Higher Cost Estimate Threatens GCV: Colonel

19 Aug 2011 By MICHAEL HOFFMAN and KATE BRANNEN DefenseNews

If an estimated cost of $17 million for the U.S. Army's Ground Combat Vehicle (GCV) is accurate, the service might have to cancel the program, the GCV program manager said.

Col. Andrew DiMarco made the comments the day after the Army announced it awarded two technology development contracts worth a total of $890 million and two days after Pentagon acquisition chief Ashton Carter ordered a simultaneous review of alternatives.

The Army acquisition arm estimated an average procurement cost of $13 million and a manufacturing cost between $9 million and $10.5 million. Army leaders have emphasized that in this budget environment, the service can't afford spiraling costs for the program. Gen. Peter Chiarelli, Army vice chief of staff, listed GCV as the Army's No. 2 modernization priority.

When asked if a ceiling existed for the program, DiMarco said the service would have to consider canceling it if the price per vehicle crept above the $13 million marker predicted by the service. But the Pentagon's Cost Assessment and Program Evaluation (CAPE) office said the program is already $4 million above that ceiling and would cost the Army an additional $7.2 billion if the service buys the planned 1,800 copies of the next-generation infantry fighting vehicle.

Army officials used a "bottom-up" approach for their estimate, while DiMarco said the CAPE used a different methodology.

In a surprise move, the U.S. Army awarded two technology development contracts instead of three for the program. BAE Systems and General Dynamics Land Systems were announced as the winners Aug. 18.

An SAIC-led team that also included Boeing, Krauss-Maffei Wegmann and Rheinmetall did not receive a contract award.

BAE, which had teamed up with Northrop Grumman, received a $450 million contract, according to the contract announcement. General Dynamics Land Systems won a $440 million contract. The team also includes Lockheed Martin and Raytheon.

Before the decision was announced, defense analysts and government officials had predicted that if the Army went with two contracts instead of three, the losing team would protest.

SAIC had said its approach to the program was to leverage the investments the company made in the Future Combat Systems Manned Ground Vehicle program and the Puma Infantry Fighting Vehicle to produce an American infantry fighting vehicle "designed for the challenges our war fighters are facing today, as well as those of future conflicts."

In an Aug. 17 acquisition decision memorandum, Carter gave the Army permission to award contracts for the program's technology development phase but also ordered a simultaneous review of alternatives.

Marked "For Official Use Only," Carter's memo also reveals a new bit of pricing data: The average procurement unit cost of each GCV will be around $13 million. This compares to the previously stated cost target of $9 million to $10.5 million.

An Army spokesman said the $13 million figure includes spare parts.

Carter's memo directs the Army to conduct two reviews to see if any existing vehicles could fill the Army's need for a new infantry fighting vehicle without a new development effort.

However, the memo also authorizes the Army to move ahead with its current new development effort.

"The Army enthusiastically welcomes the formal launch of the Ground Combat Vehicle program, which will provide much needed protection and mobility to soldiers in combat," Army Secretary John McHugh said in a statement. "Given the economic environment the nation currently faces, the Army recognizes that it is imperative to continually address requirements as we build a versatile, yet affordable, next generation infantry fighting vehicle."