By Marina Malenic
The Defense Department has postponed a review that would allow prime contractor Boeing [BA] to proceed with production of the Air Force’s multibillion-dollar C-130 Hercules avionics modernization program (AMP), with Congress moving to eliminate procurement funding for the effort in Fiscal Year 2010 as a result.
The Defense Acquisition Board had been scheduled to meet on July 30 to decide whether Boeing could begin producing AMP kits for the aging airlifters. However, according to Air Force and industry sources, that review has been canceled until further notice from the Office of the Secretary of Defense. The Pentagon’s Acquisition, Logistics and Technology (AT&L) office earlier this year noted the July 30 review on its Web site, but since then the link for information about all such reviews across the department has been removed from the site.
Congress in FY ’09 allocated $184 million for C-130 AMP-related procurement, and the review would have allowed Boeing to begin spending those funds on long-lead procurement.
“The hard part, the risky part is over,” Mike Harris, vice president of the company’s Weapon Systems Modernization division, told Defense Daily in an Aug. 20 interview. “Development is complete and we are now ready to begin production.”
However, the review delay prompted the House and Senate Armed Services committees and the House and Senate Appropriations defense subcommittees to recommend cutting all $209 million in procurement funds requested for the program in FY ’09.
“[F]unds have not yet been put on contract due to a delayed Milestone C decision,” the House Appropriations Committee’s report on the FY’10 defense spending bill states.
“Based on these delays, funding requested for fiscal year 2010 is early to need,” it adds. “The committee strongly urges the under secretary of defense AT&L to make a decision on the acquisition strategy and proceed expeditiously with the program of record.”
AT&L Undersecretary Ashton Carter’s office did not respond to a request for comment on the delay by press time.
Lawmakers from all four defense committees in Congress have, however, included $201 million for research and development in their FY ’10 budget marks.
Boeing won the original AMP contract. But after Darleen Druyun, a former top Air Force weapons buyer, admitted in federal court several years ago to illegally steering contracts to Boeing, the service said it would recompete the latter stages of the program as a means to restore trust in its acquisition processes. In doing this, the service is following the recommendations of the Government Accountability Office that upheld a protest by Lockheed Martin [LMT], which the company filed after Druyun’s revelations surfaced.
In an effort to “level the playing field” for other contractors, the Air Force will award special research and development contracts to two more competitors, allowing them to gain experience installing modernization kits ahead of the new competition, expected to open in 2011. Several companies, among them Lockheed Martin, Rockwell Collins [COL]and L-3 [LLL] are seen as potential challengers to Boeing in the fresh competition.
All of the Air Force’s C-130s need certain avionics components upgrades to be allowed to fly in international airspace. The AMP program includes those upgrades, among other survivability-related improvements.
In 2007, the program also breached the Nunn- McCurdy cost-monitoring threshold that Congress uses to gauge the health of major weapon programs. Following the overrun, the program was restructured with Air Force Special Operations Command models and several other specialized variants of the C-130 removed from the effort and placed into a separate program.
Air Force officials, in a briefing earlier this year, said the estimated per-unit cost of the AMP kits under the Boeing-run program is now $7.64 million, or $26.2 million, when the developmental costs are amortized. Harris, the Boeing vice president, said the company is still aiming for an approximately $7 million per-unit flyaway cost.