Boeing FCS contract “all messed up”: Gates

Boeing‘s contract to develop the Army’s most expensive weapons system is “messed up” because it fails to provide enough incentive to encourage exceptional performance, US Defense Secretary Robert Gates said late last week.

“The contract was all messed up,” Gates told the Senate Armed Service Committee Thursday while discussing the military`s fiscal 2010 budget that includes what the Pentagon calls a “significant” restructuring of the weapons programme.

Bloomberg adds the programme`s 12-year development phase is projected to cost $20.2 billion. Boeing`s base fee is $1.1 billion and there is $1.1 billion in performance fees for meeting specific targets.

“Ninety percent of the performance fee is guaranteed” by December 2011, when the system`s design is reviewed, “so there`s little performance incentive left for the rest of the program, including prototyping and so on,” Gates said.

William Graveline, who follows the Future Combat Systems program for the US Government Accountability Office, a watchdog agency of Congress, said the work after the review is difficult and complex.

Boeing and the Army “will face the challenge of completing the design of the complicated system-of-systems, additional engineering work, and developing and integrating millions of lines of software code, new radios and other elements,” he said.

Congress has pressed the Pentagon for several years to tie contractors` pay more closely to performance and to tighten criteria for paying bonuses.

Bloomberg says Gates` comments signal he agrees and will emphasise this in his effort to reform the weapons acquisition process.

The Future Combat Systems — manned and unmanned vehicles joined by a wireless network — is managed jointly by Chicago- based Boeing and San Diego-based Science Applications International Corp.

Its current overall cost, $159 billion, is exceeded among all Pentagon weapons programs only by the Lockheed Martin Corp. F-35 Joint Strike Fighter.

Gates discussed the Boeing program during a broader presentation of the Pentagon`s proposed $533 billion base budget for fiscal 2010.

The budget would eliminate the system`s manned vehicles, a project valued at $87 billion, because they aren`t suited for conflicts like those in Afghanistan and Iraq, Gates said. A separate program will be started to produce a vehicle that reflects the lessons learned from these wars, he said.

This restructuring offers an opportunity to revise the development contract to tie Boeing`s profit more closely to performance, Shay Assad, the Pentagon`s director of procurement, said in an interview last month.

Boeing`s fixed profit should be cut and its potential bonus increased, Assad said.

Gates added the FCS` network of wireless, on-the-move communications, drones and sensors will be developed as planned and should be given to the entire Army, not just 15 of the 45 brigades as is now planned.

The Politico.com website meanwhile reports the Army “is reluctantly going along with” Gates` decision.

But they are also looking for ways to cannibalize parts of the program to keep them going, rather than start entirely from scratch.

“I ultimately could not convince him that we had taken enough of the lessons that we learned from the current fight and incorporate them into that vehicle program,” said Gen. George Casey, the Army`s chief of staff, who was unusually frank about the service`s disagreement with Gates. “I thought we had, but he thought we hadn`t,” and so Gates proposed cutting $87 billion that was to fund a new generation of light armored vehicles.

After a long-planned review, the Army will stop work on its current vehicle plans and design a new family of manned ground vehicles within four months — by September. 7.

In addition to the FCS ground vehicles — which were to include an array of infantry carriers, reconnaissance, medical command and combat vehicles — the Army also may re-evaluate another major element of the program, the computer network, as part of the revised plan due in September.

Army Secretary Pete Geren said Gates also has asked Army leaders to review how the FCS contract was managed.

Politico.com adds that Boeing believes that the vehicles already meet 90% of current urgent requirements coming from the wars in Iraq and Afghanistan.

Gates` skepticism about the vehicles is shared by some experts.

Andrew Krepinevich, president of the Center for Strategic and Budgetary Assessments, recently told lawmakers the vehicles were originally designed to deal with an open battle against a force such as Iraq`s old Republican Guard. And though the cost appeared to have remained stable, that`s because the program repeatedly has been restructured and the Army has cut certain aspects to keep rising costs down, he said.

Gates` defense budget has emphasized two key themes: striking a balance between military equipment intended for conventional and unconventional wars and reining in programs that are underperforming.

The Army also will look at how to integrate its information network into current Mine Resistant Ambush Protected vehicles — a point Gates frequently stresses.

But that task, Casey said, is not funded in the coming fiscal year. The Army cut $633 million for the manned ground vehicles in its 2010 budget submission, but it still will spend close to $2.7 billion on research and development for the FCS in a budget of $142 billion that emphasizes improving care for soldiers and their families.

Any new manned vehicle designs will incorporate lessons learned in combat — such as the need for a hull shaped like a V to deflect blasts under the vehicle, Politico.com further adds.