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Large Cost Overrun Likely in Lockheed Helicopter Contract

By Tony Capaccio
Bloomberg News
Thursday, May 17, 2007

Lockheed Martin is projected to overspend by 34 percent on the development contract for the new presidential helicopter, according to Pentagon and Navy officials.

Costs for system design and construction of initial helicopters needed by October 2009 and more capable choppers for 2015 are estimated to total at least $2.4 billion, up from the $1.79 billion job Lockheed Martin won in January 2005, according to the Navy and the Defense Contract Management Agency.

Navy officials have repeatedly said the VH-71 aircraft, which will replace 40-year-old helicopters used for executive branch travel, is on a schedule at least three years faster than the usual timetable for a major defense program. The cost growth stems in part from delays caused by disagreement between the Bethesda defense contractor and the Navy over helicopter capabilities, according to officials.

"Typically Defense Department programs have aggressive schedules, but the presidential helicopter is even more aggressive than we are used to seeing," Paul Francis, director of acquisition and sourcing management for the Government Accountability Office, said in an interview yesterday.

Early on, the Navy and Lockheed Martin "didn't seem to be on the same page in terms of what the requirements were and what exactly Lockheed was required to deliver," Francis said. "What we are seeing is that they can't deliver the aircraft with those capabilities in that amount of time at those costs."

Consequently, Francis said, cost and weight are rising.

In a March 31 assessment of major weapons programs, the GAO said the aircraft had grown by 1,200 pounds over what was a 30,350-pound design weight.

There is "a risk" the chopper will not meet its required weight and airspeed goals, said the Navy program office in an unclassified quarterly report. "Performance risks are a direct result of continuing weight growth since contract award."

The $6.1 billion program envisions buying 20 helicopters, up from 15 last year.

Lockheed Martin is making an entirely new helicopter for the project, based on a model from the AgustaWestland unit of Finmeccanica of Italy.

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