1. We live in a volatile world Vice President & COO ChuckG@fescorp.com

3. DoD Operating & Support Costs vs. Investment % of DoD BA (Includes OCO) 1950 – 2010 Average: 36% Tension between O&S and investment will reach historic proportions Lowest investment share since the Korean War O&S (MILPERS plus O&M) Investment (RDT&E plus Procurement)

4. BALANCING QUALITY, SAFETY, RISK AND COST IN Volatile SPACE AND DEFENSE MARKETS

5. Program risks associated with an “up & down” business scenario

6. Hurry up, you are behind schedule DESIGN PROGRAMS Shortcut requirements analysis: DESIGN RE-SPINS Compromise reliability / maintainability / availability analysis: REDUCED SUPPORTABILITY Reduce scope & content of Systems / Hardware / Software Peer Reviews: MORE RE-SPINS Shortest lead time becomes principal parts selection criteria: INCREASED OBSOLESCENCE & COUNTERFEIT PARTS RISKS Hardware – Software trade-off studies scope reduced: PRODUCT DESIGN COMPROMISED Reduced emphasis on Design for Manufacturing & Test: PRODUCTION/TEST REWORK PRODUCTION PROGRAMS Shortcut work instruction preparation time: INCREASED “DO OVERS” Compromise production training: INCREASED SCRAP & REWORK Reduce rigor of first article / first build reviews: JEOPARDIZE PRODUCT INTEGRITY/SCRAP/REWORK Focus on delivery VS first time quality: MISSION FAILURE, INCREASED CUSTOMER REJECTIONS ACROSS THE BOARD RISK TO SYNERGY “CORNERS”

7. SLOW DOWN --- THE PROGRAM IS SLIPPING Design a ROLEX VS the TIMEX that the customer ordered: costs, lead times, producibility impacted Utilize science experiments to solve a problem requiring simple analysis Retain people on the program where ROI is low Introduce production changes that actually reduce producibility & testability ANOTHER DAY ON THE PROGRAM IS ANOTHER DAY OF COST!

8. Subcontractors caught in the middle Subcontract reduction/terminations/extension Delayed customer awards = Compressed Subcontractor Cycle Time Extended material/parts lead times Increased parts materials/cost: Building to ORDER VS Building to STOCK “SUBCONTRACTOR”

10. A Native American, Woman-Owned Small Business High Reliability Manufacturing Stillwater 86,500 Sq FT Facility A SMALL BUSINESS PERSPECTIVE President & CEO

11. UAS Programs Engineering Design & production focus Maritime Programs Aircraft ProgramsSpace and Missile Programs SB-4229A(V)/SP Radar Switchboards SB-4229

12. Product Assurance Network FES-QP-1 FES Quality Plan 8.1-2 8.5-2-1 8.3-2 8.1-5 5.6-1 7.4-1 5.6-1 7.4-1 8.2-1 5.6-7 7.1-1 7.2-1 FES-QSP- 8.5-2-1 8.2-1 5.6-1 FES-QSM-1 FES Quality Manual FES-QSP -7.2-2 FES-QSM-1 FES Quality Manual FES-QSP-7.2-1 7.1-1 7.2-2 7.1-1 7.4-3 8.5-1 FES-QSP- 8.5-2-1 8.5-2-1

13. CORE PROCESSES Design Material Acquisition Manufacturing Product Support

15. Developing a corporate culture of commitment & process optimization

16. Key Quality Metrics LINE of BALANCE CUSTOMER SATISFACTION ON-TIME DELIVERIES QUALITY ACCEPTANCE WARRANTY RETURNS NONCONFORMANCE CUSTOMER COMPLAINTS SUPPLIER CORRECTIVE ACTIONS SCRAP REWORK SUPPLIER PERFORMANCE RISK

17. Customer Satisfaction.810 +.988 ---.002 = 89.90 %.810 +.988 ---.002 = 89.90 % 2 Proposals Won = 86 Proposals Lost = 20 Total Proposals = 106 Wins ÷ Total Proposals Submitted = Proposal Win Rate Proposal Win Rate: 81.0 % FES Computed Delivery Rate: 98.8 % Warranty Returns = 4 Units Shipped = 2035 Warranty Returns ÷ Units Shipped : 4/2035 X 100 =.2% x 100 (Proposal Win Rate + FES Delivery Rate) /2 Warranty Return Rate = SCORE

18. Supplier Ratings

19. DoD Nunn-Perry Awards Northrop Grumman World Class Team Awards Boeing Supplier of Year Awards MILI 45208 MILI 45208 MILQ 9858 Lean Journey Begins Lean Journey Begins ISO 9001-1994 ISO 9001-1994 ISO 9001-2000 USN BMP Audit USN BMP Audit AS 9100 NGST Gold NGST Gold Supply Chain Mgt System ERP 198919941999200020012005200620082009 A journey of continuous improvement

20. challenge Forced re-design of the F-18 E/F Engine Fuel Display due to LCD supplier Bankruptcy o Hardware / Software No break in production o Required 75% reduction in re-design time Focus on 1 st Time Quality to Reduce Production Cost

21. Reduce Order to First Delivery Cycle Time PO Award FES Critical Path Sub Critical Path FES & Sub Critical Path Initial State PO Award to Sub 8 wks All material received FES 25 wks All Sub material received 30 wks Sub 1st Delivery 56 wks FES 1st Delivery 76 wks 18 wks 4 wks Current State 41 wks 48 wks 20 wks Supply Chain LEAN Deployment

22. Result Achievements: DESIGN Time Cut -75% MTBF Improved +33% PRICE Reduced -48% F/A-18E/F Engine Fuel Display Redesign Engine Fuel Display Multi-Purpose Color Display Customer Recognition: Boeing’s Avionics Supplier of the Year 2001 New Up- Front Control/Dis play F

24. Roadblocks to watch for Inadequate Training Too Much Too Early No Link to Company Objectives No Incentive Dirty fingernail gang looses clout Diverging goals and objectives Poor Communication Leadership Buy-In Backsliding

25. A Closing Thought Profitability PRICEPRICE