Brook Reinhold was riding in an armored truck last July with soldiers of the 82nd Airborne Division in Kandahar, Afghanistan, when the vehicle’s gunner stood to look out of the turret. As he moved into position, the gunner inadvertently stepped on an antenna cable, shorting out the vehicle’s radio. The soldiers were steamed. Reinhold wasn’t. He did what he always does in situations like this. He snapped a few photos on his BlackBerry and e-mailed them to a team of engineers in Rochester, N.Y. He asked them to come up with a metal shield to cover the wires—a bit of handiwork he hoped would impress the Pentagon.
Reinhold isn’t a soldier. He’s a salesman, one of about 40 employees with Harris (HRS) who have spent months alongside troops looking for small product opportunities that can lead to big profits for the defense contractor. His observation in the truck led the company to improve its Falcon III AN/PRC-117G radio system. Another time, back at Ft. Bragg in North Carolina, he heard a soldier complain that the knobs on the radio turned too easily if they got bumped. He phoned in that fix, too.
The company’s willingness to change its product on the fly has helped it to win over commanders in the field and sell more than 10,000 of the radios to the military for $30,000 apiece. “You’re not going to know what the customer wants unless you’re sitting right there with them at the moment they become aggravated about something,” Reinhold says.
Radio knobs and metal bits aren’t likely the first things that spring to mind when you think “defense contract.” Yet this unglamorous side of the business is where a lot of the money is made, and where it’s often easiest for contractors to penetrate—or even sidestep—the Pentagon’s forbidding bureaucracy. Over the last decade, U.S. defense contractors such as Harris and truckmakers Oshkosh (OSK) and Navistar International (NAV) have dispatched engineers and sales personnel, often ex-military, to Iraq and Afghanistan to maintain equipment and promote their gear directly to U.S. troops. Sending company reps to the field happens “a lot more than you think,” says Jay Kimmitt, executive vice-president for government operations and industry relations at Oshkosh, the military’s biggest supplier of blast-resistant trucks. “There have been a lot of people both in Iraq and Afghanistan, lobbying forward”—as in, lobbying for business in a “forward” area, or war zone.
Jack Kem experienced it when he started his job two years ago as the top civilian representative to the NATO training mission in Afghanistan. He describes fending off contractors trying to get an inside track on selling their services and equipment. Kem, who oversees a $12.8 billion Afghan security fund, says he doesn’t allow contractors to see him or his boss, Army Lieutenant General William Caldwell IV, to avoid any appearance of ethical taint. “I want to be completely clean,” he says.
A frequent way in is through urgent-need requests that commanders send to the Pentagon to fill gaps in equipment and rush gear to war zones. If a salesman can convince a commander to put in a request for his company’s product, it can mean a quick contract without the usual red tape. It can also lead to redundant equipment, as company reps working different parts of the country push competing products. Colonel Jim Carpenter, who served in Afghanistan last year, recalls that for a time the Army was buying multiple versions of the same kind of radio. “When I left Afghanistan last summer,” Carpenter says, “I would have vendors come see me, try to sell me other products that do that same thing.”
More common, Carpenter says, are sales calls in the U.S. “Starting eight to 10 months out before you deploy,” he says, “that’s when they’ll try to hit you up to buy their products. There are some that will come into theater, but that’s a little bit more controlled because there’s a vetting process they have to go through to get clearance.”
Bruce DeWitt, a vice-president with Alliant Techsystems (ATK), says relationships his company cultivated at stateside military bases helped it to win a $65.8 million contract to test its XM-25, an advanced grenade launcher nicknamed “the Punisher.” Soldiers in Afghanistan are evaluating the weapon. DeWitt, an Air Force Academy grad, describes his company’s approach to military sales as “business development on steroids.” Likewise, Harris has offices outside bases and is expanding to Fort Bliss in El Paso, Tex., where the Army is testing communications gear.
More sales reps will likely start showing up in war zones and at stateside bases in the near future. For years, defense contractors counted on Congress to protect them from big Pentagon cuts. No longer. Lawmakers are considering shrinking the defense budget by more than $400 billion over the next decade, making competition for contracts more intense and “forward lobbying” a necessary part of doing business. “The numbers are going to get so tight,” says Oshkosh’s Kimmitt. Hoping budget cutters won’t touch the Pentagon “is a losing strategy.”