June 16 (Bloomberg) -- The U.S. Defense Department has cut 11 Northrop Grumman Corp. Global Hawk drones from the remaining 26 third-generation aircraft that were to be purchased in an order worth as much as $3 billion.
Pentagon weapons buyer Ashton Carter, in a five-page memo dated June 14, directed the cut as part of a reorganization of the $12.4 billion program, which has had cost overruns and performance test shortfalls.
The Air Force planned to buy a total of 42 so-called Block 30 drones. It had previously purchased 16, leaving 26 for a full-rate production decision scheduled for this month. The internal memo was obtained by Bloomberg News.
Air Force officials had previously said the decision was worth as much as $3.08 billion. The Pentagon will now decide on the remaining 15 drones. Pentagon spokeswoman Cheryl Irwin confirmed the reduction of 11 from the remaining aircraft. The memo contained a typo that said a total 44 Block 30s would be bought instead of 42, she said.
In the memo, Carter said he wanted the scaled-back, full-production decision to take place “as soon as possible, anticipated later this summer.” Carter also said a full-production decision for 11 of the fourth version known as Block 40 also would be taken “as soon as possible.”
Carter, in plus for Northrop Grumman in his memo, also directed that the Air Force “fully fund” the program in the fiscal 2013-17 budget that’s under preparation now.
Carter’s memo and correspondence to Congress outlining his decision were part of a “re-certification process” in which the Pentagon reaffirmed that continuing the program was in the national interest.
The reaffirmation was triggered because the program in April breached its cost goals and violated the Nunn-McCurdy Act.
The average cost of a Global Hawk has risen more than 25 percent. The current procurement cost -- exclusive of research, development and base construction -- is $113.9 million, up from $90.8 million in 2000 dollars, according to service figures.
When research, development and construction of facilities are factored in, the cost is $173.3 million per aircraft; the comparable cost in 2000 dollars is $150 million.
Carter told Congress there was no suitable alternative to the Global Hawk and the Pentagon must continue the $12.4 billion program.
Carter, in a June 14 letter to U.S. congressional defense committees, said that the Global Hawk program, which is over budget and has fallen short in performance tests, “is essential to national security.”
“The U.S. government considers the Global Hawk as a high priority aviation program,” Carter said.
The Pentagon’s support of the Global Hawk, Northrop’s largest drone program, follows a report by the Pentagon weapons tester which found that a newer version of the drone was “not operationally effective for conducting near-continuous, persistent” intelligence, surveillance and reconnaissance (ISR) missions that it was designed to conduct.
The RQ-4B Global Hawk Block 30 was capable of providing only about 40 percent of requested coverage when flying two or three sorties a week, using three aircraft, during a test period from October through December, according to the May 27 report signed by J. Michael Gilmore, the Defense Department’s director of operational test and evaluation.
The program in 2001 was expected to cost $5.3 billion for 63 aircraft, according to the Government Accountability Office.
The restructured Air Force program will now consist of a total of 55 aircraft, Carter said. The program includes 13 older Block 10/20 drones, 31 Block 30 drones and 11 Block 40 drones, which are the newest version. A separate effort would develop an advanced ground control and communications system, according to documents Carter submitted to Congress.
The cost of the restructured Global Hawk program is $12.4 billion, which is $1.6 billion less than the cost estimate the Pentagon reported on Dec. 31, 2010. The independent cost estimate was developed by the Pentagon’s director of cost assessment and program evaluation. Carter said the independent cost estimate has a confidence level of 50 percent.
“ This is the best program for cost to provide the needed capability,” Ed Walby, Northrop Grumman’s director of business and development for the Global Hawk program, said in a telephone interview. “The reduction in numbers reflects the increased reliability of the system which allows for a reduction in replacement aircraft for the aircraft that wear out. In recent months the use of the aircraft in operations has shown that it is much more reliable than it was in testing.”
The causes of program’s cost increases have included deferred development and new requirements, Carter said in a letter to the leaders of the House Armed Service Committee. The letter was obtained by Bloomberg News.
Pentagon “incentives failed to motivate” Northrop Grumman to deliver aircraft on time and “with acceptable quality,” Carter said. The government’s negotiating power was “eroded” by “extreme delays” in issuing a final contract, he said.
“Oversight was not consistent and persistent,” Carter said. Also, even though a reliability program was directed, it was not pursued. Engineering and risk management practices were “not conducive to the management and control of costs,” Carter said.
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