By Geoff Fein

As expected, the Navy this week submitted paperwork notifying Congress that the VH-71 presidential helicopter has a Nunn-McCurdy breach.

Navy Secretary Donald Winter signed off on the document and sent it to lawmakers on Wednesday, Lt. Clayton Doss, a Navy spokesman, told Defense Daily yesterday.

"The VH-71 program office estimates a critical Nunn-McCurdy breach to the Program Acquisition Unit Cost (PAUC) in excess of 50 percent as compared to the original baseline estimate as of February 2006," Doss said. "The unit cost breach applies to the entire VH-71 program, Increment I and II. As the Nunn-McCurdy process moves forward, more refined and exact percentage and dollar amounts will be determined."

The Nunn-McCurdy statute requires congressional notice in the event of 15 percent cost growth, plus formal certification/restructuring in the event of a 25 percent cost-growth breach.

"The critical breach was not reported until now while the program explored with the contractor and customer numerous alternative program structures and requirements trade-offs in an attempt to keep the program within the original budget," Doss added.

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

In March 2008, John Young, the Pentagon’s acquisition chief, told reporters he expected the VH-71 total program cost to increase from $6.8 billion to $11.2 billion (Defense Daily, March 17).

Since December 2007, System Development and Demonstration (SDD) work on Increment II has been under a Navy issued a stop work order. There was expectation the order would be lifted as of last October. The order, however, was extended to Sept. 30, 2009. The Navy continues to due risk reduction work in preparation for when work resumes, a Naval Air Systems Command spokeswoman said.

Increment II is expected to reach initial operational capability (IOC) in 2017, with full operational capability of all 23 helicopters planned for 2019 (Defense Daily, May 7).

Under Increment I, the Navy will be buying four test aircraft and five Pilot Production aircraft. Increment I IOC will occur no earlier than September 2010 (Defense Daily, Oct. 17).

The VH-71 program has been plagued with challenges from the beginning.

"The program carried more schedule risk than normal due to the security environment created by 9/11," Doss said. "The program pressed forward with Increment I efforts despite a lack full understanding of what it would take to meet Increment II requirements."

The program has implemented various means to control costs, including independent reviews resulting in approximately 200 adopted recommendations, full participation in the Navy acquisitions gate review process, and a monthly Cost Performance Evaluation with the contractor, Doss said.

The operational requirements have been stable since the VH-71 contract was awarded January 2005. The major cost and schedule drivers are required technical upgrades to system components and the design, test, and qualification time it will take to field this aircraft.

Late last year the Navy awarded Lockheed Martin a $500 million modification to a previously awarded cost-plus-award-fee contract to provide additional funds for engineering development efforts in support of the SDD of the VH-71 Presidential Helicopter (Defense Daily, Dec. 2).

The Navy was also expected to award a contract for Increment II in February ’09. However, with notification this week to Congress of the Nunn-McCurdy breach, that contract award has been delayed until the Nunn-McCurdy breech is settled, a Navy source said.