3
First Quarter 2014
1.35 M
1.38 M
1.41 M
1.44 M
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Industry Trends
(Defense and Gov. Services)
Source: DMDC Active Duty Military Personnel Reports
Recent international events in the Ukraine, Middle East, and North Korea have highlighted the need for an agile and responsive military force
and have accelerated the repositioning of US military assets. The US’ shifting military focus can be seen not only in the media headlines but
also in government generated raw data. For example, US Defense Secretary Chuck Hagel announced that two Navy destroyers equipped
with missile defense systems will be deployed to Japan by 2017 in response to provocations from North Korea and an increasingly assertive
China. The announcement followed other steps taken by the Pentagon to bolster its military position in Japan, including an October decision
to position a second X-band missile defense radar there. Additionally, President Obama recently announced a 10-year agreement to give
US warships, planes, and troops greater access to Philippines’ military bases. Meanwhile, the US is simultaneously reducing the number of
active duty military personnel and repositioning its forces internationally. Over the one year period ending 12/31/13, military personnel
declined 16% internationally and a 1% domestically. According to data published by the Defense Manpower Data Center (DMDC), there was
a 28% YOY decline of military personnel in the Middle East and South Asia, which balanced troop levels internationally as displayed in the
chart on the left below. The balancing act is further complicated by declining discretionary budgets and the evaporating OCO funds.
As a result of this budgetary and logistic balancing act, DoD contractors that provide innovative technologies, services, and logistics
processes will be in high demand during both government acquisition processes and M&A auctions. The essence of an agile military force is
the logistics processes, resources, and systems involved in generating, transporting, sustaining, and redeploying or reallocating material and
personnel. Contractors provide the full spectrum of the military’s logistics, acquisition, and technical services and logistics requirements
remain a high priority in both times of peace and war. As America’s military efforts continue to shift away from large-scale conflict in Iraq and
Afghanistan towards more small-scale, special operations, contractors that are nimble and able to quickly adapt to the military’s needs will
see demand for their services dramatically increase.
Year End Active Duty Military Personnel By Location
Year End Active Duty Military Personnel Head Count
43%
36%
31%
35%
23%
27%
3%
3%
0% 20% 40% 60% 80% 100%
2012
2013
Middle East and South Asia Europe East Asia And Pacific Other
