Military simulation market to remain flat.

• Author: Erwin, Sandra I.

Despite sharp military spending cuts in the United States and most NATO countries, the market for training equipment and services will stay relatively flat, according to analysts. But contractors in this sector, especially in the United States, face a bumpy road ahead as the Pentagon puts programs on hold and waits for Washington to settle budget disputes.

Industry analyst Alix Leboulanger of Frost & Sullivan Aerospace & Defense has estimated the military training and simulation market worldwide will stay at about $6 billion a year for the foreseeable future. Annual contracts in this sector are expected to fall slightly from $6.74 billion in 2013 to $6.36 billion by 2022. The United States accounts for about 68 percent of the total.

In the U.S. market specifically, the snag is the lack of a long-term budget plan, which has trickle-down effects on training programs. Under current law, the Pentagon would be hit with across-the-board budget cuts next year, but its personnel accounts are protected. As a result, equipment and training programs are likely to get disproportionately squeezed. Unless a program is considered "mission critical," managers during uncertain times put off signing contracts for training services and simulators until they have confidence that the project will receive long-term funding. * 11

Economic challenges aside, programs cannot be delayed indefinitely, Lebou-langer said. "You have to keep forces trained. You have to spend on training, upgrade simulators and training facilities."

Military training contractors in the United States got a cold dose of reality in June when the Army announced it was nixing a multibillion-dollar program called TEACH, for "train, educate and coach." The agency that oversees the project, the Army's Program Executive Office for Simulation, Training & Instrumentation, or PEO-STRI, informed contractors the decision was strictly financial. The Army has taken similar measures across all of its weapon and equipment portfolios.

The training and simulation industry markets its products and services as money-savers. Military officials have said virtual training in simulators costs a fraction of what it costs to deploy real equipment for practice use. Companies hope this price differential will motivate military agencies to buy more simulator-based training equipment and tech-support services.

"The military chiefs are going to be hard pressed to accept cuts to their training accounts. They've got to...