January 11, 2013 / 7:15 PM / 5 years ago

US Army official urges patience on helicopter competition

* Army leaders cite tough budget pressures

* Multiyear helicopter procurement deal also in jeopardy

By Andrea Shalal-Esa

WASHINGTON, Jan 11 (Reuters) - A senior U.S. Army official on Friday urged industry executives not to push for a bidding competition on a new armed helicopter as the multi-billion-dollar project could be reversed due to budget pressures.

Major General Tim Crosby, who oversees Army aviation programs, said top Army leaders wanted to evaluate the overall situation before endorsing a recommendation from lower level officers to buy new helicopters rather than extending the life of Vietnam-era OH-58 Kiowa Warriors.

"They need to have the opportunity to be able to make decisions based on the entire environment, and we don't know what that entire environment is yet," Crosby told reporters after a meeting hosted by the Association of the U.S. Army.

"Let's don't rush into a competition ... that we're going to have to change in six months or maybe in a year," he told industry and military officials at the conference. "The cut and run mentality will hurt us. We have to maintain a strategic vision of where our branch is going."

Many helicopter makers were discouraged this week when an Army official said he did not expect a final Pentagon decision on whether to go ahead with a new armed helicopter until spring, which could delay the bidding until 2014.

Crosby told reporters on Friday that briefed senior Army leaders before Christmas and again more recently, and further briefings were planned. He refused to say when he thought top Army leaders would decide whether to proceed with a competition.

Lieutenant General James Barclay, the deputy chief of staff of the Army in charge of the budget, did not address the helicopter issue specifically, but underscored the high level of uncertainty about the budget outlook for the entire Pentagon.

Defense Secretary Leon Panetta on Thursday ordered the U.S. military services to freeze civilian hiring, delay maintenance work and reduce other spending, acknowledging for the first time that additional cuts - on top of $487 billion already being implemented - were increasingly likely.

Barclay said the Army faced "tighter and tougher times," even if Congress managed to avert the full brunt of $500 billion in further cuts now slated to start taking effect on March 1.

Defense Secretary Leon Panetta on Thursday ordered the U.S. military services to freeze civilian hiring, delay maintenance work and reduce other spending, acknowledging for the first time that the additional cuts - on top of $487 billion already being implemented - were increasingly likely.

Lieutenant General William Phillips, the military director of Army acquisition, said there was a huge focus on affordability and ensuring that modernization funds were balanced across an array of competing needs, including new acquisition programs, current programs and the Army's goal to develop and field a new vertical lift capability in two decades.

If the Army proceeds with a new "armed aerial scout" helicopter competition, it would be the Army's third attempt to start replacing the OH-58 helicopters, which were built by Bell Helicopter, a unit of Textron Inc. The basic OH-58 airframe dates back to the Vietnam War era, although it has been upgraded and modernized several times to keep it current.

Boeing and a number of other weapons makers hope to bid for a contract that could eventually be worth $6 billion to $8 billion. It represents one of few new acquisition programs on the horizon at a time when arms companies are bracing for cuts in military spending after a decade of unbridled growth.

Boeing has said it plans to offer a version of its AH-6 Little Bird if the competition is launched. Sikorsky Aircraft, a unit of United Technologies Corp and the North American unit of Europe's EADS, have each invested heavily to develop new, more capable helicopters for a possible competition.

Bell Helicopter; AgustaWestland, a unit of Italy's Finmeccanica SpA; MD Helicopters; and AVX Aircraft are also interested in the program.

Officials said Army procurement plans were also jeopardized by the fact that Congress has not passed an appropriations bill for fiscal 2013, which began on Oct. 1. Under the continuing resolution now funding government operations, the military services are banned from starting any new programs.

In the Army's case, that means it may have to scrap a five-year, multibillion-dollar procurement agreement with Boeing Co for CH-47 Chinook helicopters that officials say would save the Army $810 million.

Officials said they were in talks with lawmakers about how to allow that contract to proceed, given the high amount of savings, but said it remained unclear if that would happen.

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