Army to Revise Boeing Program
The U.S. Army on Tuesday was expected to announce a new structure for a $100-billion modernization program led by Boeing Co. to improve oversight, people familiar with the matter said.
The Army has decided to convert the Future Combat System into a traditional defense procurement contract from its current form as an “other transaction authority,” which exempts the project from certain cost and auditing requirements, the people said on condition of anonymity.
The move follows concerns raised last month by Republican Sen. John McCain of Arizona, whose scrutiny helped scuttle a big Boeing contract with the Air Force last year.
Army Secretary Francis J. Harvey was expected to meet with McCain on Tuesday to discuss a range of matters, including the Future Combat System, which will eventually use advanced communications to link troops with a family of 18 light, fast, manned and unmanned air and ground vehicles, Army spokesman Lt. Col. Tom Collins said.
McCain last week asked Harvey, a former defense industry executive, to provide cost estimates by Friday for converting the Future Combat System agreement into a traditional defense contract. McCain contended that the other transaction authority structure was intended for small, developmental projects and should not have been used for the Future Combat System.
“We don’t want to damage the program,” one Senate aide said. “We just want to get the structure under control.”
Boeing spokesman Randy Harrison said the Chicago-based firm, the No. 2 U.S. defense contractor, would carry out any modifications or changes the Army wanted.
Boeing is lead systems integrator on the project along with junior partner Science Applications International Corp.
Boeing and Science Applications won an initial $14.8-billion contract in December 2003 to oversee development of the Future Combat System. Much of the design work is being done in Southern California. In July 2004, the Army added $6.1 billion as part of a restructuring that delayed full operational capability four years to 2016.
Army officials declined to comment on the latest revisions. But the sources said Harvey had taken a strong personal interest in the project and was keen to avoid a long battle over the project with Congress.
President Bush’s first pick to head the Army, then-Air Force Secretary James G. Roche, withdrew his name from consideration last summer amid a controversy over a $23.5-billion Air Force deal with Boeing.
Boeing shares are trading near their high for the year, buoyed by strong defense spending on the war in Iraq.
Critics say agreements structured as other transaction authorities provide less oversight and accountability than a normal federal procurement contract, bypassing many regulations, such as the Truth in Negotiation Act, which requires contractors to certify their cost or pricing data are current, accurate and complete.
