive military advantage.

F/A-22 Raptor

The Raptor is an entirely different bird of prey. Designed by Boeing, General Dynamics, and Lockheed Martin, the Raptor's composite-and-titanium construction provides agility and stealth. Twin 35,000-pound-thrust engines can cruise beyond the speed of sound without fuel-guzzling afterburners. The Raptor packs six Amraam air-to-air missiles, mounted internally to avoid disrupting the ultrasmooth profile that hides the plane from radar. The missiles are launched by hydraulic arms that hurl them away from the jet so quickly that the weapons-bay doors pop open for less than a second. The first Raptor squadron won't officially reach combat readiness until 2005, but the planes are likely to make a cameo appearance in any earlier conflicts--including Iraq, if needed--for critical under-fire testing. The Raptor's missile-launching mechanism is made by EDO, which specializes in communications gear and composite structures; the contract could be worth as much as $1 billion over the Raptor's planned 40-year service life. --D.H.F.

COST: $100 million per plane COMPANY TO WATCH: EDO WHAT IT MAKES: Vertical ejector for air-to-air missiles

JLENS Anti-Cruise-Missile Radar

Ground-based radar has difficulty seeing cruise missiles that hug the terrain. Air-borne radar is better, but there are rarely enough planes in the sky to provide comprehensive coverage. A high-tech blimp can fill the gap. Properly speaking, the Joint Land Attack Cruise Missile Defense Elevated Netted Sensor is really an aerostat--an unpowered blimp. Some 230 feet long and filled with nonflammable helium, each radar-equipped JLENS floats as high as 15,000 feet. Built by TCom, a Maryland-based firm whose entire business is unmanned airships, some JLENS variants can keep a 3,500-pound payload aloft for 30 days and survive 100 mph winds. Others fit in a truck and require a crew of only two. --D.H.F.

COST: $130 million per installation COMPANY TO WATCH: TCom WHAT IT MAKES: Military blimps

MQ-9B Predator B Hunter-Killer

Since its debut over Bosnia in 1995, the Predator unmanned aerial vehicle (UAV) has been the centerpiece of the U.S. effort to develop robotic weaponry. Predators were originally used only as spy planes, but fitted with a Hellfire laser-guided missile, they've gone on to destroy al Qaeda targets in Afghanistan and Yemen. Coming soon: the Predator B, which can carry 14 Hellfires or six 500-pound smart bombs. The Predator also can launch swarms of mini UAVs that look like engorged metallic dragonflies. Predators are built by San Diego-based General Atomics, a former nuclear-energy division of General Dynamics that was spun off in 1955. --I.M.

COST: $7.8 million per drone COMPANY TO WATCH: General Atomics WHAT IT MAKES: Unmanned planes

Sea

The days of opposing warships slugging it out on the high seas are probably gone for good. The U.S. fleet is now tailored for coastal, or "littoral," operations, in which ships attack targets on land or in the air. But ships are also taking on an entirely new mission: serving as vital nodes in the Pentagon's information network. Instead of supporting national interests through gunboat diplomacy, Navy vessels increasingly act as floating platforms for the collection and distribution of real-time intelligence.

Upgraded Phalanx MK-15 Close-In Weapons System

The Phalanx is a last-ditch defense to protect Navy surface ships from fast-moving cruise missiles, aircraft, or attack boats. Introduced 25 years ago, the Phalanx is a robotic Gatling gun that sprays a wall of 20mm cannon shells at incoming threats. To contend with smarter cruise missiles and radar-evading aircraft, Brashear, a Pittsburgh-based optics specialist, created a new infrared fire-control system for the Phalanx, giving it the ability to lock onto a missile skimming over the water at nearly the speed of sound. Brashear lost $100 million in 10 years when it was owned by Swiss defense firm Contraves, but former Nextel chairman William E. Conway Jr. bought the company in 1997 and turned it around. Brashear earned $2 million in 2001 on sales of $30 million. --D.H.F.

COST: $5 million per installation COMPANY TO WATCH: Brashear WHAT IT MAKES: Fire-control system

T-AKR Strategic Sealift Ships

One of the best tools in the military's quest for quickness is a floating parking garage. The Navy's new Bob Hope-and Watson-class ships can each carry about 50 tanks and 900 heavy vehicles. Inside, the ships feature seven cargo levels connected by ramps and elevators that greatly speed unloading. Though huge, the ships require a crew of just 26 and sail at 24 knots. Units of General Dynamics and Northrop Grumman built the boats, but the Navy outsources their operation to Maersk Line and Patriot Contract Services. Maersk's five-year contract to run the Bob Hopes could top $400 million. --I.M.

COST: $200 million per ship COMPANIES TO WATCH: Maersk Line, Patriot Contract Services WHAT THEY DO: Ship management and operations

Arleigh Burke-Class, Flight IIA Destroyer

At 509 feet long, the Navy's new Arleigh Burke-class destroyers are small compared with the hulking battleships of World War II. But they pack far more wallop. Called Flight IIA, the new ships carry Tomahawk missiles and minesweeping helicopters, yet their most sophisticated system is the latest version of the Aegis radar, which coordinates simultaneous attacks against ships, submarines, aircraft, and missiles. Most impressive, the Aegis was built largely from commercial technology: 129 IBM and HP computers running off-the-shelf operating systems like HP-UX and PowerMax. By avoiding the IT equivalent of the $300 military-spec toilet seat, the Navy has saved millions of dollars. Northrop Grumman plans to deliver the first destroyer equipped with the new Aegis radar, the USS Pinckney, in April 2004. --I.M.

COST: $900 million per ship COMPANIES TO WATCH: Hewlett-Packard, IBM WHAT THEY MAKE: Next-generation radar electronics

Space

The weapons here on earth fire the bullets, but the hardware in space steers the battle. Satellite networks allow allied forces to communicate, spy on enemies, and locate friends and foes to accuracies of within a few yards. Without them, many of the U.S. military's most formidable weapons would be useless.

Bandwidth Satellites

The new military devours bandwidth. A single Global Hawk unmanned spy plane needs 500 megabits per second to transmit high-resolution video footage. (That's enough bandwidth to transmit the collected works of Shakespeare in a fraction of a second.) The Pentagon operates two constellations of communications satellites, both of which were built by Lockheed Martin. The government's birds have been overwhelmed by the demand for connectivity, however, so the Defense Department has tapped the commercial satellite industry, leasing capacity from companies that normally beam Disney and BBC programming to remote corners of the world. Most of the Pentagon's business goes to Intelsat, a privately held firm that was originally formed in 1964 as an intergovernmental venture involving nearly 150 countries. That has generated some controversy: Among Intelsat's shareholders are potential U.S. foes such as Iraq and Iran. --M.M.

COST: $200 million per satellite COMPANY TO WATCH: Intelsat WHAT IT DOES: Commercial satellite operations

SBR Surveillance Satellite

Conventional spy satellites use high-resolution cameras that can distinguish a Ford Explorer from a Toyota Camry while flying 400 miles above the earth. But the cameras can't tell whether a target is moving, and they're easily blinded by clouds or darkness. The space-based radar (SBR) program addresses those shortcomings with a constellation of 24 high-flying satellites that use radar pulses to track moving objects anywhere in the world, in any weather, and to beam data directly to commanders. Though a full fleet of SBR satellites won't be operational for at least six years, Spectrum Astro of Gilbert, Ariz., has been awarded a contract to design an early prototype. Spectrum specializes in building a satellite's "bus"--its payload-carrying body. Owned by its 430 employees, Spectrum has grown its revenues from $18 million in 1996 to $154 million in 2002.

--D.H.F

COST: $750 million per satellite COMPANY TO WATCH: Spectrum Astro WHAT IT MAKES: Satellite chassis

GPS IIR Satellites

Operated by the Air Force, the Navstar constellation of global positioning system (GPS) satellites is the military's best-known space system. Initiated in 1978, Navstar consists of 27 satellites that provide military and civilian users with extremely precise time and velocity information to pinpoint positions within a few meters. Lockheed Martin's new GPS IIR satellites give Navstar a second civil signal and two super-precise military signals, while also improving overall signal strength. Behind many of the enhanced capabilities is a new waveform generator from ITT Industries, of White Plains, N.Y. The generator boosts the satellites' signals; in conjunction with software that allows the satellite to reconfigure signals while in orbit, the added power makes it more difficult for enemies to jam the GPS network. --M.M.

COST: $40 million per satellite COMPANY TO WATCH: ITT Industries WHAT IT MAKES: High-powered amplifier

Network

The central component of the Pentagon's new war-fighting doctrine isn't a weapon at all, but an information network. The military wants to tie together every scrap of incoming intelligence to create a comprehensive picture of the battlefield that can be shared by different military branches or combat units in real time. Achieving that will take years, but the basic theory behind network-centric warfare is simple: When every soldier becomes a part of the network, the network itself becomes more lethal than the sum of its parts.

Pocket-Sized Forward Entry Device (PFED)

The PFED is a handheld computer created specifically for use by forward observers--the stealthy scouts who take up positions near enemy lines to coordinate air strikes. The devices are equipped with special software that completes the complex calculations needed to determine the exact position of a target. The PFED stems from a partnership between General Dynamics and Florida-based Talla-Tech, which makes the heavy-duty electronics. Built using many off-the-shelf components to reduce costs and ensure ready availability, the PFED incorporates the motherboard, display, and other electronic parts of an HP iPaq h3900-series PDA. --M.M.

COST: $2,300 per handheld COMPANY TO WATCH: Talla-Tech WHAT IT MAKES: Military handheld computers

Combined Arms Tactical Trainer (CATT)

It takes practice to master coordinated air, sea, and land attacks, but "combined arms" exercises are hugely expensive and can sprawl over thousands of square miles. CATT provides a reasonable substitute, allowing hundreds of soldiers to hone teamwork skills in a network of combat simulators. Occupying a building the size of two football fields, a version of CATT is already operational in Britain, with real-time data links to a similar facility in Germany. CATT can be intensely realistic--tank crews see detailed 3-D terrain through periscopes, and foot soldiers step out of their simulated armored vehicles to fight using a "dismounted infantry" simulator. Sound like a huge videogame? No surprise. Hard-core gamers are already familiar with Quantum3D's high-powered PC graphics cards, but many of the company's most powerful systems end up in CATT. --D.H.F.

COST: $544 million COMPANY TO WATCH: Quantum3D WHAT IT MAKES: Computer image generator

RC-135 Rivet Joint Upgrade

Think of the Rivet Joint as an airborne National Security Agency listening post. Rivet Joint aircraft carry signals-interception technologies that allow the crew of as many as 31 analysts, technicians, linguists, and code-breakers to eavesdrop on the enemy. The Air Force's 17 Rivet Joints are built around Boeing 707 airframes first flown 40 years ago, but the planes have received new electronic systems developed by L-3 Communications. The L-3 upgrades integrate data from the aircraft's avionics, global positioning receivers, Doppler radar, and antenna arrays that reportedly can pick up faint radio signals from 300 miles away; they then channel that information to a series of crew workstations equipped with interchangeable flat-panel displays. The entire RC-135 fleet should be upgraded by 2005. --M.M.

COST: $31.5 million per aircraft COMPANY TO WATCH: L-3 Communications WHAT IT DOES: Electronics upgrades and integration