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Air Force Cost Goals Restrict Competition for New Rescue Helicopter

The U.S. Air Force is once again trying to attempt to buy a new aircraft to replace their MH-60 rescue helicopter fleet from the Eighties. The original CSAR-X program faltered twice earlier this century due to protests. Boeing (BA) had one the last contest with a version of the CH-47 but after protests from the losing bidders it was decided to start over.

The current Combat Rescue Helicopter program had put out a RFP for new proposals due in January. The goal is to buy just over 100 aircraft at a cost of $6.4 billion.

Unfortunately it was announced this past week that the only company interested in bidding on the contract is Sikosrky, part of United Technologies (UTX), teamed with Lockheed Martin (LMT). Sikorsky made the current HH-60 fleet. Other potential bidders including Augusta Westland, Eurocopter, Bell and Boeing believe that the cost goals will be too hard to meet for their products. Some have basically said the contract requirements were written in such as way so only a version of the UH-60 Black Hawk could meet them.

The Pentagon is obviously trying to reduce cost but at also at the same time promoting competition. Sometimes, as here, the two things don’t always work together as to attract bidders there must be some profit in it for them.

The Air Force has struggled with large acquisitions for a few years now. The new aerial tanker, KC-X, took 3 tries before Boeing won. The CSAR-X has already been discussed. They are currently redoing the Light Air Support aircraft contest after Embraer and Sierra Nevada’s win of the original contract was overturned on protest.

Whether they want to continue the current contest with limited bidders or try to re-do the requirements to attract more will be the next decision. They could just wait and see if more then one bid in January as originally intended.

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FCS Cancellation Fallout

The cancellation of the current Future Combat Systems (FCS) development contract was one of the cornerstones of the Obama Administrations 2010 defense budget. The program of new vehicles, unmanned aerial and ground systems, and the data links connecting them was estimated at over $160 billion. The Army still has a requirement for a upgrade to their combat brigades currently using the Eighties produced M1/M2 vehicles and the Styker Interim system. As such a new program was set up to replace FCS almost immediately after the contract with Boeing and SAIC was canceled.

Now the Army is concerned that the money planned for in the budget may not be available for this new program. At a minimum some of it will be needed to pay the termination fees related to the various contracts ended prematurely. They were ended at the convenience of the government so the contractors are entitled to payment for whatever work they had done and what it takes to close out the contracts. If the money doesn’t remain in the FCS line then the Army will be forced to fund it from other programs.

Congress in their mark up of the 2010 budget cut most of the money budgeted for this as they felt there were sufficient current funds to cover this. This may be a little too much penny save pound foolish. The Army knows fairly well what is needed and probably budgeted appropriately. The cost to other parts of the Army including the new modernization program may be quite high.

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Army continues investment in Excalibur

The Excalibur is a 155 mm artillery round fired by the standard Army gun systems, both towed and self-propelled. When the program started in the Eighties the plan was to use laser guidance for terminal homing. Excalibur now uses GPS guidance, like the Joint Directed Air Munition (JDAM) used so successfully over the last seven years in Iraq and Afghanistan. The round also has extended range over older, more conventional ammunition. Raytheon was awarded a production contract for the US and Australia. The value is about $85 M.

The press release is at the Phoenix Business Journal.

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Congress, the media and the KC-45 award

I made the mistake of watching Lou Dobbs on CNN this Saturday who had a rant about the KC-45 award to Northrop Grumman and EADS. The only guest he had on was the head of the machinist union from Boeing who was obviously not unbiased. He had no guest from DoD or Northrop to talk about the award. It was clear that Mr. Dobbs does not understand how DoD buys things. Here is the video from Mr. Dobbs blog on this issue. Read more

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