The Army recently said its Armed Reconnaissance Helicopter (ARH) program has exceeded its $6.2 billion budget estimate by over 40 percent, triggering a mandatory Defense Department review of the effort.
The Army notified Congress of the overrun on Tuesday night, service officials told reporters during a background briefing at the Pentagon yesterday.
Under the Nunn-McCurdy cost-growth cap statute, the service must inform Congress of a 25 percent or greater program cost increase, and the Defense Department must justify the program’s continuation based on four criteria: importance to national security; lack of a viable alternative; reasonable new cost estimates; and evidence that cost growth causes have been remedied.
The ARH, built by Textron‘s [TXT] Bell Helicopter unit, is intended to replace the Army’s aging OH-58D Kiowa Warrior. Kiowas are the service’s most heavily deployed helicopters in both Iraq and Afghanistan. The initial replacement for the platform was the Boeing [BA]-Sikorsky [UTX] RAH-66 Comanche, which was canceled in 2004 in favor of the smaller, cheaper ARH.
Army aviation officials said they expect the Pentagon’s review to be completed by September.
“Right now, the Army’s not considering terminating the program,” an Army acquisition official told reporters. “The program is critical.”
The per-unit cost of the aircraft has swelled from $8.6 million in 2005 to $12 million, according to the Army. The acquisition official said Defense Department analysts would examine labor and materials costs as part of their recertification process, but the official would not elaborate on the exact reasons for the cost overrun.
The cost growth comes even after the service increased its initial desired buy quantity in 2005 from just over 300 aircraft to 512–a move that was expected to drive down per- unit costs.
While “a requirement for the capability endures,” according to an Army aviation official, there remains the possibility that the ARH program could be “terminated” following the Pentagon review, service spokesman Paul Boyce said during the briefing.
“We’ve been working closely with Bell-Textron,” he told reporters.
Mike Cox, a spokesman for Bell Helicopter, said his company is committed to the program.
“We remain confident that that we can produce the ARH at an affordable price,” he said yesterday. “Bell Helicopter and its team of suppliers are ready to begin low-rate initial production (LRIP) of the ARH, and we are dedicated to producing a world-class weapons system for the Army’s warfighters.”
A milestone C decision, which provides the green light for LRIP, was initially scheduled for this month. It will now be delayed until at least September 2009, pending the Defense Department’s review of the program, according to Army officials.