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Gates Moves Quickly To End Boeing And Lockheed Programs

In the proposed 2010 Defense Budget from the Obama Administration several large programs were recommended for termination. Two of the biggest were the Navy's new Presidential Transport Helicopter, the VH-71, and the vehicle portion of the Army's Future Combat System (FCS).

The VH-71 had seen schedule and cost increase significantly over time for a variety of reasons. There were concerns that the changing conditions in the "Overseas Contingency Operations" had made the requirements for the FCS vehicles obsolete. Most notably they were not maximized to protect against Improvised Explosive Devices (IED). The word from the Pentagon though was that various other components of FCS including the various Unmanned Aeriel (UAV) and Ground Vehicles would continue as would the data links required to connect all of the parts.

One of the issues faced by OSD when these kind of decisions are recommended is that Congress can keep a program going by maintaining the funding. This has happened with the C-17 transport where Congress continues to buy aircraft beyond the request of the Air Force and OSD.

Now Gates in an obvious attempt to make that process more difficult for Congress has directed the services to order stop work on the contracts. This means that the contractors cannot continue to do any work and the program manager cannot spend any of their existing funds. Sometimes this is done to reevaluate the whole contract and allow changes to be made, or sometimes just to end the program. The Army ended the Armed Reconnaissance Helicopter (ARH) program this way.

With FCS the Army is restructuring a whole new program called Brigade Combat Team Modernization which will allow those parts they want to continue. Of course this new start program will have to go through the process of being approved by Congress and the funds realigned. The major thing it does is cut Boeing and SAIC out of the program as they were the prime integrators on the FCS and had received the most criticism for the way their contract was structured. If the contract really has ended then the Army will pay termination costs to Boeing that will need to be negotiated.

The VH-71 program also received a stop work order on Friday the 15th. Lockheed Martin supposedly was expecting it. In this case it is hoped the contract will start again with some renegotiation. Congress and Lockheed had been pushing for a restructuring of the contract to allow the first phase of production and testing to continue and possibly build more aircraft to an earlier, less capable configuration.

Obviously Congress still has the right through the appropriation and authorization legislation process to have a say in the ultimate fate of these programs but Gates' has upped the pressure and difficulties involved.

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