By Geoff Fein

The White House has decided to move forward on Increment 2 of the next presidential helicopter, VH-71, citing that the Lockheed Martin [LMT] aircraft provides the capability requested by the government.

Meanwhile, redesign work on Increment 2 will raise the program’s cost by $3 billion, and increase the total VH-71 program cost by roughly $5 billion, according to John Young, the Pentagon’s acquisition chief.

“We do now expect the total program cost to increase from $6.8 billion under the current plan to a total of $11.2 billion. The expected cost of the Increment 1 portion of the program has increased from $2.3 billion to $3.7 billion. The estimated cost of the Increment 2 portion of the program has increased from $4.5 billion to $7.5 billion,” Young said in a statement released on Friday.

Young said he has determined that there are no options for replacing VH-71 with another helicopter at this point.

“In trying to avoid the cost growth on this program, I have led several meetings with the program office and the industry team. We have looked at many options, both inside and outside the VH-71 program. None of these options meet the full set of White House requirements,” Young said.

Lockheed Martin is partnered with Bell Helicopter Textron [TXT] and AgustaWestland on the presidential helo effort also known as Marine One.

The Navy deleted four VH-71 presidential helicopters from its fiscal year 2009 budget and is instead requesting an increase of roughly $810 million (above its FY ’08 funding), for continued research and development funding for the program.

Under the new budget proposal, the first three of the helicopters will not be procured until FY ’10. That number will jump to four per year for FY ’11, ’12 and ’13, according to Navy budget documents. Initial Operational Capability (IOC) for Increment 1 is planned for 2010.

“Progress on Increment 1 and continuation of work on the Increment 2 helicopters is completely dependent on urgently needed support from Congress for the FY ’09 president’s budget request for the VH-71 program,” Young said.

The current fleet of presidential helicopters is roughly 30 years old and has deficiencies in terms of communications, performance, and safety, he added.

“Increment 1 provides five modern helicopters with improved communications capability and safety features. The White House has made compromises on the Increment 1 helicopter requirements to help with cost and schedule issues,” Young said.

Since the contract award, the White House has not changed their stated requirements for the 23 Increment 2 helicopters. However, no existing medium lift helicopter can meet the Increment 2 requirements, Young noted.

“The original VH-71 program planned to rely on an existing commercial helicopter and make modest modifications. The Navy and industry team did not clearly realize the full implications of the White House requirements,” he said. “These issues were further complicated by the enforcement of Navy certification requirements on a helicopter designed to commercial aviation standards. To achieve the requirements and the government technical certification demands, the Navy and industry teams are having to complete substantial redesign of the EH-101 helicopter to meet the Increment 2 requirements.”

This redesign work is driving significant cost growth into the program, Young said.

Because of cost growth issues and congressional funding cuts, the Increment 2 portion of the program is under a stop work order, Young said.

A stop work order letter was sent to Lockheed Martin Systems Integration-Owego on Dec. 21, 2007 directing them to temporarily stop work on all activities associated with VH-71 Systems Design and Demonstration Increment 2 contract requirements for the next 90 days.

“NAVAIR (Naval Air Systems Command) had issued a letter on 10 October 2007 to LMSI-O limiting funds for Increment 2 work to $10 million for all of FY ’08, and requested a plan to allow for a minimal level of Increment 2 efforts to continue,” NAVAIR said last month. “The Government saw indicators of ongoing Increment 2 efforts that exceeded the $10 million limit. The government decided to formally issue the temporary stop work order to preserve resources for Increment 1.”