The Right Stuff for Future GIs?

A Boeing-led $125 billion program to develop future combat systems is raising eyebrows. Will the weapons make soldiers more vulnerable, not less?

By Stan Crock

The roadside bomb that killed 14 Marines in Iraq on Aug. 3 was a deadly reminder that unconventional warfare poses the biggest threat to American forces. But the U.S. Army is betting billions of dollars on the notion that future wars will be fought on open battlefields against conventional enemies. At the heart of that strategy: Future Combat Systems (FCS), an ambitious plan to create 18 new weapons, from robots to light combat vehicles to aerial drones, and link them all in a vast war-fighting network.

The Army brass figures that tomorrow's more mobile GIs will be able to see first, strike first, and dodge counterattacks. "[FCS] is just going to drive circles around everybody," says John Pike, director of in Alexandria, Va. "The enemy is going to be roadkill."


  But not everyone is so enthusiastic. The grand vision of FCS -- which is slated to consume nearly half of the Army's procurement budget in the coming years -- is under increasing scrutiny. After the Army's three-week drive to Baghdad, analysts question the value of FCS's claims for a speedier force. And with soldiers and Marines improvising armor for their Humvees in Iraq, critics wonder whether the lighter FCS force could survive close-quarter urban combat.

Skeptics also fear that the FCS technology is a reach and that its price tag is too dear. The Army estimates it will spend $125 billion to develop the FCS and equip a third of its units with new weapons -- not counting $46 billion in new radios and other communications gear the system requires. "They've got a caviar appetite for requirements but a beer budget," says one House GOP aide.

The criticism is also putting more attention on the contract awarded to Chicago's Boeing (BA ) to oversee the FCS. Boeing serves as lead systems integrator for the FCS -- a sort of super general contractor that helps the Army figure out its needs and monitors the work done. As the Army approaches a major review of the FCS on Aug. 8-12, Boeing gets high marks for managing the program under a two-year-old contract.


  But the Army has restructured the FCS several times. As a result, it will now cost 60% more than an earlier $78 billion estimate and take four years longer to develop. Given the Army's shifts, "our performance to date is on schedule and on budget," says James Albaugh, CEO of Boeing's Integrated Defense Systems.

But other aspects of Boeing's involvement have raised eyebrows. Senator John McCain (R-Ariz.), who probed the aerospace giant's tainted air-refueling plane deal, has questioned the FCS contract. The initial $14.8 billion development pact gave Boeing an unusually high 10% fixed fee, plus up to 5% in incentive awards -- a total of $2.2 billion in potential profit. Typically, when program costs escalate, the dollar amount of the profit remains the same, squeezing margins. But on this contract, BusinessWeek has learned, when the initial cost grew by $6.4 billion, Boeing got 15% for that increment, too, for $960 million more in potential profits.

The agreement also bypassed many procurement safeguards, using rules designed to attract nondefense companies. Boeing -- the nation's No. 2 defense contractor -- hardly qualifies for the special treatment. The Army says it was trying an innovative approach to buying arms.


  Under pressure from McCain, who backs the program, the Army is writing a new contract that includes normal procurement rules. The fixed fee is being lowered to 3% and the incentive award raised to 12%, maintaining a total potential profit of 15% -- high but not rare in defense deals.

The Boeing contract has also become a poster child for other ills that lawmakers see in defense contracting. Like some other companies, Boeing collects a paperwork fee when subcontractors transfer parts between plants. Experts also raise concerns about the Army decision to award Boeing the contract to write a critical chunk of software that links various systems together. Brigadier General Charles Cartwright, deputy director for the Army research and development command, argues that "it was better to give Boeing that one piece" because of its integrator role. By Stan Crock But the Institute for Defense Analysis, a government-funded research center, says this creates "an inherent tension in Boeing's roles" in overseeing the contract. McCain has introduced a bill to define the role of a "lead systems integrator" and clarify what activities should be permitted.


  Boeing also has taken hits for its work designing an advanced radio, the Joint Tactical Radio System (JTRS), a cornerstone of the FCS network. In April, the JTRS's Pentagon overseer sent Boeing a letter threatening to cancel the contract for what could be $22 billion worth of radios. The Government Accountability Office says the Pentagon fears Boeing can't deliver. One snafu: The radio had a three-kilometer range, when it's supposed to transmit 10 km, the GAO says. Boeing says the problems have been fixed.

Indeed, the entire FCS blueprint -- a complex mix of communications, computers, and vehicles -- poses daunting challenges. The system requires more than 30 million lines of software. "It's a large software development program," concedes Dennis Muilenburg, Boeing's vice-president for FCS. So the company has added four major field tests to reduce the risk of failure.

The uncertainties surrounding FCS are causing heartburn among top Defense Dept. aides. Kenneth Krieg, the Pentagon's acquisition czar, fears the Army could spend vast sums on development and have little to show if budgets tighten before the costly work of building the vehicles begins, says a top Pentagon official familiar with Krieg's thinking. Krieg, who declines to comment, "wants to make sure they get something out of this," the source says.


  So rather than roll out fully equipped FCS units, the Army now plans to field the system's technology as it develops. Trouble is, according to the House GOP aide, the electronics at the heart of the FCS are not now slated to go into many existing Abrams tanks and Bradley fighting vehicles.

Lawmakers have reservations as well. The House voted to slash the program by $450 million, or 12%, in fiscal 2006. "No one can live with a $450 million cut," says the Army's Cartwright, who hopes a House-Senate conference will restore the money. Even the top brass is hedging its bets. While Army Chief of Staff General Peter Schoomaker would like to see the new technology and lighter-but-smarter doctrine prevail, he said at a conference in April: "Until we've got something that's a great leap over the M1 Abrams tank, we're not moving in that direction."

The fear: While the FCS network could give GIs the advantage of surprise and speed, the enemy can pull surprises, too. And the FCS's lighter vehicles would be more vulnerable than 70-ton Abrams tanks used in Iraq. The FCS notion is that "we are going to have equivalent firepower and survivability in a 20-ton vehicle," says Pike of "That's still an open question."


  Some analysts wonder whether the program is what the Army really needs. After watching the U.S. twice dismantle Iraq's once-vaunted forces, few foes are likely to engage the U.S. in open battle. "They're making a bet on a force structure and world that may never exist," says defense consultant Robbin F. Laird.

And it's not clear the Army can afford the FCS at the same time it's fighting in Iraq. "When your helicopters are wearing out and you can't figure out what's motivating the enemy, the need for a network a generation from today tends to fall in your list of priorities," says Loren Thompson, COO of the Lexington Institute, an Arlington (Va.) think tank. "The program has been simply overtaken by events."

The Army's recent procurement record is spotted with failures. Defense Secretary Donald Rumsfeld canceled the Comanche helicopter and the Crusader howitzer when they were beset by cost overruns and delays. Loss of the FCS would weigh more heavily on the Army than the demise of those weapons. "They weren't carrying the whole future of the Army," says the senior Pentagon official. "This is." But at the rate the things are going, the Army's best future combat systems may be the Abrams and the Bradley -- the weapons it has had all along. With Stanley Holmes in Seattle

Crock is chief diplomatic correspondent for BusinessWeek