McCain seeks limits on Pentagon’s use of multiyear contracts

Senate Armed Services ranking member John McCain, R-Ariz., is angling to insert language into his committee's markup of the fiscal 2008 defense authorization bill that would place new restrictions on the Pentagon's use of multiyear contracts to buy major weapons systems.

McCain's language, which is also contained in a massive bill he introduced Tuesday to overhaul the defense acquisition system, could affect several programs -- including the Army's CH-47 helicopter -- for which the Defense Department has requested multiyear contracts. McCain said in a floor statement Tuesday night that he hopes to attach the entire bill to the defense authorization measure, which the Senate Armed Services Committee is marking up behind closed doors this week.

McCain and other lawmakers, including former Senate Armed Services Chairman John Warner, R-Va., have long been skeptical of the multiyear contracting approach, which allows the military services to sign long-term contracts for weapons systems for a fixed price. Although the law limits the life of these contracts to no more than five years, critics have argued such arrangements hinder oversight of the procurement programs.

"If Congress bought these items under a series of annual contracts, there would be a meaningful opportunity for it to annually review the programs' progress," McCain said. "For this reason, using multiyear contracts should be limited to only the best performing and most stable programs."

But proponents of the multiyear contracting approach have countered that any savings under these arrangements are significant and worthwhile, particularly as the Defense Department modernizes its weapons systems while also spending billions to repair and replace equipment lost and damaged in battle.

"We think that doing multiyear [contracts] that save any money to the American taxpayer is a good thing," a senior Army official said Wednesday. "It's just common sense. I don't know that there's a magical number."

McCain's language would allow the Pentagon to issue multiyear contracts on programs that save at least 10 percent of the total cost of the contract. If a multiyear approach would save 8 percent to 10 percent of total costs, the Pentagon could still enter into a multiyear deal if the program met certain requirements, including at least $500 million in total savings.

The Army is seeking several multiyear contracts in its fiscal 2008 budget request, including two five-year contracts to upgrade 152 CH-47D Chinook helicopters into the latest F model configuration and to buy 41 new CH-47Fs.

The Army estimates the conversion deal would save $134 million and the long-term CH-47F purchases would save $40 million over year-to-year contracts, but these savings would fall short of McCain's proposed cost-saving requirements.

Meanwhile, the Army's request for a four-year contract to upgrade 965 Bradley Fighting Vehicles also would not appear to meet the requirements in McCain's proposal.

Last year, McCain lost a floor battle over his efforts to prohibit the Air Force from using a multiyear contract to buy 60 F-22 Raptor fighter jets over the next three years. The independent Institute for Defense Analyses concluded in a report last year that the F-22 multiyear contract could save $235 million, or about 2.2 percent, of the estimated cost of procuring the jets through separate annual contracts.