Six years ago, the Army decided to stake its future on an untested approach to acquiring futuristic weapons in support of a grand theory about the nature of 21st century warfare. The resulting program, known as Future Combat Systems, has turned out to be the most expensive and complex procurement effort in Army history. According to current estimates, the service will spend well in excess of $100 billion by 2014 to develop the "system of systems," which includes manned and unmanned air and ground vehicles and sensors tied together by a wireless network. The Army's bid for unprecedented speed and killing power requires double the amount of computer code than is contained in the Joint Strike Fighter's systems, relies on 53 new technologies and requires more than 100 network interfaces.
The challenge is so daunting that "I don't think we could manage it by ourselves," says Col. Charles Jorgenson, the Army's deputy program manager of business integration for FCS. He says the service lacks both the management and technical personnel to develop and integrate that many different systems. So it has decided not to try. In March 2002, the Army outsourced much of the management of FCS by hiring Boeing to serve as the program's lead systems integrator.
Boeing is slated to be paid about $21 billion to select and manage the contractors that will build the 18 FCS systems, design the overarching network that those systems will plug in to, and make sure the first FCS components are delivered on time and within budget to reconfigured Army brigades beginning in 2014.
The Army isn't the first federal agency to turn to a lead systems integrator to manage a complex and highly technical acquisition effort. Boeing also serves as lead integrator for the Missile Defense Agency's ground-based interceptor missiles, while Lockheed Martin and Northrop Grumman are managing the design and procurement of the Coast Guard's Integrated Deepwater System partnership to assemble a new fleet of aircraft and ships. None of these programs, however, is as big as Future Combat Systems, nor has any attracted as much skepticism.
The Wall Street Journal reported in November 2004 that the Defense Criminal Investigative Service was looking into possible ethics violations in Boeing's effort to win the contract. The Government Accountability Office has concluded that the "unprecedented complexity" of FCS puts it at "significant risk." In early April, after Sen. John McCain R-Ariz., sharply criticized the Army's use of a nontraditional procurement authority to award the contract, service leaders announced that they would restructure the FCS program.
Still, the Army believes that the focus should be less on the controversies surrounding how the next-generation weapon will be built and more on the overwhelming advantage it will offer in future wars. Gen. Peter J. Schoomaker, Army chief of staff, captured the thoughts of many in the service about the program's high-risk strategy at a February House Armed Services Committee hearing. "We are committed to the Future Combat System," he said, "but this is a journey. It is not a destination."
The Future Combat Systems journey began on a bare-bones airfield in Albania in the spring of 1999, when the United States agreed to provide 24 Apache helicopters to participate in a NATO-led effort to oust Serbian dictator Slobodan Milosevic's forces from Kosovo. The Army believed it could move the aircraft from their home installation in Germany to a military base in Macedonia in eight to 14 days.
But the effort became far more complicated when a lack of space at the Macedonian base forced the Army farther south to a rarely used installation in Albania. The base had little infrastructure, so the 465 Army soldiers needed to operate and support the 24 Apaches quickly grew to a force of more than 5,000. Ultimately, it took the Army nearly four weeks to deploy the Apaches to Albania at a cost of roughly $250 million-and they never were used against Milosevic. Pictures of soldiers and tanks and other armored vehicles stuck in muddy roads surrounding the base underscored concerns that the Army was too heavy for post-Cold War missions that required smaller forces and lighter vehicles. "You had an Army that could kick the living hell out of anyone, but it couldn't get there," says retired Lt. Gen. John Riggs, who was the Army's "objective force director" from 2001 to 2004.
Shortly after the fiasco, Gen. Eric K. Shinseki, who had commanded NATO's peacekeeping mission in the Balkans a few years earlier, became the Army's chief of staff and began pushing for the creation of a lighter, more mobile force. Shinseki called for the Army to reorganize into smaller, brigade-size combat units that would be able to deploy anywhere within 96 hours and sustain themselves for up to seven days.
Riggs, an Army aviator who logged 1,100 hours as a helicopter pilot in Vietnam, was asked to lead the design of the new combat units and come up with systems to replace the Army's prized ground weapons, the Abrams tank and Bradley Infantry Fighting Vehicle. Riggs had Shinseki's backing to scrap the Army's traditional method for building weapon systems. All the weapons for the new force would be designed and funded together, and tied into the same information network overseen by the lead systems integrator. That approach has two factors working in its favor: It is backed by an emerging warfighting concept and it is structured to draw the maximum amount of political support.
The Defense Department's Office of Force Transformation has spent several years pushing its vision of network-centric warfare, which calls for using information technology on the battlefield to quickly overwhelm technologically inferior enemies. Aligning the service's plan for purchasing the next generation of weapons systems with a strategy popular with Pentagon leaders has helped the Army win billions of dollars in initial funding to reconfigure its forces and start building FCS.
Combining 18 separate weapons programs under the FCS umbrella also makes the project less vulnerable to cuts on Capitol Hill. Typically, the Army has built weapons that are far less expensive than the multibillion-dollar ships and fighter planes pursued by its sister services. As a result, Army programs have had fewer backers among lawmakers and have proved more vulnerable to cuts. With FCS, the Army can issue briefing materials trumpeting the fact that the program involves contractors in "106 congressional districts in 29 states and growing!"
Before the advent of FCS, Army staff officers at the Pentagon had referred to the annual list of the top 10 Defense programs as the "chart of shame," because not a single Army system appeared on the list. That has changed in the proposed fiscal 2006 budget. FCS, at $3.4 billion, ranks as Defense's fourth-largest weapons program. Of course, that level of funding comes with strings attached in the form of increased scrutiny on Capitol Hill.
At a Senate Armed Services subcommittee hearing in March, McCain grilled Army officials about FCS, particularly the fact that they awarded the contract to Boeing using a provision known as "other transaction authority," rather than through the traditional procurement process. The special authority allows contractors to operate outside normal acquisition rules, such as those requiring vendors to provide extensive pricing data and to follow stringent ethics guidelines in the 1996 Procurement Integrity Act.
Congress gave the Defense Department authority to use OTA in 1989 to negotiate contracts with smaller companies that ordinarily did not bid on military work. But the approach had never been used on a program of the size and complexity of FCS. The Army justified its use by citing the urgent need for the new system and claiming the unique nature of the technologies required that the lead systems integrator attract nontraditional Defense contractors to work on it.
Claude M. Bolton, the assistant secretary of the Army for acquisition, technology and logistics, said at the March hearing that OTA made it far easier to negotiate language in the FCS contract, by avoiding the 147 standard clauses in typical contracts that sometimes keep away contractors, especially small ones. Bolton says the Army has negotiated specific oversight language in the FCS contract that is at least as tough as the standard rules.
For example, Bolton says using OTA allowed the Army to sidestep burdensome requirements for certified cost and pricing data required under the Truth in Negotiations Act. But the FCS contract requires companies working under the Boeing umbrella to make the same financial disclosures required of public corporations. The contract also gives the Army access to contractors' financial records and allows independent reviews by the Defense Contract Audit Agency, the Defense Contract Management Agency and the Government Accountability Office.
Still, McCain ripped the use of OTA at the hearing. He noted that Boeing's chief financial officer, Michael Sears, had suggested that the approach be used for the FCS contract. Sears is now in federal prison as a result of his role in illegally negotiating a job at Boeing for former Air Force procurement executive Darleen Druyun while she still held sway over the company's contracts at the Pentagon.
Bolton, a former Air Force general who had worked with Druyun on acquisition efforts before joining the Army in 2002, told McCain he had never talked to Sears about the OTA strategy. The November Wall Street Journal report said investigators were examining communications between Bolton and Sears about rising overhead costs in Army aviation programs just before the Army and Boeing settled on the terms of the FCS contract.
Kenneth Boehm, chairman of the National Legal and Policy Center, a watchdog group in Falls Church, Va., that first tipped off Defense investigators about the Druyun scandal, is incredulous that the Army would allow Boeing to operate outside normal procurement rules. "The most ethically challenged defense contractor in the country is now charged with the most expensive, high-risk defense program, using an agreement that minimizes oversight and accountability," Boehm said at the hearing. "If that doesn't call for increased oversight, what does?"
The Institute for Defense Analyses, an independent research group funded by the Pentagon, issued a report on FCS in August 2004. IDA noted that in an unusual arrangement, Boeing is both building the FCS network and developing a smaller software package as a subcontractor. Ordinarily, a lead systems integrator does not have a stake in building significant parts of a program that it is managing. "Boeing has a large stake in the future of this program, thus creating a tension in Boeing's role and responsibilities," IDA said.
The institute found that the use of OTA authority had done little to attract non-defense companies to FCS, but downplayed other critiques of the technique. "The Army's and Boeing's conservative approach in creating this agreement defuses concern that use of [OTA] has created special risks for the program," its report stated.
Nevertheless, after McCain publicly questioned the use of OTA, Army Secretary Francis J. Harvey announced on April 5 that FCS would be restructured to change it to a standard Federal Acquisition Regulation-based contract. "The OTA was appropriate for the earlier phase of FCS," Harvey said, but the standard approach "ensures FCS is properly positioned."
The Army's Jorgenson insists that the service has always maintained strong oversight over FCS. He says 685 Defense employees have been assigned to the Army's FCS program office to monitor the contract, working with 5,300 contractor employees. The program is run by 16 "integrated product teams," which include both Defense employees and contractor representatives.
"The government is involved with all decisions," says Jorgenson, adding that when the product teams can't reach a consensus, issues are sent to a program decision board made up of senior Army and Boeing officials. The service has final say if board members can't agree on a program decision, such as what type of hardware will be used or whether or not schedules can be met.
Dennis Muilenburg, Boeing's vice president and program manager for Future Combat Systems, says the approach is working. He notes that 350 companies submitted proposals to bid for the 18 FCS subsystems, but not a single protest was filed after 23 subcontracts were awarded. And, he said, Boeing, which had bid for several subcontracts, was awarded only one, valued at $100 million.
Still, that's no guarantee that FCS can deliver on the vast promises it has made. Some independent observers have strong doubts. "The FCS is at significant risk for not delivering required capability within budgeted resources," said Paul Francis, GAO director of acquisition and sourcing management, during the March Senate hearing. "The program's level of knowledge is far below that suggested by best practices or DoD policy," he added. "Nearly two years after program launch and with $4.6 billion invested, requirements are not firm and only one of over 50 technologies are mature."
Francis noted that the program was originally slated to cost $79 billion, and said the effects of any further schedule changes on future costs would be "dramatic." A one-year delay, Francis said, could cost the Army more than $3 billion.
"What if the cost would double?" he asked. "What if we get the solution we want, but it's so expensive we can't buy it?"
Nobody in the Army seemed ready to answer that question.