Monday, May 23, 2011

Next-Generation Air Defense: No Hits and All Misses (excerpt)

For anyone curious about the dark side of weapon procurement programs, look no further than MEADS.

The Medium Extended Air Defense System — in development since 1999 by Germany, Italy and the United States — was conceived as a mobile air defense system designed to replace the aging Patriot. The United States has been responsible for funding 58 percent of the development costs, with Germany covering 25 percent and Italy 17 percent.

More than a decade and $3 billion later, MEADS International, the prime contractor, says it needs more time and money to complete the development. But the Pentagon decided to pull the plug.

Like many other programs in the Pentagon’s acquisition trash heap, MEADS is an example of how the Pentagon spends billions of dollars on new weapon designs that never materialize. The cancellation of MEADS, however, has been far more controversial than others because the Defense Department says it must continue to spend $804 million over the next two years to avoid penalties.

“It's unbelievable the amount of money we're spending for a weapon system that's over budget but apparently going to shut down. And we've got nothing to show for it. And we may have to pay another $804 million just to close it out. I don't get it,” gripes Sen. Scott Brown, R-Mass., during an Armed Services Committee hearing on weapon acquisitions.

Brown’s singling out of MEADS as a poster child for Pentagon waste has drawn attention because Brown represents the state that would stand to lose thousands of jobs if MEADS ever reached fruition. The prime contractor for the system it would replace, Patriot, is The Raytheon Co., based in Tewskbury, Mass.

Dave Berganini, president of MEADS International, which is owned by Lockheed Martin Corp., has indirectly pointed fingers at Raytheon for having contributed to MEADS’ woes. “The predominant delay in the program is due to a protest by the losing contractor, Raytheon. It lasted two years and disrupted the multinational funding stream for five years,” Berganini writes in an article published in National Defense this month.

A Raytheon spokesman says the company, for now, prefers to not comment on Berganini’s allegations.

Raytheon did in fact protest the 1998 award of MEADS to Lockheed Martin, but it is hard to see how a protest that occurred more than 12 years ago, and held up the program for nine months, is the reason why MEADS is at least six years behind in delivering a working prototype.

A Defense Department report says MEADS “system design and development,” and flight tests are scheduled to be completed by 2012. But based on the latest review, the Pentagon estimated that MEADS needs 30 additional months and another billion dollars. That would push initial production of the system until 2017 at the earliest. Under the original schedule, the system was to have been in operation by 2008.

The initial plan was to field 48 batteries by 2034, at a cost of $17 billion.

What is now raising hackles on Capitol Hill is that the Pentagon has acknowledged that MEADS is in a deep hole, but apparently wants to keep digging. The Obama administration requested $804 million for MEADS development over the next two years, but announced it would stop short of fielding the system.

The reason behind this odd decision is that, under the U.S. agreement with MEADS partners Germany and Italy, a unilateral withdrawal would incur costly fines. There is also a penalty to be paid to the contractor, which is standard practice when the government ends a contract for convenience. So the Pentagon decided that, instead of paying $800 million in penalties, it would continue to fund MEADS until development is completed.

Berganini says the $804 million for the next two years will be enough for three flight tests. After that, the program would need $1 billion more from the United States to enter production.

He contends that MEADS must go forward because the 40-year-old Patriot system is costly to maintain. “Placed side by side with MEADS, the U.S. military would need five times the manpower and 10 times the transport planes to deploy Patriot in a crisis and defend the same area,” he says.

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