The Missile Defense Agency (MDA) and Army Corps of Engineers are using a “carrot and stick approach” including refusing payments to get the contractor on track to finish building the years-delayed Aegis Ashore Poland site, officials said Thursday.
MDA director Vice Adm. Jon Hill told the House Armed Services Strategic Forces Subcommittee that after conferring with the Army Corps of Engineers the Corps “has refused to offer payment to submittals that are coming in from the company today from the construction contractor.”
Rep. Mike Roger (R-Ala.) asked about the site after calling the construction delays a “nightmare” and hoping the contractor was eating the cost rather than the government.
“That’s sending a message, in fact their surety company is on sight so we know the message is being heard,” Hill said.
Rep. John Garamendi (D-Calif.) asked for clarification on what the surety company being on site means.
Hill said the surety company is doing an assessment for the company. “What that means is they are preparing to either move out and complete as fast as they can or preparing for the government to terminate.”
The Army Corps of Engineers contracted the Poland Aegis Ashore site construction to prime contractor the Wood Group.
Last month, during the fiscal year 2021 budget request press briefing, the agency said it was seeking another $96 million to finish the Poland site and after delays it is now expected to be available for use by 2022.
During that briefing, Hill said the builder had been having problems with the “last tactical mile” even while the site is 92 percent finished. He said this includes auxiliary controls, heating, power, cooling, and items that feed a combat system.
“That’s where that design and engineering that is inside that construction contract has slowed down and where the contractor is having problems,” Hill said in February.
At the time, Hill said he was meeting with Lt Gen. Todd Semonite, commanding general of the Army Corps of Engineers, to figure out a way forward because the Corps is in charge of the contract.
On Thurday, Hill said he recently met with Semonite and noted “it was a tough meeting because we were looking for a way to get more predictability into that schedule. I will tell you for as long as I’ve been on board that’s just been very hard to measure.”
He underscored the Corps’ contract with the Wood Group limits the pressure they can put on it because it is a firm fixed price award.
However, Hill said they are pressuring the builder by stopping payment and prioritizing specific items.
“We’re no longer giving them the freedom to just go work on what they want to work on. That’s not predictable, so we’ve said these are the priority areas that support the Aegis Combat System install and check.”
Hill noted the actual Aegis Combat System is ready on site in a temperature-controlled box, ready to be installed once the facility is finished.
“We’re working very closely with the Army Corps to really leverage and pressurize the contractor. It could move into the direction where none of us really wants to be, but for now we’re giving them a chance but it’s kind of a carrot and stick approach – here’s the priorities and we’re not going to pay until you get those done,” Hill added.
The Poland site was originally expected to be delivered by December 2018 but in early 2018 then-MDA Director Air Force Lt. Gen. Samuel Greaves revealed military construction issues were delaying delivery to 2020. At the time, he said it was caused by a combination of bad seasonal weather and less than expected performance from the construction contractor (Defense Daily, April 13, 2018).
Then, in June 2019, a Government Accountability Office report said site delays kept accumulating and delivery was likely pushed to May 2020 (Defense Daily, June 7, 2019).
Lockheed Martin [LMT] is the prime contractor for the Aegis system but is not involved in the Aegis Ashore site construction.