US Navy confident about revamped Lockheed helicopter By Andrea Shalal-Esa
U.S. NAVAL AIR STATION, PATUXENT RIVER, Md., April 14 (Reuters) - After a rocky start on the VH-71 presidential helicopter program, Lockheed Martin Corp (LMT.N: Quote, Profile, Research) is making good progress toward fielding the first batch of aircraft in September 2010, the Navy officer in charge of the program said on Monday.
The program was recently restructured after delays and billions of dollars in cost overruns that stemmed from an overly ambitious schedule adopted after the Sept. 11, 2001 hijacking attacks and an incomplete understanding of complex requirements, Capt. Donald Gaddis told reporters.
"I think there's sufficient blame to go around for everybody, in government and industry. We just didn't set up this program up with a high percentage of success rate," he told reporters. "We accepted a whole lot more program risk on this program than we normally do."
It became apparent soon after the program began in 2005 that it would cost more and take longer to modify the AgustaWestland Merlin helicopter chosen by Lockheed for its new job ferrying the president, he said. Both sides underestimated the complexity of software challenges and other issues.
But Lockheed, the Navy and the White House now understand what is needed for the new fleet of helicopters and plan to allot adequate time for development and testing, Gaddis said. He said the Pentagon's office of testing and evaluation also planned to keep closer tabs on testing of the new helicopters.
Lockheed is scheduled to deliver the first batch of production aircraft in 2010 and the remaining, fully-loaded, 23 helicopters beginning in 2017. They have logged more than 700 hours of flights on the test aircraft, officials said.
Costs should be more stable after the restructuring, which added $2.3 billion to the first phase of the program, Gaddis said. The first phase includes four test aircraft and five production aircraft, now costing a total $3.7 billion.
The second phase of the program is now slated to cost $7.5 billion, about $4.5 billion more than initially expected, he said. It includes 23 full-rate production aircraft with more powerful engines, longer rotors, an upgraded transmission and improved defensive equipment.
"We now have a well-defined technical baseline. We know what we have to build," he said.
Two of the test helicopters are already at the Patuxent base where Lockheed is upgrading their tail rotors. A third helicopter arrived at Lockheed's Owego, New York facility last week and is undergoing military modifications, Gaddis said.
The fourth test helicopter will arrive next week from AgustaWestland, a unit of Italy's Finmeccanica (SIFI.MI: Quote, Profile, Research). Additionally, all five of the phase-one production aircraft will be in the United States by the end of 2008, Gaddis said.
Jeff Bantle, Lockheed vice president, acknowledged the early problems, but said the program was still about one year ahead of the schedule of most major acquisition programs.
Gaddis said it was vital that Congress fund the full $1.047 billion requested for the program in the fiscal 2009 defense budget, saying previous cuts of about $500 million made by the Pentagon and Congress had already added two years to the schedule. Fiscal 2009 begins Oct. 1.
The officials suggested the program could deal with small cutbacks and stay on schedule, but said any significant funding cuts could delay the program by another year.
In restructuring the program, the Navy examined 35 possible options including canceling the program, but concluded the AgustaWestland aircraft was best suited for the job.
"We picked the best helicopter. There's no doubt about that," Gaddis said, adding the decision to pick a foreign-made helicopter had not been a factor in delays and cost growth.
Lockheed beat Sikorsky Aircraft, a unit of United Technologies (UTX.N: Quote, Profile, Research), and its S-92 helicopter to win the deal.
Gaddis said Lockheed had earned no contractor incentives in the first year of the program, and only one percent of what was available the second year. He said the company would likely do "better" in this year's review, which will come in September.
He said the award fee system would be revamped as part of Lockheed's Increment 2 contract. The contract talks were beginning now, with a final request for proposals due out next month, and a contract expected in the first quarter of fiscal 2009.
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http://www.reuters.com/article/marketsNews/idUSN1440613720080414?rpc=401&
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