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McCain, Auditors Question Army Modernization Effort

By Renae Merle
Washington Post Staff Writer
Thursday, March 17, 2005; Page E02

The Army's $120 billion modernization effort was challenged yesterday by government auditors, who said it might be too complex to complete on budget, and by Sen. John McCain (R-Ariz.), who questioned whether taxpayers' interests are protected.

The Future Combat System (FCS) is designed to replace the Army's heavy tanks and battlefield equipment with a lightweight, high-tech mix of manned and unmanned vehicles. The Government Accountability Office said at a hearing before McCain's Senate Armed Services airland subcommittee yesterday that nearly two years and $4.6 billion after the program began, only one of more than 50 required technologies is mature. It noted that the program will need 34 million lines of software to operate, about twice the number used by the F-35 Joint Strike Fighter, the largest previous military software project.

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Chicago-based Boeing Co. is managing the Army transformation project. Some critics have questioned whether Boeing, which has been mired in procurement scandals during the past two years, was the right choice for "lead system integrator" -- a position that gives the aerospace giant more influence than a typical prime contractor in deciding the program's design and awarding subcontracts.

McCain pointed out that Boeing is running the program under what is known as "other transaction authority," or OTA, rather than a normal procurement contract. The agreement excludes, for example, the Procurement Integrity Act, which limits government employees' ability to negotiate a job with a contractor, and the Truth in Negotiations Act, under which the government conducts audits.

"We do have laws in place . . . in order to protect the taxpayers," McCain said. "I appreciate the enormity of the challenge here and the importance of modernizing our Army to meet the new challenges, and we're not interested in holding it up in any way. But we do have this obligation to the taxpayer."

Critics have also questioned whether Boeing, the Pentagon's second-largest contractor, should be using an agreement Congress originally intended to attract small commercial companies to the industry. The Pentagon's inspector general has called the increasing use of the agreements with traditional contractors "disturbing."

"If one accepts the premise that FCS is unprecedented in its scale and importance and that the Army is changing the way it does business in order to accomplish FCS, then it makes sense for the relationship with the defense industry to change as well," Boeing spokesman Randy Harrison said after the hearing. "You can't get to the future by doing business as usual."

Army officials defended the program. "The bottom line is that we need to acquire the best capabilities that we can afford within time constraints given to us," said Claude M. Bolton Jr., the Army's chief weapons buyer. "I believe the [lead systems integrator] and the OTA are both vitally important to the success of this program."

The Army streamlined the agreement to eliminate unneeded paperwork and save time, Bolton said. The goals of the laws McCain cited are reflected in the agreement, he said.

"All the protection is there," Bolton said.

Bolton said during the hearing that, under the agreement, the company's prices are certified as fair. But after the hearing, the Army told the committee that the contract does not require certification, the Project on Government Oversight, a D.C. watchdog group, said it learned. A committee aide confirmed that account and said the agreement also did not appear to allow the Army to recoup funds if it determined the company had overcharged or that costs were not fair and reasonable.

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