Fuss about Future Combat Systems

Army switches contract vehicle after McCain expresses concerns

After weeks of congressional and industry scrutiny, Army officials have agreed to change the contracting vehicle for the Future Combat Systems (FCS). Intervention by Sen. John McCain (R-Ariz.) prompted Army officials to switch their contracting approach for the multibillion-dollar program.

Army officials will use the standard Federal Acquisition Regulation (FAR) instead of the lesser-known Other Transaction Authority (OTA) for the next phase of FCS, a program to develop light, rapidly deployable vehicles with the firepower and protection of heavy tanks and infantry carrier vehicles.

Francis Harvey, the Army's secretary, said the FAR is better suited to the program's current phase, adding that OTA was appropriate for an earlier phase of the 2-year-old program.

FCS represents a multiyear effort to equip the Army's future force of brigade-size units with light vehicles that will have the heavy firepower of the service's current division-size forces. Each brigade of 1,500 soldiers will have 18 manned and robotic air and ground systems connected by a fast and secure communications network.

FCS will cost $122 billion to $125 billion, including $30 billion for research and $92 billion to equip 15 brigades through 2020. Army officials budgeted $2.8 billion for FCS in fiscal 2005 and requested $3.4 billion for fiscal 2006.

The program began in 2000, when officials at the Defense Advanced Research Projects Agency awarded four contracts. DARPA helped Army officials manage the program until 2002, when the officials selected an industry team to help them. Boeing and Science Applications International Corp. became the lead systems integrators under an OTA contract.

But FCS attracted scrutiny during a March hearing of the Senate Armed Services Committee's Airland Subcommittee. McCain, the subcommittee's chairman, asked why Army officials chose OTA, a contracting approach lawmakers created in 1989 for DARPA officials to use when they hired small, nontraditional vendors.

Defense Department and industry officials have repeatedly requested that the government allow OTA to be used for larger contractors, but congressional leaders have opposed it.

"We have taken the view that with hundreds of millions, or even billions, of dollars at stake, the taxpayer needs the protections built into the traditional procurement system," McCain said.

During the March hearing, Danielle Brian, executive director of the Project on Government Oversight, a watchdog group, said she was apprehensive about the Army's use of OTA, saying it lacks the safeguards built into contracting statutes and regulations to ensure fair, reasonable procurement prices.

A Government Accountability Office report released in March states that the FCS program is at significant risk. Auditors wrote that the Army has spent nearly $4.6 billion on a program that still lacks firm requirements and mature technologies.

"As planned, the program will attain the level of knowledge in 2008 that it should have had in 2003," said Paul Francis, director of acquisition and sourcing management at GAO, testifying during a hearing that coincided with the report's release.

Defense analysts attribute the heightened scrutiny of FCS to a variety of factors, including:

  • Weight and overheating problems with the Joint Tactical Radio System's Cluster 1 devices, which provide one of the communications transport layers for FCS.
  • A leaked Army study on poor performance by the new Stryker infantry carrier and Army Battle Command System, which has attributes similar to FCS.
  • News reports suggesting that the program's costs will reach $145 billion by 2020.
  • A procurement scandal involving an Air Force deal to buy tanker aircraft from Boeing.

"FCS is facing problems on several different levels that are all coming together now," said Phil Finnegan, director of corporate analysis at the Teal Group, an aerospace and defense consulting firm.

"On one level, there is concern if FCS is the right way to go for the Army and if the program is affordable," Finnegan said. "On another level, there is concern [about] the contract and management structure of FCS and whether it gives too much control to defense contractors."

When McCain and Harvey met April 5 to discuss the FCS procurement, Harvey agreed to change the program's contracting vehicle.

"I am gratified by the Army secretary's receptiveness to my concerns about the program," McCain said at the time.

Some have speculated that McCain's concerns about the Air Force/Boeing scandal fueled his concern about FCS. "It's clear that Sen. McCain is very concerned whether Boeing has gotten special treatment in contracting," Finnegan said.

But Harvey said he does not think McCain wants to retaliate against Boeing indirectly through FCS. "I've had personal conversations," he said. "I don't think that Sen. McCain holds anything against Boeing at the present time. Sen. McCain's OK with Boeing as a company."

Randy Harrison, a Boeing spokesman, declined to comment on the change to the FCS contracting vehicle and referred questions to Army officials.

A question of contracting controls

Army officials agreed to use the standard Federal Acquisition Regulation (FAR) instead of a lesser-known Other Transaction Authority (OTA) for the next development phase of the Future Combat Systems after critics raised contracting concerns.

Here are definitions and sample characteristics of the two contracting vehicles:

FAR provides rules for negotiated contracts with federal agencies.

  • Contractor records are open for the Government Accountability Office or Defense Department auditing agencies to examine.
  • Small-business participation is required.

OTA allows agencies to sign agreements for research or prototype-building projects related to weapons systems.

  • Traditional contracting controls do not apply.
  • Contractors’ intellectual property rights are fully protected.

Source: Project on Government Oversight

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