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C-130 Aircraft Modernization Program: Continuation or Termination? September 21, 2009

Posted by Trice Kabundi in Analysis.
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The C-130 Aircraft Modernization Program (AMP) has been recommended for termination by Air Force Chief of Staff Norton Schwartz. This recommendation comes in light of Secretary Gates’ call earlier this year for the Pentagon to reexamine its spending and come up with $60 billion in savings over the next five years. The cut is based on expectations that the defense budget will not experience significant growth in the mid term. Thus, new priorities set by the QDR will be financed by the offset which is expected to put greater emphasis on research and procurement accounts. Schwartz’s recommendation will likely be approved by Gates as many programs have had to be trimmed down or cancelled.  This situation is especially unfortunate because while Schwartz has cited the high cost as reason for termination, some of the costs have been attributed to the Air Force itself.

The C-130 AMP is a multibillion-dollar upgrade project, whose purpose is to update cockpits of aging C-130 aircraft, thus improving the C-130’s communication and navigation systems. The C-130, a versatile four-engine turboprop aircraft, has been used from war zone transportation to the delivery of humanitarian relief supplies due to its ability to land and operate in rough terrain. However, the aging of many C-130s became a cause for concern, therefore initiating the modernization program in 2000.

Boeing was awarded the $4 billion contract to improve all 519 C-130s and since that time the program has been plagued by significant delays and large cost overruns. The cost overruns were, in fact, so large that they required reevaluation under the Nunn-McCurdy amendment which statutorily mandates reevaluation if there is a 50% or more increase from a program’s estimated costs; the unit costs for the AMP had grown by more than 160% from the initial program estimates. The assessment cut the number of planes to be upgraded from 519 to 388 and the Joint Chiefs further trimmed down the program to 222 based on an assessment of the air force’s available funding. Between 2007 and 2008, there was further reduction in the program until finally the call for termination came last week.

DOD’s Deputy Director of Operational Test and Evaluation/Air Warfare (DOT&E) Mike Crisp has placed much of the blame for the cost increases on the Air Force. The Air Force’s original estimate was based on the understanding that all information on damages and repairs to the aircraft were up-to-date and repairs would essentially be uniform. However, Boeing discovered that this was not the case and many of the damages, repairs, and modifications were exclusive to each aircraft.  The original estimate was inaccurate because the Air Force had failed to complete long overdue technical change orders which catalog modifications, configurations, updates and general maintenance performed on aircraft and systems. The continuation of the AMP program therefore required updating missing information, cost increases and project delays.

Further complicating the issue, the AMP faced additional delays because of investigations by DOD’s Inspector General and the Government Accountability Office (GAO) into an undisclosed relationship between Principal Deputy Assistant Secretary of the Air Force Darleen Druyun and Boeing. The investigation caused sections of the AMP contract to be reconfigured.

The sum of these mistakes have equated to a program that is no longer seen as salvageable.  If the recommended termination is accepted, Schwarz has suggested equipping the aircraft with “stand-alone integrations” as a less expensive alternative to the C-130 AMP.

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