By Marina Malenic
Outgoing Pentagon arms buyer John Young yesterday lamented not having reviewed the fee structure in the Army’s contract with Boeing [BA] and SAIC [SAI] for its multibillion-dollar modernization effort.
“I should have done more to review the contract structure and, I think, segregate the programs” within the Future Combat Systems (FCS) effort, Young told reporters yesterday in his last day on the job. Ashton Carter was sworn in yesterday as the new acquisition chief.
In retrospect, Young says, he should have crafted separate production contracts for each of the program’s unmanned aerial and ground vehicles, sensors and other components.
“I was prepared to agree with the Army that you had to look at this in a coherent and holistic ‘system of systems’ way–that’s great,” he said. “But the buy decisions had to be made discretely on systems.”
Young primarily criticized the program’s fee structure, which he says was designed to award 90 percent of the fees to Boeing-SAIC before the program had even gone through a critical design review. In his former role as Navy acquisition chief, Young said he insisted on “back-loading” fees until after completion of that key milestone to retain some leverage over the contractor.
“To have only 10 percent of the fee to use as leverage on the most difficult testing that comes at the tail end of development, in my view, is a flawed strategy,” he added.
Defense Secretary Robert Gates has advocated canceling the $87 billion manned ground vehicle portion of FCS. Boeing has told lawmakers that a termination fee would be priced upwards of $750 million, according to a congressional aide.
Young told reporters that the Pentagon wants an open competition on a fresh vehicle modernization effort Gates has directed the Army to begin in its stead. However, Young also said the Boeing-SAIC team could have a role in systems engineering for the new effort in order to link the vehicles to the remainder of the FCS program.
“It’s very hard to fix signed contracts,” Young said, “so I don’t know that more could have been done. But I can’t let myself off the hook for not having tried to do more.”