February 24, 2009 / 1:54 AM / 10 years ago

Obama says U.S. helicopter project costs "gone amok"

WASHINGTON (Reuters) - President Barack Obama vowed on Monday to crack down on costly military programs, citing a project to build a new presidential helicopter fleet as an example of the procurement process “gone amok.”

Lockheed Martin Corp’s helicopter program is now more expensive than Air Force One, the high-tech Boeing 747 that ferries the president, former Republican presidential candidate Senator John McCain told a summit convened to look at ways of curbing the United States’ $1.3 trillion deficit.

Lockheed shares closed down nearly 5 percent on Monday, a day when Wall Street shares hit 13-year lows.

McCain and Democratic Senator Carl Levin, head of the Senate Armed Services Committee, will introduce a bill this week to rein in military weapons programs which now routinely run billions of dollars over budget, Levin said.

“This is going to be one of our highest priorities,” Obama assured McCain when the senator told him at the summit that the government had to act to curb the “excesses of procurement.”

With the United States facing the worst economic crisis in decades, Obama has pledged to review major defense programs.

As a result of the cost growth, the Defense Department must either end the program or certify that it is essential for national security and meets other tests established by law.

“I have already talked to (Defense Secretary Robert) Gates about a thorough review of the helicopter situation. The helicopter I have now seems perfectly adequate to me,” Obama told about 130 lawmakers, academics and business leaders gathered at the White House.

“It is an example of the procurement process gone amok and we are going to have to fix it.”

The Navy notified lawmakers last month that the VH-71 presidential helicopter program, for which Lockheed bid $6.1 billion, is more than 50 percent over budget.

The White House has named physicist Dr. Ashton Carter as its nominee for under secretary of defense for acquisitions.

Lockheed and its chief subcontractor on the project, AgustaWestland, a unit of Italy’s Finmeccanica, won the contract in January 2005. They beat Sikorsky Aircraft, a United Technologies Corp unit that makes the current “Marine One” helicopters used to transport the president.

LOCKHEED CONFIDENT, SUPPORTS REVIEW

Lockheed Martin spokesman Troy Scully told Reuters that, “consistent with President Obama’s call for a thorough review of the VH-71 program, Lockheed Martin and the U.S. Navy are supporting the ongoing Nunn-McCurdy review that will comprehensively examine budget, schedule and requirements.”

Lockheed is confident “we can deliver the required number of helicopters compliant with the specifications that emerge from the ongoing review,” he said, adding that the new aircraft offer “significantly better command, control and communication capabilities than exist today.”

Earlier, Armed Services Committee chairman Levin said the bill he was co-sponsoring with McCain would create the presumption that development of a weapons system would not continue if it ran over budget.

“You have to come up with a rationale to continue. If you do continue you must go through your financial assessment again on costs,” he told reporters on the sidelines of the summit.

Under the existing Nunn-McCurdy law, the Pentagon must cancel any weapons program in which costs rise more than 25 percent unless it can show the program’s importance to national security, the lack of a viable alternative and proof the problems that led to cost overruns are under control.

A congressional aide familiar with Levin’s planned legislation said the bill contained “dozens” of provisions to help lawmakers crack down on cost overruns.

At Monday’s summit, Obama tasked one group of lawmakers, officials and academics to look at cutting costs in the government procurement process.

They called for restrictions on the routine use of cost-plus contracts, which critics say invite abuse because they allow companies to charge the government costs plus a fixed profit no matter how poor their performance.

Senator Joe Lieberman, chairman of the Senate Homeland Security Committee, cited a report by the Government Accountability Office that said cost overruns on Department of Defense weapons systems amounted to $300 billion.

Additional reporting by Andrea Shalal-Esa and Jim Wolf

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