Leadership: Killing The Wounded

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October 19,2008:  In a rare demonstration of decisiveness regarding failing procurement projects, the United States Department of Defense has cancelled the ARH-70 helicopter. The cancellation was justified by the 1981 Nunn-McCurdy law, which mandates a project be cancelled if it goes more than 25 percent over budget, and a compelling case cannot be made that the system is critical for national security. The ARH-70 is 70 percent over budget, there is little chance of the budget problems being fixed, and the army has lots of helicopters that can do what the ARH-70 was designed to do.

This came after two years of delays, and huge increases in costs. This cancellation is nothing new, as the army has cancelled several too-expensive projects in the last decade. This came despite manufacturers mustering their Congressional and military allies to oppose such moves. The army told the ARH-70 manufacturer to come up with a convincing rescue plan. No such plan was produced, and now another helicopter manufacturer will get a shot at the contract.

The army was supposed to get the first of its new ARH-70 scout helicopters by September, 2008. But over a year ago that slipped to sometime in 2010. It got worse. The ARH-70 was supposed to cost $8-9 million each. That was the original 2005 estimate. But now the manufacturer, Bell Helicopter, wants over $12 million per aircraft. The army originally wanted to buy 368 ARH-70s. But with the delays and price increases, that number was sure to shrink.

The 2.8 ton ARH-70A is a militarized Bell 407. The helicopter it is replacing, the OH-58D, itself a militarized version of the older Bell 206. ARH stands for or armed reconnaissance helicopter. ARH-70 has a max speed of 243 kilometers an hour, and max range of 577 kilometers. It was supposed to be a straightforward conversion. A new engine and tail assembly, plus adding a fire control and weapons system similar to that installed in the OH-58D. But problems were encountered, that took more time, and money, than Bell expected, to fix. If you follow defense procurement, you've heard that many times before.

The OH-58D Kiowa Warrior has a top speed of 226 kilometers per hour, and a range of 241 kilometers. It has a mast-mounted sight, which carries a powerful FLIR (heat sensing camera) and a laser designator. The OH-58D is lightly armed, and usually only carries four Hellfire (anti-vehicle) or Stinger (anti-aircraft) missiles, or 14 70mm unguided (or guided) rockets.

The delays and price increases are attributed to the usual problems. The manufacturer over-promised, and the army keeps adding new features to the fire control and cockpit electronics. The manufacturer knows how this works, and has lawyers, tech writers, Congressional lobbyists and public relations teams standing by to come up with perfectly good, and legal, reasons for the delays and cost increases. The military, and the taxpayers, usually relent and pay up. Not always, but usually. Collective amnesia then sets in, and the process is repeated endlessly. But in the last decade, that has begun to change. Troublesome projects are increasingly at risk, and that acts as an incentive to make things work.

The Nunn-McCurdy law was intended to eliminate the overruns, but for over two decades it did not, or at least not often. What is happening is that the military in general, and the army in particular, is changing the rules. Some of that is coming from the public becoming aware of the game, and forcing the politicians to back off from supporting these bloated projects. The military appreciates this for other reasons, primarily because a way over-budget project is often one that is not performing up to spec either. This has also become more widely known, making Nunn-McCurdy one of those rare procurement laws that have grown more effective over the years.

The ARH-70 was itself the result of the cancellation of the RAH-66 Comanche helicopter. The army will now seek another new scout helicopter, while refurbishing and upgrading some of the current 375 OH-58D scout helicopters in the meantime. Whoever gets the new contract will probably be more successful, as they have no doubt that the army will act if the project gets out of control.

 


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