US Navy, Lockheed weigh W.House helicopter changes
WASHINGTON, Nov 13 (Reuters) - The U.S. Navy and Lockheed Martin Corp (LMT.N) are locked in discussions about how to restructure the $6 billion VH-71 presidential helicopter program amid concerns over sharply higher costs.
Lockheed was due to submit a detailed proposal for the second phase of the program in early September, but asked for a three-month extension until December, a senior Navy official said. A program review by top Pentagon officials, initially scheduled for Nov. 2, has been postponed indefinitely.
Lockheed, which teamed with AgustaWestland, a unit of Italy's Finmeccanica (SIFI.MI), to win the helicopter award, is tight-lipped about the program. It referred all queries to the Navy, which in turn said it is waiting to see Lockheed's plan before it can comment on cost and schedule.
Defense analysts and Congress' Government Accountability Office (GAO) say there is no doubt that cost growth and schedule delays are likely. But it is still not clear if they will be severe enough to breach congressional cost thresholds that would trigger a mandatory life-or-death program review.
Loren Thompson of the Virginia-based Lexington Institute said the Navy's air system command has increased its demands so significantly that it is no longer clear they can be met by the AgustaWestland 101 helicopter picked for the program.
The initial plan was to build seven test and five pilot production aircraft to be fielded in October 2009. That was to be followed by a second batch of 10 low-rate and eight full-rate production helicopters in full operation by 2015.
"So many equipment carrying requirements and performance requirements have now been added to Increment II (the second phase of the program) that it could unravel that whole idea of using the existing helicopter that was selected," he said.
"At this point the Pentagon doesn't know how to proceed and may not do anything on Increment II during this administration," added Thompson, a consultant to Lockheed. "They're sort of at a stalemate at this point."
He said the Navy's changes would require a longer tail, a bigger main rotor and other key changes to the helicopter.
The range requirement for the first batch of helicopters already had to be reduced because their weight was 1,200 pounds over the original limit, according to an April GAO report.
Navy officials had no comment on a recent news report that Navy Secretary Donald Winter had proposed postponing funding the next phase of the helicopter program until 2010.
Navy acquisition chief Delores Etter, who will leave office and return to her teaching career this month, briefed acting Pentagon arms chief John Young about the program on Friday, a meeting also attended by Lockheed officials.
Navy spokesman Lt. Cmdr. John Schofield said only that the Navy and Lockheed remained in constant communication, and the Navy was waiting for Lockheed's Increment II proposal.
"Until we have that it's very difficult to speculate on the effect of the restructuring on cost and schedule," he said.
Richard Aboulafia, analyst with the Virginia-based Teal Group, said the government was unlikely to terminate the program despite mounting costs, given the urgency of replacing the current aging fleet of presidential helicopters.
The outcome of the VH-71 restructuring has bigger implications for Lockheed, which is proposing a modified version of the same 101 aircraft in a troubled $15 billion Air Force competition for new search and rescue helicopters.
The Air Force has reopened that competition on the advice of the GAO, but Lockheed got a low rating in the first go-round for its performance on the presidential helicopter.
Company officials argue that the program is now back on track and its current problems stem from additional requirements imposed by the government, not its efforts. (Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn)
