Lockheed and US Army fumble $6 billion Aerial Common Sensor project

The Washington Post can be credited for bringing this ridiculous management fiasco to my attention: $6 Billion Lockheed Deal For Spy Plane in Jeopardy. Reading the story reveals that it’s an even more amazing situation: “The Army ordered Lockheed Martin Corp. to stop work on a $6 billion manned spy plane program yesterday after determining that the company’s proposal would not meet the project’s requirements.”
What I’m still trying to figure out is how did the contract ever get awarded and Lockheed start working on the project if their proposal didn’t meet the project requirements in the first place?
Let’s try to clarify the situation by drawing a simple parallel: you’ve asked a carpet company to bid on installing new carpet throughout your office, they’ve submitted a bid that doesn’t actually match your specifications, but to which you, for no obvious reason, say “Looks good! Why don’t you get started?” A few days later your partner says “Hey! We wanted blue carpet and they’re installing green! Didn’t you actually check the darn bid before giving them the go-ahead?”

Seems unlikely, doesn’t it? But for this $6 billion spy plane project it’s not unlikely at all, in fact, it’s criminal idiocy, it’s hundreds of millions of of our tax dollars being grossly mismanaged in exactly this fashion.
Didn’t anyone at the Army actually check the proposal against the project specifications to ensure that it matched before telling Lockheed to get started? Or has it come down to a situation where Lockheed and similar aerospace companies are so confident in their bids that they just green light the project simultaneous to submitting the bid?
To find out more, I decided to spend some time digging into this story. The Post reports that the project is called the “Aerial Common Sensor”, so I Googled the phrase. Seconds later I was reading about the Aerial Common Sensor [ACS] on the Federation of American Scientists Web site. My question: Was the contract actually ever approved by the Army, or was Lockheed working on the project without formal approval?
A bit more digging and I found that Morningstar quoted Dow Jones News Service on an article entitled Lockheed Hasn’t Been Paid $7 Million on Troubled Spy-Plane Work, wherein the article states: “Lockheed Martin won an $879 million contract last year to develop the Aerial Common Sensor, a new spy plane sought by the Army and the Navy. The program is now at risk of cancelation after encountering weight, cooling and other aircraft problems.”
So this is clearly an evolving fiasco, where the contract was awarded to Lockheed, but that in addition to the issue of aircraft size (as reported by the Post) there are also problems with weight and cooling. More importantly, given the latest Post reporting, it’s baffling – and, yes, maddening – to learn that the initial Lockheed proposal was approved by the Army even though it didn’t meet the requirements of the project.
As a taxpayer I’m not pleased to read “If the Pentagon ends the program for reasons other than poor performance, Lockheed could receive a hefty termination fee” and to realize that if the Army incorrectly gave a green light to Lockheed, that it probably isn’t considered “poor performance” on the part of the contractor and Lockheed could get an estimated $50 million termination fee, according to sources. Is this the military’s version of a golden parachute?
I’m just aghast at this story because as a working professional, I never tell someone to go ahead until we agree that what they’ll deliver meets my specs and requirements, and I’d never proceed with client work until I have a contract in hand and am confident that my deliverables are an exact match for their requirements. I bet you’re the same.
How can Lockheed and the Army get away with this sort of dismal mismanagement? We’re not just talking about a few million dollars, either, we’re talking about a $6 billion dollar project, $6 billion that could, for example, go a long way to restoring the damage from Hurricane Katrina. Heck, the $50 million cancellation fee – if that actually happens – could by itself be a big help!
With stories like this happening under our noses, it’s very hard not to become completely cynical about government incompetence and military mismanagement of billion dollar budgets, to say the least.
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6 comments on “Lockheed and US Army fumble $6 billion Aerial Common Sensor project

  1. Dave,
    It sounds like you just got an introduction to the Pentagon’s procurement process, especially as it relates to Lockheed. Lockheed has had a special status for a long time, especially when it comes to spy planes.
    Years ago (mid 1980’s) I worked on a bid for a replacement for the Navy’s Orion aircraft (built by Lockheed). Naturally, Lockheed was among the bidders for the replacement. Lockheed proposed a nearly complete redesign of the Orion, with amazing cost and performance advantages over the competition. Naturally, they won. After starting work and spending over $300 million, they had to tell the Pentegon that it was impossible to build the aircraft or even come close to meeting the budgets they had proposed. The project was cancelled. Any other company would have been barred from bidding on contracts for quite some time, but not Lockheed.
    One of the amazing things about the current fiasco is the cost. $6 billion? What were they thinking? It’s obviously mis-management on a truly grand scale.

  2. I just want to point out a couple of things. The contract was not for $6 billion. It was for $879 mil. They were given the task of creating a new plane. If the plane met the requirements the rest of the contract to build a few would be worth $6 billion.
    Many bids go out asking for every bell and whistle possible. When the bids come back often times they are for less then was asked because that is all that can be reasonably achieved with the technology at hand. The program may have been approved as a best that could be expected situation that was later re-evaluated.
    Yes there is a lot of money at stake here and I don’t like to see it wasted however it bugs me to have it over sensationalized to $6 billion as that was not the amount at stake that was the possible total of the whole project not the contract. $879 million is a big enough figure so why blow it up more.
    As to the $50 million for termination. There are huge up front costs with bids like this that are not returned in the incremental payments. If the contract goes to the end these cost are recouped if not they would be out of the winning bidders pocket. This is a lot of money but probably not out of line with the realities of the situation.

  3. Good points, Chris, but it’s still a lifetime $6 billion to $7 billion project, and it seems to me that if it’s going to cost upwards of $879 million + $50 million termination, say a cool billion, just to find out that the plane can’t be built, there’s something terribly wrong and wasteful about the entire procurement system.

  4. As a recently retired Navy Aircrewman who used to fly in these type of aircraft, the big problem was the type of aircraft chosen. My guess is that Lockheed Martin SWAGged the total weight of the system and figured the ERJ145 could handle the load. The Army should have chosen a larger aircraft such as the BAe RJ series, the successor to the C-27 Spartan, the Gulfstream G-V, or the Global Express (what LM is now proposing. The Navy should work getting the system on the C-40 Clipper (a 737), which the Navy is already flying and should be able to handle the load and still have room for mission growth.

  5. I became part of the LM team after they won this contract, a latecomer who never saw a lick of work. The contract was cancelled because neither the government nor any of the teams had considered the weight of the cabling required when asking for and submitting the proposal. Once all parties realized this, a quick evaluation revealed the futility of marching on, and so the Army cancelled the contract. Time to start again, this time more intelligently

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