By Emelie Rutherford
Frustrated lawmakers pressed Pentagon officials yesterday to find a way to lower the United States’ $800 million tab for exiting the multi-nation Medium Extended Air Defense System (MEADS) program.
Army Secretary John McHugh told the Senate Armed Services Committee (SASC) he agrees the “optics” of the MEADS situation from afar can be “puzzling.” The Army plans to spend “some $800-plus million dollars” to exit the three-nation air-defense program in 2014 instead of withdrawing now, he said. If the United States left now it would be liable to pay termination costs likely “in excess of $800 million,” he said. The Pentagon thus wants to stick with the program until FY ’14 and glean technology developed for it.
The prime contractor for MEADS, which has had cost and schedule overruns, is group dubbed MEADS International and includes Lockheed Martin [LMT].
SASC Ranking Member John McCain (R-Ariz.) and members Sens. Scott Brown (R-Mass.) and Jeanne Shaheen (D-N.H.) all prodded McHugh to help find a way to lower the U.S. liability.
“The only thing that I don’t think the taxpayers understand, and I don’t either, is why we would have a situation where termination costs would cost the taxpayers as much to continue,” McCain said.
McHugh said when Italy, Germany, and the United States negotiated the current terms of the MEADS pact a few years ago they decided if any nation withdraws before a “proof of concept” date in the future, it must pay the entire amount it would have paid leading up that time. He said Italy and Germany do not want to back out of the MEADS agreement, which is formalized for the three nations in a memorandum of understanding (MoU).
The Army secretary said while he does not know the U.S. cost to exit MEADS, “reasonable calculations are that it would be somewhere north of $800 million.”
At a separate House Armed Services Strategic Forces subcommittee hearing yesterday, Deputy Assistant Secretary of Defense for Portfolio Systems Acquisition David Ahern said he has heard the figure $846 million used.
At the SASC hearing, Brown asked if the United States is having “serious negotiations with Italy and Germany to try to mitigate the damages and not pay the full nut.” McHugh said the nations are in “constant communication” on the matter; however, he said the Army did not negotiate the current MEADS agreement for the United States, and he was not able to say precisely who did.
SASC Chairman Carl Levin (D-Mich.) said he will have committee staff investigate the history of the MEADS program.
McHugh said a bit of “good news” with staying with MEADS until 2014 is the Pentagon will be able to keep whatever technology-capability package is available. Brown, though, expressed frustration about not being able to learn details about that technology.
McHugh said MEADS, which has been around for 15 years, “has been an under-performing program” and the Army “very strongly endorsed the termination.”
“It’s rarely met the thresholds of development that was desired to be,” he said.
In the House yesterday, at the Strategic Forces panel hearing, both Chairman Michael Turner (R-Ohio) and Ranking Member Loretta Sanchez (D-Calif.) asked if the Pentagon can lower the United States’ MEADS liability.
“I understand the government’s contract termination obligations, but spending $800 million…in this budget environment, on a program that is not going forward into production, doesn’t make a whole lot of sense,” Turner said at the missile-defense budget hearing. “These resources could be better spent on other missile-defense priorities.”
The Pentagon is seeking Congress’ permission to spend $400 million in FY ’12 and another $400 million in FY ’13 to pay for the remaining U.S. obligation to MEADS.
Lockheed Martin hopes that in a few years it can “convince the United States to come back into the program, either at the time of production of shortly thereafter,” Mike Trotsky, vice president, air and missile defense systems for Missiles and Fire Control, told reporters March 21 (Defense Daily, March 22). The company stands by MEADS, and said the cost for the United States to stay involved could drop because additional foreign nations have expressed interest in participating.