US Army may cancel programs to trim budget-official

Tue Oct 11, 2011 6:59pm EDT

* Army's share of cuts could be $12 bln-14 bln a year

* No "buzz saw" approach to programs

* More agile, affordable approach to acquisition

By Andrea Shalal-Esa

WASHINGTON, Oct 11 (Reuters) - The U.S. Army's share of massive defense budget cuts will be up to $14 billion a year over the next decade, which may force the service to cancel a variety of weapons programs, a top Army official said Tuesday.

Lieutenant General Robert Lennox, deputy chief of staff for weapons programs, told Reuters at the the annual Association of the U.S. Army conference (AUSA) that program cancellations were "certainly a possibility" and could affect a mix of large and smaller programs.

He declined to identify which programs could be affected and said no decisions had been finalized. The Army's plans also still required approval by top Pentagon leaders, he said.

Big Army suppliers like General Dynamics Corp , BAE Systems Plc , Boeing Co , Lockheed Martin Corp and Raytheon Co are keeping close tabs on Army budget plans, given widespread speculation that the service will be hit especially hard in the coming defense budget crunch as U.S. forces withdraw from Afghanistan and Iraq.

Army officials acknowledge big problems with their weapons buying process in recent years but say they have learned important lessons from the Pentagon's decision to cancel its big Future Combat Systems modernization program in 2009.

Lennox said the service also had racked up some successes, including the rapid development and fielding of MRAP vehicles that could withstand roadside bombs, body armor for soldiers and hundreds of unmanned aerial vehicles.

Lennox told the conference that White House order to cut defense spending by over $450 billion over the next 10 years would shave $12 billion to $14 billion from the Army's annual budget each year.

The "brunt" of the cuts would come in modernization and training, since cuts in the number of active-duty soldiers would not kick in quickly enough to generate needed savings.

Lennox said Army budget officials were working on a budget plan for fiscal year 2013 and a related five-year budget plan but hoped to know the outcome of congressional deficit-cutting efforts before the budget is finalized.

Defense spending could be cut by up to $600 billion more if the so-called congressional "super committee" fails to identify $1.2 trillion in deficit-reduction measures.

Acting Army acquisition chief Heidi Shyu told reporters that the Army did not favor taking a "buzz saw" to all programs, which officials say could slow them all down and make it more difficult to move ahead later.

Instead, she said, the service was trying to weigh the risks involved in possible program cancellations, factoring in the age of current weapons, existing multiyear contracts and whether putting off new purchases would sharply increase maintenance costs for existing planes and ground vehicles.

Lennox said the service was also trying to factor in how quickly it could recover if it made the wrong decisions. For instance, he said, it took five years to build a new attack helicopter but far less time to build new trucks.

The Army has already twice revamped its plan for developing a new ground combat vehicle and recently issued revised rules for a new light vehicle program to replace its workhorse Humvees. It also invited companies to demonstrate existing light helicopters, in a third attempt to replace the aging fleet of OH-58 Kiowa Warriors.

Analysts say all three programs -- which together would be worth tens of billions of dollars to companies in coming years -- could be scrapped or delayed because of the budget cuts.

Shyu said the Army was developing a more agile and affordable process for buying weapons, injecting more competition and figuring out early how much military requirements added to the cost of new weapons, she said.

Lennox said Army acquisition officials were trying to set priorities within weapons portfolios and make trade-offs earlier in the process that should damp cost growth.

"I really hate to think that because you screwed up 10 years ago, that you're going to be forever stupid," Shyu said. "We are learning ... what we need to do to change our processes."

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