Foes of transport plane call Air Force cost estimates exaggerated

The Georgia delegation and the Pentagon are exaggerating the estimated cost of terminating the Air Force's C-130J transport plane program, according to a congressional aide familiar with the contract between the Air Force and aircraft manufacturer Lockheed Martin Corp.

Under the terms of the contract, Air Force could legally terminate the program by Nov. 16 this year for $438.7 million, the aide told CongressDaily.

The cost to abort the program drops to $383.3 million in 2006 and $347.3 million in 2007. By 2008, the termination cost would be zero. But according to Air Force Chief of Staff John Jumper, the Pentagon is reconsidering the proposed C-130J termination because of costly penalties associated with canceling the program.

"I'm not sure at the time that we did these calculations at the end of December that we were fully informed about the costs of canceling the program," Jumper told the Senate Armed Services Committee Thursday.

"Those costs will be probably more than we anticipated." Georgia Republican Sens. Johnny Isakson and Saxby Chambliss, who have been fighting to save the C-130J, contend the cost of canceling the program could climb as high as $800 million. The C-130J is manufactured at Lockheed Martin's aeronautics unit in Marietta, Ga.

Peter Simmons, a spokesman for Lockheed Martin, said the Pentagon has not formally notified the company of its plan to terminate the Air Force's C-130J contract.

One defense industry source familiar with the program said extra costs associated with ending the contract could bring the total to $1 billion. But the source said the Air Force's actual penalty is limited to the figures outlined in the contract -- namely, the $438.7 million penalty if the program is terminated in 2005. The remaining $560 million would be the primary cost to Lockheed Martin of closing the C-130J line. The Pentagon would not pay for these costs, but it could end up absorbing them through its remaining contracts with the company when Lockheed is forced to spread its overhead costs across a smaller business base as a result of the canceled agreement. In addition, the Defense Department could end up paying higher per-unit costs as a result of the reduction in the total number of aircraft purchased, which includes Marine Corps KC-130J aerial refueling tankers.

On Thursday, the Project on Government Oversight released a Feb. 7 memo between Lockheed Martin employees in which the company appears to limit Pentagon access to C-130J contract information -- the same day that the president submitted his fiscal 2006 budget request to lawmakers. According to the memo, the company announced that future communications between Lockheed and the program office be limited to only those required by contract, and that "all recently requested non-contractual data" be removed from Lockheed's computer system that communicates with the program office.

Also Thursday, the Air Force announced that 30 C-130E model aircraft had been grounded because of cracks discovered in the center wing box. Another 60 C-130 planes were placed on restricted flight status.