Bloomberg News

Pentagon May Have Mismanaged $2.6 Billion Helicopter Program

January 19, 2012

Jan. 5 (Bloomberg) -- Pentagon officials may be mismanaging a $2.6 billion program that buys foreign-made helicopters such as the Russian Mi-17 and provides them to U.S. allies, according to the Defense Department’s inspector general.

The Pentagon purchases the so-called non-standard rotary wing aircraft for allies whose pilots are less accustomed to U.S.-made helicopters. The Afghanistan and Pakistan armies are among the military services that fly Mi-17 helicopters. Non- standard helicopters also include the MD-530F, AW-139 and Russian-made Mi-35s.

Since 2007, the Pentagon has spent more than $1.6 billion buying and supporting these types of helicopters and plans to spend an additional $1 billion, according to an executive summary of a report submitted to Congress by the inspector general. The summary was released on the inspector general’s website.

Deputy Defense Secretary Ashton Carter in November 2010 consolidated Pentagon purchases of the helicopters under Army aviation oversight in Huntsville, Alabama.

Still, Pentagon officials “did not adequately manage the acquisition and support” of aircraft, said the inspector general’s one-page report summary.

“Specifically, Defense officials were unable to identify a comprehensive list of all DoD-owned and supported Mi-17s, their total ownership costs and all planned requirements” to support the helicopters, the summary says.

Not Fully Empowered

The Army office overseeing the helicopters hasn’t been fully empowered to make all decisions about the aircraft for the Pentagon, the summary says.

“As a result, the DoD may not have achieved the best value for the more than $1.6 billion” it has spent “and is at risk for inadequate management of more than $1 billion in estimated future costs,” it says.

The inspector general recommends that Pentagon leadership grant the Army program office major defense acquisition program authority and improve its capability to implement buying practices for all Defense Department agencies.

The inspector general, in a separate audit, is reviewing the oversight, management and pricing of Mi-17 overhauls and the Pentagon’s ability to provide quality assurance for maintenance done at a Russian facility.

The watchdog agency also is assessing whether the Army contracting officer negotiated “fair and reasonable prices” for $100.4 million in modifications. It’s also assessing whether the program office approved $11 million to buy parts at potentially inflated prices.

Army Response

Army project manager Colonel Bert Vergez said in an e-mail, “This investigation was conducted during the early stages of the project office’s initial creation and the report reinforces the decision by the Department of Defense to create it.”

“The office brings programmatic rigor and discipline to the situation that prior to its creation did not exist,” Vergez said. “Some of the shortcomings identified existed prior to the program office being established. The office is in the process of correcting and, in many cases, has corrected these shortcomings.”

Vergez’s office has a contract with the Moscow-based Rosoboronexport State Corporation for 21 fully militarized Mi-17 choppers that include full western avionics packages of navigation and communications equipment and are equipped to handle rockets and guns. The Army said they cost about $16.4 million apiece, including integrating the electronics.

The corporation operates as an intermediary agency for the export of Russian-made military equipment.

Nine were scheduled to be delivered by Dec. 30 for use by the Afghanistan Army.

--Editors: Jim Rubin, Terry Atlas

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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