http://www.businessweek.com/stories/2007-06-24/high-tech-weapons-a-loss-of-control

Magazine

High-Tech Weapons: A Loss Of Control?


At the core of the Bush Administration's campaign to transform the U.S. Army into a leaner, more technologically advanced fighting force is something known as Future Combat Systems. A vast computerized network, FCS would link soldiers and commanders to a galaxy of sensors, satellites, robots, drones, and armored vehicles, both manned and unmanned. While debate rages over the military's performance in Iraq, the five-year-old FCS has sparked concern about whether the Pentagon is too eager to surrender control over complex weapons to the companies that design and make them—in this case, to Boeing Co. (BA)

In a little-noticed report issued on June 7, the Government Accountability Office, the investigative arm of Congress, warned that Boeing's influence over FCS poses "significant risks to the Army's ability to provide oversight." Because of the program's complexity and cost, GAO auditors urged the Office of the Secretary of Defense to assume direct supervision. The projected bill for FCS through 2030 has already more than doubled, to $230 billion. Boeing would receive an undetermined fraction of that. The estimated price tag has ballooned even as former military officials and other experts question whether the ambitious program can accomplish its goal of allowing U.S. forces to cut through the confusion of battle.

FCS "misunderstands the frailty of the technologies, the limitations of the sensors, what they can and can't and never see," says Winslow T. Wheeler, a former GAO auditor of military programs who now directs the Center for Defense Information, a private research group in Washington. U.S. Army and Boeing officials counter that FCS remains on track and that the Pentagon hasn't ceded too much influence to the company. "We think [FCS] is going to revolutionize how we conduct warfare," says Lieutenant General Stephen M. Speakes, who heads the program to outfit 15 combat brigades, or about 60,000 soldiers, with the innovative gear.

Former Defense Secretary Donald Rumsfeld took office in 2001 pledging to transform a plodding Cold War force to a smaller, more mobile fighting machine, based on technological superiority. Much of that agenda fizzled when Rumsfeld encountered stiff resistance from uniformed leaders and Congress to trimming spending for tanks, nuclear submarines, and other expensive weapon systems designed for a war with the Soviet Union. Rumsfeld was forced from office in December, 2006, when his strategy of occupying Iraq with a relatively spare force failed to quell the bloodshed there.

One element of the Rumsfeld transformation that has moved forward is FCS. The Pentagon in 2001 set as a goal a first-ever detection-and-communication network that would connect disparate Army units of armor, infantry, and aircraft, which traditionally have had trouble maintaining contact and pinpointing the enemy in the proverbial fog of war. The daunting task would require the writing of 63 million lines of computer code, the most ever for a weapon system.

The Army quickly concluded that it lacked the technical capacity to manage the program, according to Speakes. Beyond the sheer complexity of FCS, the Pentagon had seen 38% of its civilian workforce eliminated from 1989 through 2002, with much of the reduction coming from the staff that oversees weapons purchases.

Boeing, the Chicago-based military and civilian aviation giant, underbid General Dynamics Corp. (GD) and Lockheed Martin Corp. (LMT) to win the main development contract for FCS. Previously only a minor player in competing for Army contracts, Boeing hired as its main subcontractor Science Applications International Corp., based in San Diego. Acknowledging in 2003 that it would rely on Boeing to handle supervisory chores normally done by Army officials, the Pentagon named the company "lead systems integrator," a new designation in the arcane world of military contracting, although one not unique to FCS. "It means there is really nobody [in the Pentagon] monitoring the performance of these government contracts," says Joshua I. Schwartz, co-director of George Washington University's government procurement law program.

From the contractor's point of view, the arrangement offers the opportunity to anticipate the Pentagon's buying proclivities. "Simply being in a strategy-shaping position offered the potential to have an unprecedented understanding about the needs of a rapidly evolving [Pentagon] customer and could enable the defense contractor to better target its product and service offerings," industry analysts with Sanford C. Bernstein & Co. noted approvingly in a report earlier this year. Boeing doesn't break out its annual FCS revenue, but in 2006 that money stream combined with the company's space-related revenue to total $11.9 billion. Boeing had overall revenue of $61.5 billion and net income of $2.2 billion.

WEIGHT PROBLEM

The GAO auditors observed in their June 7 report that Boeing's influence has already raised troubling questions. One example: Armored vehicles outfitted with FCS technology were supposed to be light enough to be transported by C-130 cargo planes built by Lockheed Martin. But under Boeing's supervision, plans have already shifted to make the vehicles heavier, leaving the C-17, a plane built by Boeing, as the only aircraft capable of moving them. On another front, the Army's weapons-testing command has raised concerns about whether Boeing has been granted excessive influence over assuring that FCS works properly.

The program "is at wide variance from the best practices" for acquisition embodied in the policies of the Office of the Secretary of Defense, the GAO concluded.

Boeing and the Army's Speakes disagree. "The Army is extremely happy," the general says, referring to the FCS program and Boeing's role. He stresses that the company, despite its unusual role, still works for the Army, which set the initial requirements for FCS. On the question of heavier vehicles and whose plane can transport them, Speakes says engineers are struggling to develop lighter, stronger armor. But it could take years to reduce the weight of FCS vehicles.

Dennis Muilenburg, Boeing's vice-president for Future Combat Systems, says the Army participates in supplier selection and that all subcontractor bidding is competitive. Acknowledging the problem with overweight vehicles, he, too, says engineers are trying to address it. Boeing, he adds, enforces a strict "firewall" separating contractors writing specifications for FCS from those bidding on hardware contracts. "We have a hardware exclusion," Muilenberg says of Boeing, meaning that his company is prohibited from competing for subcontract work. "The process we set up precisely ensures that [conflicts of interest] don't happen." Boeing's role as lead systems integrator and its compensation are appropriate for such an intricate program, he adds.

KIDDING THEMSELVES?

Boeing and Science Applications stand to collect a total of $20.77 billion from FCS development work over the coming years. Boeing is expected to make a lot more for managing manufacturing assignments. The company and the Army plan to produce the first elements of FCS next year. These include the initial version of the program's operating software, a tactical radio, and ground sensors for use in Iraq. Full production of FCS weapons isn't scheduled to start until 2013.

Speakes says the Army ultimately will get its money's worth: "What we are doing is giving the soldier the ability to see and operate through remote sensors and other technologies. We do understand the changing shape of war, and we will continue to evolve FCS to adapt to those changing requirements."

Wheeler, the former GAO auditor, says Speakes and his allies are kidding themselves. FCS "is an attempt to micromanage the battlefield to a degree that is physically and mentally impossible. It just misunderstands technology and warfare at a fundamental level."

Some former senior military officials agree. Paul K. Van Riper, a retired U.S. Marine lieutenant general, says the Pentagon must first focus on post-Cold War challenges such as how to confront urban guerrilla fighting. "We don't understand insurgencies, and we don't know how to counter them," Van Riper says. "I would have no problem with the Army researching FCS concepts, but to put these hundreds of billions of dollars into it is a waste of time and money. We don't need it in the immediate future."

Some in Congress, meanwhile, have begun to signal hesitation about FCS. Without trying to halt the program, the House Armed Services Committee in May approved an authorization bill that would reduce FCS spending for fiscal 2008 by $857 million, to $2.85 billion. The committee expressed "serious concern" about the program draining the Army's future budget. The panel also inserted language in the measure instructing the Defense Dept. not to issue new contracts with corporations as lead systems integrators. The full House passed the bill, but the Senate restored some of the House cuts in its version of the legislation. The two bills now have to be reconciled.

However lawmakers resolve the current tangle, the Army has bet a big part of its future on FCS, and Boeing appears likely to continue to benefit.

By Stanley Holmes


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