$15 Billion Contract in Jeopardy
Wednesday, April 27, 2005
The Pentagon has warned Boeing Co. that it might terminate the company's contract to replace the more than 100,000 radios in Army vehicles and helicopters, a $15 billion program considered critical to the Army's modernization program.
The program is the first part of the Joint Tactical Radio System that was described in a congressional hearing last month as key to the Army's $124 billion Future Combat Systems, a series of air and ground vehicles, manned and unmanned, connected by wireless computers. The Future Combat Systems program is also managed by Boeing.
The radio program, whose cost is separate from that of Future Combat Systems, was to deliver radios that can operate on all military frequencies and give soldiers wireless connections to transmit video, data and voice communications while on the move. The military now uses 22 types of radios, which operate on different frequencies and often cannot communicate with one another.
"The government wants to avoid termination if at all possible," said Lt. Col. Ellen G. Krenke, a Pentagon spokeswoman. But "the department has concerns about the contract and the progress being made by Boeing . . . The show cause [letter] provides notification that the government is considering terminating the contract due to Boeing's anticipated failure to meet cost, schedule and performance requirements."
"This is not routine correspondence," said Steven L. Schooner, a government-contracting expert at George Washington University. "The general purpose of the letter is to put the contractor on notice that the government is considering canceling the contract for default; and default termination is a draconian solution. . . . Most of the time . . . this is a shot across the bow, this is a legal predicate to them taking the termination action."
Last month the Government Accountability Office said the program began in 2002 with "an aggressive schedule, immature technologies, and lack of clearly defined and stable requirements." The GAO said the program could be delayed two years and require an additional $458 million. If the radios are not ready for the first phase of the Future Combat System in 2008, "surrogate radios may be needed to fill the gap," the GAO said.
In January, the Pentagon told Boeing to stop building the radios until the technology could be tested. The military found that radios powerful enough to carry the desired amount of data would have to be bigger and heavier. The Army also wanted to add security features.
Chicago-based Boeing said it received the letter, which gives the company 30 days to respond. "We are working with our customer to fully understand those concerns in order to prepare a comprehensive response in accordance with the government's request," the company said in a written statement.