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How Much Money Did Canceling the VH-71 Save?

Update — The Associated Press and other media corrected this report to say that it was an extension of a contract worth $8.4 million. The total contract value with the extension is over $8 billion. The point stands that there will be a cost associated with keeping the aging systems working while a new system is developed.

One of the programs that was ended as part of the Obama and Gate’s defense reforms was the new Presidential Transport helicopter. Lockheed Martin (LMT) and its Italian partner, Finmeccanica, had won the contract to build a new helicopter to ferry the President around replacing a fleet of venerable VH-3 and VH-60 aircraft made by Sikorsky (UTC). The program had faced cost and schedule issues due to massive requirements creep that caused the total cost to balloon. In 2009 the Navy pulled the plug on the program and started over.

Because a whole new program began it meant that the existing aircraft would need to extend their planned service lives. Some in Congress, especially Congressman Hinchey (D-NY), who represented the area where Lockheed Martin was doing the work on the program argued that this decision could end up being more expensive then continuing the existing program. Lockheed and Finmeccanica did offer a reduced cost program utilizing the aircraft already purchased that could meet some of the requirements but not all of them. One aspect that was raised that there would be a cost related to continuing the use of the older aircraft as they would need to be maintained and modified to stay in use.

Today the Defense Department announced that they were awarding Sikorsky a contract to carry out “VH-3D executive helicopter special progressive aircraft rework induction.” This means money to overhaul and update the current fleet of VH-3 aircraft. The estimated value of this contract is over $8 billion. This is money that is needed because the President’s aircraft must be maintained to the highest standard.

This does illustrate that in some ways Congressman Hinchey was right. The money saved by ending the VH-71 will now go to keeping the older aircraft flying and starting the new program. Eight billion dollars will buy you a great deal of helicopters and capability. Not neccessarily what you wanted in the VH-71 but certainly it would go a long way to meeting the needs of that program.

Penny wise and pound foolish as my Nana use to say.

Photo from sophiea’s flickr photostream.

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Starting Over With Or Without The VH-71

November 24, 2009 by · Comment
Filed under: BNET 

The Pentagon discussed starting a new program to buy the President a helicopter. The last attempt was the VH-71 but this was canceled by the Obama…

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War Of Words Continues On VH-71 With Lockheed In The Middle

October 13, 2009 by · Comment
Filed under: BNET 

The 2010 Defense budget bill approved by the House kept funding to use the existing VH-71 aircraft purchased under the canceled program while the…

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House Moves To Keep VH-71 Increment One Alive

The various defense appropriations and authorization bills are working their way through the House and Senate. Many items have been included not requested by the Obama Administration or Secretary of Defense Robert Gates. This really is not surprising as Gates attempted to cut a lot very quickly. He spared no service cutting Air Force F-22 and C-17 aircraft, Navy VH-71 and destroyers, and Army vehicle and missile defense systems. Congress has pushed back on certain programs.

One that they are trying to keep alive is the VH-71 helicopter for use in transporting the President. This program has not only been unfunded in the President’s 2010 budget but Lockheed Martin has been told to stop work. The company and the Pentagon are negotiating termination costs.

The House Appropriation Defense sub-committee, though, included almost half a billion dollars to try and utilize the Increment One aircraft already procured. The program was structured with two increments of aircraft, the first being basic ones to be used to support testing and development. A larger buy in five or so years would have all the required equipment. To date the U.S. has invested about $3 billion in the program. The House wants to see if some use could be derived of the aircraft already delivered.

While the current fleet of VH-2 and VH-60 aircraft have served the President well they are somewhat dated. The VH-71 would have more modern survivability and communications equipment with greater range and lift. The strenuous requirements are what led to the programs cost and schedule growth. There will be more to come on this issue to say the least.

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HASC Wants To Continue VH-71

In their markup of the 2010 Defense Appropriations Bill the House Armed Services Committee added money for continued production of the F-22. It also recommended that the Navy and Defense Department continue production of the Increment One of the VH-71 New Presidential Helicopter.

They feel that this would be the best use of the over $3 billion already spent on the program. There is obviously still a requirement for this aircraft and a new program is planned. The HASC wants the first group of VH-71 to be used as “the normal transport for the President…” with other systems looked at for the more stringent requirements. Right now the President uses VH-3 for short range, normal duties and then longer ranged CH-53 and UH-60 for other missions. One of the problems faced by the VH-71 was the attempt to buy one aircraft to do all missions.

Finemeccanica had offered to just deliver Increment One aircraft at reduced price for the total program. Of course these did not meet all of the requirements that the Navy had levied. This was a major reason the program’s cost and schedule increased so much.

So far the HASC markup does not necessarily agree with the Obama Administration’s proposals in the area of the F-22 or the VH-71. The bill still needs to go through the process of other committee markups, the full House and Senate and then the Conference. This means that this language may or not make it to the final version but it does show support for the VH-71 program.

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Lockheed Plans Further Job Cuts Due To VH-71 Ending

Lockheed Martin had already cut over one hundred jobs at their Upstate New York facility in Owego. This was mainly due to the decision by Obama and Secretary of Defense Gates to end the VH-71 New Presidential Transport helicopter program. Even though the aircraft was made in Italy Lockheed did all the modifications and integration in Owego.

Despite a great deal of argument and pressure to keep the program going in some form or another the contract was recently terminated. Lockheed is now saying that another seven hundred and fifty people may lose their jobs. Right now they are looking for people to voluntarily leave or retire with a promise of severance. The plan is to begin the layoffs in July based on how many people agree to leave voluntarily.

One of the arguments against ending this and other production programs is that they will just add to the joblessness during the current recession. Of course the defense budget is not really a jobs program and that is fairly poor reasoning to continue spending billions of dollars on a system that does not meet requirements. It is still possible that Congress will pass some form of spending that will keep pieces of the program alive in the 2010 defense budget but that will not be finished until the Fall.

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Northrop Tries To Save Kinetic Energy Interceptor

Update — On June 10th the Missile Defense Agency (MDA) terminated the Kinetic Energy Interceptor (KEI) for the convenience of the government. This meant that all of Northrop’s lobbying to continue the program to at least conducting the first key test in the program was wasted.

Moving quickly like he has on the FCS and VH-71 programs the Secretary of Defense Robert Gates had another stop work order issued for a program recommended for cancellation in the 2010 budget. MDA told Northrop Grumman to halt the KEI program. This $4 billion contract had only recently been issued and the first test flight of the propulsion system was planned for later this year.

Congress has shown a great deal of support for this program recently and the decision to end it was not well received. There was some concern expressed that the program had not been given a chance to demonstrate its capability. The total missile defense budget saw almost a twenty percent cut with this and the Ground Based Mid-Course system making up the bulk of that money. The plan is to focus on the Navy’s system as well as shorter ranged Army ones.

Northrop has proposed that even with the termination of the program they will still be able to meet schedule and complete the booster test. This may be an attempt to sway Congressional and Administration support for continuing the program beyond 30 September 2009. If they really can meet this test schedule and the history of missile defense programs is not in their favor due to the complexities of the tests and technology then it might help them carry the program over.

A Northrop Grumman video on the program is below which is kind of amusing as it is done as a fake newscast:

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TSAT Contract Latest To Be Ended

Secretary of Defense Gates announced that in the FY10 budget plenty of different programs would be ended. Unlike previous administrations who decide to de-fund a contract in next year’s budget but let the current year play out Gates has aggressively ended the contracts. The latest one announced was the U.S. Air Force’s Transformational Satellite Communications System (TSAT).

When the budget plans were announced in April the plan was to end this system and begin development of two new separate systems for the same mission. The TSAT like most military satellite and space programs had suffered delays and cost problems. They were not insurmountable but as time goes by the Pentagon often looks at different or new requirements that the older planned systems may not meet.

So following in the footsteps of the VH-71, Future Combat Systems (FCS) and the Kinetic Energy Interceptor (KEI) programs the TSAT contracts were terminated for convenience today. There were two separate contracts — one with Lockheed Martin for mission operations systems and one with Booz Allen Hamilton for systems engineering.

One idea of doing this so fast is to prevent Congress from keeping the program alive through continuing funding despite the Pentagon’s request. Without an active contract it will be hard to do this in the next year. More to come on all of these various moves as the budget makes its progress.

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Uncertainty About The Defense Budget In Ohio

Dayton and Columbus, Ohio are near Wright-Patterson Air Force Base (WPAFB). This is the location of the U.S. Air Force’s Material Command (AFMC) which oversees all acquisition for that service. As such a large number of contractors small and large have work and facilities there as they provide support to AFMC and the various research labs at WPAFB.

Two recent articles from Dayton’s media reflect the concerns people have about Obama’s future defense plans.

First WHIO reports that MacAulay-Brown, Inc. a local company has won two more contracts and may grow so much it will no longer be considered a small business by the U.S. Department of Defense. There are benefits in being in that category when it comes to bidding on contracts but a larger company is capable of winning bigger contracts with more value and work.

Second is the Dayton Daily News which writes that many companies are concerned with the plans to reduce contractor work forces and add government employees. Nobody is usre how that will work and if the jobs will go away in Dayton and be added somewhere else. Will all the current contractors involved in acquisition the prime work at WPAFB just be absorbed into the government or lose their jobs?

This kind of situation will be faced in communities across the U.S. large and small as the policy is implemented. The direct economic effect of all this could be highly negative if contractors are replaced by government people in D.C. or another state. It might not as the contract work force may just transition to civil service. The key economic affect of these jobs is the good salaries and the spending they generate. If those go away due to program cuts or workforce restructuring the effect on a community can be devastating. Look at what Owego, NY is now facing due to the end of the VH-71 program. This could be mirrored across the country in the months to come.

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CAGW Advises Congress Not to Ground Presidential Chopper — Press Release

CAGW Advises Congress Not to Ground Presidential Chopper

WASHINGTON–(BUSINESS WIRE)–Citizens Against Government Waste (CAGW), the nation’s premier taxpayer watchdog organization, today expressed support for the continuation of the VH-71 Presidential Helicopter Program. President Obama included the program on the list of program terminations and reductions to the fiscal year (FY) 2010 budget, which he released on May 7, 2009 in a bid to whittle $17 billion out of his overall $3.6 trillion budget. The President had stated in February, 2009 that the helicopter he currently uses “seems perfectly adequate” and added, “I think it is an example of the procurement process gone amok. And we’re going to have to fix it.”

But even in his recommendation to terminate the program, Defense Secretary Robert Gates acknowledged that a new fleet of presidential helicopters is necessary due to the advanced age and technological limitations of the current fleet. In a post-9/11 world, there is broad consensus that the President should not be flying Vietnam-era technology.

“CAGW applauds the President’s desire to cut wasteful spending, but taxpayers are between a rock and a hard place on the helicopter issue,” said CAGW President Tom Schatz. “One of the most common axioms of aviation is that every takeoff is optional, but every landing is mandatory. The same could be said now about the $13 billion program to fund the new fleet of presidential helicopters.”

It has become increasingly clear that it won’t be as cost effective as it may have appeared to terminate the VH-71 program. More than $3 billion has already been invested in the program to cover the R&D and production costs of the first phase. Navy officials estimate that program termination and liability costs will be $555 million. Factoring in costs already incurred and shut-down fees, terminating the program now would leave taxpayers with nothing to show for nearly $4 billion – even though nine new aircraft have been produced that meet performance requirements. “This program is also another example of the rampant lack of realistic budgeting and absence of fiscal discipline in the Pentagon’s procurement process,” said Schatz.

More alarming, according to a recent memo prepared by House Armed Services Committee staff, the Navy has told Congress it will require billions of dollars to extend the life of the current fleet of presidential helicopters, which are already 35 years old, in order to keep them in operation for another decade until a new program can be devised. “In light of these facts,” said Schatz, “starting a do-over program from scratch would be even more costly than completing the current program – leaving the taxpayer to foot the bill twice rather than maximizing the current investment. Given the urgent security needs of the President and the massive amount of money that would be wasted should the Pentagon and the White House terminate the program at this late stage, the prudent course would be to move forward, take possession of the helicopters we have paid for, and find a responsible solution both for the taxpayer and the Office of the President.”

Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.

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Obama’s Budget Hits Orbital Hard

Orbital Sciences stock took a pounding last week as one of its major programs was proposed to be canceled by Obama and Secretary of Defense Gates. Missile defense programs along with the F-22 and FCS wheeled vehicles took the biggest in the budget. If the budget moves forward with the planned ending of major programs other companies may see their stock affected.

The upside though is that if the restructuring of the budget goes forward it will provide opportunities for other companies. There will also be new programs eventually as the need for some of these — like the VH-71 — are still there. The next big contract that seems will be awarded is the KC-X tanker replacement some time next year. A new competition will be held between EADS and Boeing. Currently it looks like the award won’t be split as some had hoped for.

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AugustaWestland Work Force Worried About VH-71 Contract

While Finmeccanica has stated that they are not worried about the pending cancellation of the VH-71 new Presidential helicopter as proposed by Secretary Gates, there is concern at AugustaWestland‘s facility in Yeovil, England. The local paper reports that if the program is ended there would be major cuts to the work force at that facility. AugustaWestland is not coming out and stating anything in this regard, but much of the work going on there supports the two phases of the program. As Finmeccanica has said Phase II has not yet started and that is why their earnings would not be effected in the next few years — no money has been spent on that part of the program. AugustaWestland makes the base helicopter which is then modified by Lockheed Martin in New York. The company would also provide support to the delivered aircraft. The contract while it is only for 23 aircraft is very large due to the cost of the individual platforms and the necessary modifications. The support contract would also be significant. The cancellation is just a recommendation right now and ultimately Congress will decide whether to end the program, restructure it, or just continue the current path.

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VH-71 Suffers Cost Breach and Connecticut is Lobbying

The Connecticut Post reports that the VH-71 new Presidential helicopter program suffered a “Nunn-McCurdy” cost breach. There are two levels of this breach and the higher one, a 25% increase, requires the Secretary of Defense to certify the program is still required for the U.S. national defense. The fine Senators and Congressmen from Connecticut have pricked up their ears at this development and want to meet with DoD to discuss canceling the program and giving it to Sikorsky. The contract with Lockheed Martin has seen considerable cost growth due to requirements creep since the contract was awarded. This has required wholesale changes to the EH-101 platform selected. Hence the great increase in cost and schedule for the program. Of course the DoD will have to weigh the savings if another vendor proposes something cheaper with the time required to restart the program. With a new administration it is conceivable that the contract could be canceled and started over, like ARH, but it probably won’t happen.

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Looking to buy DRS

This article discusses the idea that Finmeccanica, the Italian defense conglomerate, is looking at DRS Technology for an American acquisition. Like EADS and BAE the Italian company has been expanding its presence in the US. Its helicopter arm, Augusta Westland, won the VH-71 Presidential helicopter teamed with Lockheed Martin and is also trying to win the CSAR-X recompete post-protest. DRS which makes advanced sensors and electronics while providing SETA services has long been an attractive take over target. It’s stock though has done very well recently and for Finmeccanica to buy it would require a substantial investment. Read more

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Hillary accused of hypocrisy on KC-45

This article explains why some feel that Democratic candidate for President, Hillary Clinton, has been accused of double standards on the KC-45 contract. The basic argument is that she is very supportive of the VH-71 contract for the new Presidential helicopter. This is also a foreign aircraft teamed with a US integrator, here Lockheed Martin. The fact that the final assembly is done in Oswego, NY as compared to Alabama has nothing to do with it she says. On the KC-45, like many Democrats, she has taken a protective stance. While not as outspoken as Barack Obama, she has made noises of disapproval of the selection of EADS over Boeing. Senator McCain, due to his rather role in the whole matter, supports the Air Force’s position. More to come, I am sure.

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Connecticut politicians lobby for Sikorsky for VH-71 contract

A group of 11 Congressman, mainly from Connecticut, wrote a letter to DoD asking for the Lockheed contract be canceled and put out for re-bid. See Hartford Courant for more. The hope is that Sikorsky will win the recompete. Read more

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