Army to overhaul future weapons system contract

The Army will restructure a contract with Boeing worth more than $120 billion to manage its Future Combat Systems project amid concerns that the deal offered too few protections to the government.

"It's not going to change Boeing's role as the lead system integrator at all," Army Secretary Francis Harvey told reporters on Wednesday.

Harvey expects little or no changes in the overall cost of the contract as a result of the negotiations, which will last three to four months. Instead, he said, the changes will be in contract language that will ensure Boeing follows the same rules required in most federal contracts.

The Future Combat Systems project involves developing the Army's next generation of manned and unmanned air and ground systems, which will be tied together by an information network. FCS will replace the service's heavy tanks and other equipment beginning in 2014. FCS is the largest and most complex acquisition ever undertaken by the Army, with 18 separate systems and more than 50 new technologies envisioned for it.

Unlike most weapons projects, the Army does not directly oversee the contractors building it, and instead has hired Boeing as its lead systems integrator to assemble and manage subcontractors and oversee deadlines and budgets. The Army has final approval of Boeing's decisions and provides broad program oversight.

The Army's novel acquisition strategy for developing FCS has come under congressional scrutiny in recent months because the contract was written without following federal acquisition rules. Instead, the Army used "other transaction authority," allowing it to negotiate the deal more quickly and to operate outside the Procurement Integrity Act, Truth in Negotiations Act, and other standard contracting rules. Those rules limit government employees from taking future jobs with contractors and require contractors to provide extensive cost information.

At a congressional hearing last month, Sen. John McCain, R-Ariz., raised sharp questions about OTA and charged that it made the contract ripe for fraud, abuse and wasteful spending. Army acquisition chief Claude Bolton defended the use of the nontraditional approach, saying it sped negotiations with Boeing and could help the service attract non-defense contractors to work on the FCS project.

Harvey said, however, that OTA was necessary only early on to attract multiple contractors to bid for the LSI work, but now that the deal was in place there is no need for it. Subcontractors working for Boeing developing the FCS components have deals that were negotiated under traditional contract rules, he added.

Harvey said that the Army had been weighing the changes since early in the year and they were not made simply to appease McCain.

In a prepared statement McCain said, "I am gratified by the Army Secretary's receptiveness to my concerns about the program and I am looking forward to seeing precisely how the Army implements its stated commitment to ensuring that the interests of the taxpayer are preserved."