U.S. Army eyes longer weapons contracts
WASHINGTON (Reuters) - The U.S. Army's top arms buyer said on Monday he would like to acquire new helicopters and Bradley fighting vehicles with contracts that lock in prices for three years, rather than the standard one year, a move generally cheered by industry.
"We're talking large dollar amounts" of potential savings, said Assistant Army Secretary Claude Bolton, who is responsible for $56 billion in procurement of weapons and services this year.
Speaking to reporters during the annual conference of the Association of the U.S. Army, a support organization, Bolton mentioned potential savings on Boeing Co (BA.N) Apache attack helicopters, Textron Inc's (TXT.N) Armed Reconnaissance Helicopter and the EADS (EAD.PA) light utility helicopter.
Generally, Congress balks at approving multiyear contracts unless they save at least 10 percent of the cost of a typical one-year deal with options for later years.
But the idea is popular with the Pentagon, even for smaller savings, because it locks in lower prices. Defense contractors like it because it makes longer production runs more likely, providing stability.
Bolton said congressional staffers rejected an Army effort this year to buy Bradley Fighting Vehicles with a contract covering more than a single year because the savings would have totaled only about 7 percent. The Bradley vehicle is manufactured by BAE Systems Plc (BAES.L)
Asked about an endorsement of multiyear deals by President Bush's nominee to be the Pentagon's next top weapons buyer, Bolton said he would like to work such deals out "with as many of the programs that ... we can get through Congress."
The nominee to be undersecretary of defense for acquisition, John Young, told Congress last week he favored multiyear contracts except when savings would be "insignificant."
Bolton said it would probably take two years to have enough information on the helicopter programs at issue -- which are all relatively new -- to justify going ahead with multiyear contracts.
He said he was satisfied with a plan to put the Armed Reconnaissance helicopter, which some lawmakers have proposed to kill for performance shortfalls, back on track.
The program should be on a "reasonable" path by the end of March, said Bolton.
