Special Operations Forces: Army Plans Highly Concurrent Acquisition Strategy for Costly Helicopters

Published by the Government Accountability Office on 1990-09-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Army Plans Highly
Concurrent Acquisition
Strategy for Costly

                                                                                                                         *                            E
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                  United States
                  General Accounting Office
                  Washington, D.C. 20648

                  National Security and
                  International Affairs Division

                  September 28,199O
                  The Honorable William V. Roth, Jr.
                  United States Senate
                  Dear Senator Roth:
                  As you requested, we evaluated cost, schedule,and test plans for the
                  Army’s special operations forces (SOF) helicopter program. Specifically,
                  we reviewed (1) the Army’s planned concurrency of prototype and oper-
                  ational testing with helicopter production and (2) current cost estimates
                  for the program.

                  The Army plans to award full-rate production contracts for SOF helicop-
Resultsin Brief   ters before it completesdevelopmental testing and long before it com-
                  pletes operational testing. In fact, the Army plans to have about
                  90 percent of its SOF helicopters either delivered or in production before
                  the completion of operational testing.

                  The Army’s current acquisition strategy for SOF helicopters increasesthe
                  risk of having to make expensive retrofits on production helicopters to
                  correct deficiencies identified in testing rather than limiting the risk to
                  only those systems produced in a low-rate initial production run. Fur-
                  ther, the Army plans to field these systemswithout an important self-
                  defensecapability required for certain missions.
                  The Army currently reports total SOF helicopter modification program
                  costs at about $1.36 billion. However, a more accurate estimate of the
                  cost is at least $2.1 billion becausesomecomponent and airframe costs
                  are being reported and paid for by Army activities other than the SOF
                  product office. In addition, many other costswere not included in the
                  Army’s estimate. Furthermore, this estimate doesnot include the added
                  costs of installing additional equipment after the helicopters are fielded
                  and of overcoming problems identified during testing.

                  The Army initiated SOF modification programs in 1986 for someof its
Background        CH-47 Chinook and UH-60 Black Hawk helicopters. Operationally, these
                  modified aircraft, designatedthe “MH-47E” and the “MH-6OK,” are
           Y      expected to be able to perform clandestine, deep-penetration airlift mis-
                  sions in adverse weather conditions and high-threat environments.

                  Page 1                             GAO/NSIAD-DO-267   Army SOF Helicopter   Program
                        Appendix I provides greater detail on the modifications being made to
                        the Chinooks and Black Hawks to convert them to SOF aircraft.
                        Believing that both the MH-60K and the MH-47E helicopters were
                        nondevelopmental items, the Army originally decided that little heli-
                        copter developmental testing and no operational testing were needed.In
                        its 1989 statement of its SOF helicopter acquisition strategy, the Army
                        assumedthat becausethe helicopters used in the program were quali-
                        fied systems,planned testing and evaluation would consist primarily of
                        integrating and testing already qualified components.Recently, how-
                        ever, the acquisition and testing strategies for both helicopters have
                        been restructured to include additional developmental testing and evalu-
                        ation of the prototype aircraft. The Army believesthat current SOF pro-
                        gram cost and performance risks are acceptable.

                        Although the Army has designatedthe SOF aircraft as nondevelopmental
                        items, the SOF modifications include an extensive integration of both off-
                        the-shelf and newly developed avionics equipment. More specifically,
                        the Army plans to combine about 40 piecesof communications, naviga-
                        tion, and aircraft survivability equipment into the integrated avionics
                        subsystem in the SOF aircraft. In addition, the Army plans to integrate a
                        multimode radar, a forward-looking infrared sensorsystem, a map dis-
                        play generator, and an aviator’s night vision imaging system. According
                        to independent Army evaluators, it is the extensive integration of avi-
                        onics equipment that puts the SOF aircraft at risk.

                        In addition to producing one prototype helicopter for each program, the
                        Army plans to award a series of contracts for the production of
                        60 MH-47E and 22 MH-6OKhelicopters between fiscal years 1990 and
                        1993. Of these, the Army has designatedthe first 11 MH-47E and
                        11 MH-6OKhelicopters as low-rate initial production helicopters.

                        Department of Defenseand Army regulations call for operational testing
High-Risk Acquisition   before production decisionsare made to reduce cost and technical risks.
Test Strategy           Past unsatisfactory experiencein system acquisition demonstratesthe
                        need for this testing. In the SOF program, however, the Army doesnot
                        plan to conduct initial operational test and evaluation before proceeding
                        beyond low-rate initial production. Rather, under current Army plans,
           I            most SOF aircraft (63 of the planned 74) will be in production or deliv-
                        ered before operational tests even begin. Further, the Army plans to test
                        and field SOF helicopters that do not possessall the equipment necessary
                        to satisfy operational capability requirements.


Acquisition Policies and   Current acquisition guidance calls for early developmental and opera-
Regulations Provide        tional testing to demonstrate that a system will work as intended and
                           can accomplish its intended mission. Department of Defensepolicy man-
Internal Controls to       dates the completion of initial operational testing and the assessmentof
ReduceDevelopmental        results before the full-rate production phase. Army regulations state
Risks                      that low-rate initial production may be conductedto verify production
                           capability and to provide the assetsnecessaryto conduct various types
                           of testing, including operational testing. These regulations also require
                           that before the full-rate production decision, initial operational test and
                           evaluation on a production-representative system must be conducted,
                           with a dedicated phase of initial operational test and evaluation on a
                           system certified as ready for fielding.
                           When the Army doesnot follow operational testing requirements, it
                           risks fielding systemsthat require expensive retrofits or are unable to
                           perform their required missions. For example, in 1986, we reported that
                           the Army had little performance information available on the Sergeant
                           York air defensegun to measureits reliability, maintainability, and
                           effectiveness before production began.The acquisition and testing plan
                           for the SergeantYork was similar to that of the SOF helicopter program
                           in that critical operational test information about the ability of the Ser-
                           geant York to perform its mission under realistic conditions was unavail-
                           able prior to the production decision. The Army judged both
                           performance and cost risks on the SergeantYork to be acceptable,based
                           on the use of mature componentsand subsystemsand contractor
                           responsibility and experience.Thus, with only limited test results, pro-
                           duction began on an unproven system. However, the system integration
                           processproved more difficult than expected.When operational testing
                           was eventually conducted,the SergeantYork was unable to perform as
                           intended, and the Secretary of Defenseconsequently terminated the

Army Plans Production      The Army plans a low-rate initial production of 22 SOF helicopters
Concurrent With            (30 percent of the total helicopter buy) concurrent with developmental
                           testing on the prototype aircraft. The Army also plans to award full-rate
Developmental Testing      production contracts for both helicopters nearly 2 years prior to the
and Before Operational     completion of the developmental testing of the prototype helicopters
Testing                    and over a year earlier than planned operational testing is to begin. Over
                           90 percent of the 72 MH-47E and MH-6OKproduction helicopters are to
                           be in production or delivered by the time operational testing is to be

                           Page 3                             GAO/NSIAD-SO-267   Army SOF Helicopter   Program

                                             Figures 1 and 2 show the developmental and operational testing sched-
                                             ules for the Army’s SOF helicopter modification programs, along with the
                                             production decisionsfor each of the helicopters.

Figure 1: MHIIE     Testing and Production Schedule

                                  Number of Production Aircraft:

      Contract Award

       Low-Rate Initial II
       Production Decision
       (11 Aircraft)

                                                       Contractor Prototype Testing             II       Operational Testing
                                             @j#j@ Government Preliminary Airworthiness        t-)       Developmental Testing
                                                   Evaluation of Prototype Aircraft
                                             gig@j Government Prototype Testing

                                             Source: GAO analysis of Army data.

                                             Page 4                                   GAO/NSIAIMO-2f37    Army SOF Helicopter   Program



Fiaura 2: MH-60K Testing and Production Schedule

                                       Number of Production Aircraft:
                                       Delivered:                  0                    7       18
                                       On Production Line:     5                   15       3
                                       Total:                      5                   22   22

                                                                   I                   I        I
                                                                   I                   I        I

                                                                                       I         I
            Contract Award
                                                                                       II       II
            Full-Rate                                                                  I        I

            Low-Rate Initial -.---!V
            Production Decision
            (11 Aircraft)

                                                             Contractor Prototype Testing                II      Operational Testing
                                                   @@J Government Preliminary Airworthiness              f-)     Developmental Testing
                                                        Evaluation of Prototype Aircraft
                                                   gggj Government Prototype Testing

                                                  Source: GAO analysis of Army data.

Aircraft Will Be Fielded                          Each of the Army’s SOF helicopters is to have an air-to-air missile system
Without Somti Required                            and a flight data recorder, neither of which will be available when the
                                                  helicopters are to be fielded. Flight data recorders are required; how-
Equipment                                         ever, they are not critical to the SOF helicopter’s ability to perform its

                                                  Page 5                                        GAO/NSIADSO-~~~A~I~     SOFHelicopterProgram


                                 missions. On the other hand, the air-to-air missile provides a key defen-
                                 sive capability for the helicopter when it is performing certain missions.
                                 Without the missile, there is little to protect these helicopters if they are
                                 discovered by the enemy while on such missions. Neither the missile nor
                                 the recorders have been developed,but the Army plans to incorporate
                                 both items into the helicopters at a later date through preplanned
                                 product improvements.

Army Has Identified Some The Army has identified four areasof risk associatedwith the SOF heli-
Program Risk             copter program: (1) the development of the Integrated Avionics Sub-
                         system mission processor,(2) the time required for the certification and
                                 qualification of the multimode radar system, (3) the performance of
                                 government-furnished equipment, and (4) retrofit costs for four helicop-
                                 ters in production during contractor flight testing and government pre-
                                 liminary airworthiness evaluation flight tests.

                                 While the Army has identified these areas of risk, it has not addressed
                                 the risk associatedwith concurrent production and government develop
                                 mental and operational testing. On the contrary, Army officials told us
                                 that delaying a full-rate production decision until after the completion
                                 of operational testing would result in cost increasesfor MH-47E aircraft.
                                 They believe that costswould increasebecauseMH-47E and other modi-
                                 fications would have to be made after the CH-47Dproduction line is

                                 Operational testing of the MH-47E is expected to be completed in Feb-
                                 ruary 1993. At that time the Army will have 32 CH-47Daircraft in pro-
                                 duction. As we reported in February 1990, the Army doesnot have a
                                 mission-basedjustification for 34 of the 61 MH-47E aircraft it plans to
                                 procure.’ Therefore “E” modifications could be made to 16 of the
                                 32 CH-47D aircraft still in production after the completion of opera-
                                 tional testing and before the closeof the CH-47Dproduction line.

                                 The Army has estimated the SOF modification program cost for 74 heli-
ProgramC--C-     IA*
           ,uai~ lvltich         copters to be about $1.36 billion. However, a more accurate estimate of
   ther Than
Higj-   --                       the cost is at least $2.1 billion becausesomecomponent and airframe
Cukently Estimated               costs that will be incurred are being reported and paid for by Army
              Y                  activities other than the SOF program office. The government is likely to

                                                     Forces: Army Plans to Buy More MH-47E Helicopter8 Than Needed
                                               -118, Feb. 14,lOOO).

                                  Page 6                                  GAO/NSIAD-DO-267    Army SOF Helicopter    Program

                          incur additional coststo correct problems identified during develop-
                          mental and operational testing and to install equipment that will not be
                          included on the helicopters when they are fielded. This additional equip-
                          ment, such as the air-to-air missile, is necessaryto make the MH-47E
                          and MH-6OKhelicopters capable of meeting operational requirements,

Many Costs Not Included   Currently reported cost estimates for the modification program exclude
in SOFModification        many costs associatedwith obtaining fully equipped SOF helicopters,
                          including the cost of mission-essentialequipment that has not yet been
Program Estimates         developed.
                          The Army’s current SOF program cost estimate of $1.36 billion doesnot
                          include costs associatedwith SOF helicopter equipment that is paid for
                          and reported by other Army activities. Theseother costs include (1) the
                          cost Qf changesbeing made to the older CH-47Chelicopters (under the
                          CH-47Dmodification program) before they are upgraded to the
                          MH-47E model; (2) much of the cost of obtaining T-712 engines,which
                          are modified to provide better performance for the MH-47E; and (3) the
                          cost of providing internal auxiliary fuel tanks neededto make the
                          MH-47E self-deployable. Coststo obtain the basic Black Hawk airframe,
                          the engine and equipment common to both the basic Black Hawk and the
                          MH-60K, and the 230-gallon external fuel tanks required for some
                          MH-6OKmissions are also reported in other programs. Finally, over
                          $196 million is neededto fund cost increasesthat have been identified
                          by the SOF product office but are not reflected in current Army esti-
                          mates. Table 1 details a more accurate estimate of the SOF modification
                          program’s costs.

                          Page 7                            GAO/NSIAD-90-267   Army SOF Helicopter   Program

Table 1: Eatlmate of Actual Program
Carts                                 Dollars in millions
                                      Cost element                                                 MH-47E            MH-6OK               Total
                                      Current Army estimatea                                       $888.35           $467.95          $1,356.30
                                      Other costsb
                                        CH-47D modifications                                         318.24                  0           318.24
                                        T-71 2 engine                                                 66.28                  0            66.26
                                        MH-47E fuel tanks                                              16.80                0             16.80
                                        Basic Black Hawk airframe                                          0           142.13            142.13
                                        Black Hawk external fuel tanks                                     0             1.18              1.18
                                        Subtotal                                                  1,289.67            611.26           1,900.93
                                      Cost increasesC                                                 97.60             97.60            195.20
                                      Total                                                      $1,387.27           $708.86          $2,096.13
                                      %cludes research, development, and procurement costs for 51 MH-47Eand 23 MH-fXlKaircraft plus 2
                                      combat-mission simulators.
                                      bCosts related to obtaining fully equipped Army SOF helicopters that are to be paid for and reported by
                                      Army activities other than the SOF product office.
                                      CTotalof $195.20 million in cost increases not included in the Army’s current estimate (a).

                                      The Army’s current unit cost estimate, including research,development,
                                      test, and evaluation plus procurement for 51 MH-47E helicopters, is
                                      $17.4 million. The Army estimates a $20.3 million unit cost for
                                      23 MH-6OKhelicopters. Using our estimate of total program costs shown
                                      above,these unit costs are more likely to be $27.2 million for the
                                      MH-47E, or $9.8 million more than the Army’s estimate, and $30.8 mil-
                                      lion for the MH-GOK,or $10.5 million more than the Army’s estimate.

Further Cost Growth Is                The Army has not estimated the potential cost impact of developing,
Likely                                procuring, and installing somerequired equipment on the SOF production
                                      helicopters. Further, additional cost growth is anticipated for the
                                      MI-I-6OK.The Army’s required operational capabilities documents for
                                      SOF helicopters state that the SOF helicopters must be equipped with air-
                                      to-air missiles and flight data recorders. These capabilities are to be
                                      added as product improvements when they are developed.In addition,
                                      production costs for the MH-6OKcould increaseif production of the
                                      basic UH-60 Black Hawk ends as planned with the fiscal year 1991
                                      purchase. The Army has not yet estimated this potential cost increase.

                                      Page 8                                            GAO/NSIAD-90-M7        hy    SOF Helicopter    Program
Concurrent Testing and       The Army’s plan to have most SOF aircraft in production or delivered
Production Plans Could       before developmental and operational testing is completed not only
                             increasestechnical risk but also increasesprogram cost risk. At present,
Also Increase Program        the Army has not estimated the total cost risk associatedwith this deci-
Cost Risk                    sion. The correction of problems identified during developmental and
                             operational tests could increaseprogram cost.

                             We recommendthat the Secretary of Defensedirect the Secretary of the
Recommendations              Army to take the following actions:
                             Limit low-rate initial production to the minimum number of MH-47E and
                             MH-6OKhelicopters necessaryfor operational testing.
                             Postponecontract awards beyond low-rate initial production until the
                             Army can demonstrate that the aircraft can meet the operational needs
                             of the users through required operational test and evaluation.
                         .   Develop and provide to the Congresscomplete cost estimates that accu-
                             rately reflect all coststo the government associatedwith acquiring fully
                             equipped, mission-capableSOF helicopter systems.

                             We conducted our work from January through June 1990 in accordance
Scopeand                     with generally acceptedgovernment auditing standards. As requested,
Methodology                  we did not obtain formal agency commentson our draft report, but we
                             did discussour observations with agency officials during the assign-
                             ment. We conducted interviews and obtained and analyzed data at the
                             Army’s Special Operations Aircraft Product Office; various offices at
                             the Army Aviation SystemsCommand,St. Louis, Missouri, including the
                             UH-60 Black Hawk Project Office and the CH-47 Chinook Project Office;
                             the U.S. Special Operations Command,MacDill Air Force Base,Tampa,
                             Florida; the Office of the Assistant Secretary of Defensefor Special
                             Operations and Low Intensity Conflicts, the Pentagon,Washington, DC.;
                             the U.S. Army Materiel SystemsAnalysis Activity, Aberdeen, Maryland;
                             and the US. Army Operational Test and Evaluation Agency, Alexan-
                             dria, Virginia. We also visited the Sikorsky Aircraft Division of United
                             TechnologiesCorporation, Stratford, Connecticut; the Boeing Helicopter
                             Company, Philadelphia, Pennsylvania; and the IBM Federal Systems
                             Division, Owego,New York.


                             As arranged with your office, unless you announceits contents earlier,
                             we plan no further distribution of this report for 30 days. At that time,

                             Page B                             GAO/NSL4D&O-267   Am~y SOF Helicopter   Program
we will send copies to the Chairmen of the Senateand HouseCommit-
tees on Armed Servicesand on Appropriations, the Director of the
Office of Managementand Budget, the Secretariesof Defenseand the
Army, and other interested parties.

Major contributors to this report were Henry Hinton, Associate Director;
Jim Shafer, Assistant Director; Gary Billen, Assistant Regional Manager;
John Wiethop, Evaluator-in-Charge; and Carole Coffey, Staff Member.
Pleasecontact me at (202) 276-4141if you or your staff have any ques-
tions concerning this report.
Sincerely yours,

Richard Davis
Director, Army Issues

Page 10                           GAO/NS~@O-267   Army SOF Helicopter   Program

    Page 11   GAO/NS~BO-287   Army SOF Helicopter   Program

Appendix I                                                                                         -
Descriptionsof the Army’s SpecialOperations ’
Helicopter Modification Programs

                    The Army modification programs for the SOF helicopter systems are
                    among the most demanding helicopter development tasks to date. The
                    modification programs stress commonality of upgrades to mission equip-
                    ment systems.The MH-47E and the MH-6OKhelicopters also contain a
                    common state-of-the-art integrated avionics subsystem.

MH-4’7EHelicopter   The MH-47E is being produced through a modification to the Army’s
                    ongoing CH-47Dhelicopter modernization contract. Under the
                    CH-47Dmodernization effort, the Army is upgrading and modernizing
                    earlier models of its tandem-rotor, twin-engine, medium-lift CH-47 heli-
                    copter to provide improved handling and increasedperformance. The
                    Army had planned a total fleet of 472 CH-47Dmodel helicopters. How-
                    ever, that number will be reduced to 421 if all 51 planned
                    MH-47E models are produced.
                    The MH-47 “E” model will include somebut not all of the
                    CH-47Dmodel’s improvements. In addition to some“D” modifications,
                    the MH-47E model will include an internal cargo-handling system,
                    internal auxiliary fuel tanks, a terrain following/terrain avoidance
                    radar, a forward-looking infrared radar, a rotor brake, an air-to-air
                    refueling probe, a rescuehoist, additional troop seats,0.50-caliber
                    machine guns, and T&L-714 engines(seefig. 1.1).The MH-47E will also
                    contain avionics system upgrades and an integrated avionics subsystem.
                    Avionics improvements include aircraft survivability equipment, and
                    the integrated avionics system includes both monochromeand color dis-
                    play monitors, mission and display processors,a map display
                    generator/data transfer module, and remote terminal units.

                    Page 12                           GAO/NSIAD-M-267   Army SOF Helicopter   Program
                                             Demrlpthu   of the Army’s Special

Flgum 1.1:MH-47E Configuration

                                                            Internal              Internal
                                                        Cargo-Handling            Auxiliary
                                                            System               Fuel Tanks

             Rotor /A?
                                                                                                    Terrain Following/
                                                                                                    Terrain Avoidance


                              0.50 Caliber
                             Machine Guns
                                                                                                    L       Forward-Looking
                                                 Rescue Hoist                                                Infrared Sensor
                                                                      Integrated and
                                                                     Updated Avionics
                                                                                               Refueling Probe

MH-6OKHelicopter                             The Army is procuring MH-6OKhelicopters through a contract modifica-
                                             tion to its multiyear procurement of new production UH-6OLBlack
                                             Hawk helicopters. The Black Hawk is a t&n-engine, single-rotor,
                                             medium-lift helicopter whose primary mission is to transport troops and
                                             equipment. Additional functions are to provide aeromedical evacuation,
                                             troop resupply, and command and control.
                                             The MH-6OKhelicopter modification will include a folding stabilator, a
                                             rotor brake, an external hoist, wire strike protection, an air-to-air
                                             refueling probe, shipboard compatibility modifications, O&SO-caliber

                                             Page 13                                    GAO/NSIAlMO-267   Army SOF Helicopter   Program

                                                    Appendix 1
                                                    Dtsdption~ of the Amy’8 Spedal
                                                    Operatlona Hehpter  lbdiflcation             Progmme

                                                    guns, and external fuel tanks. The MH-6OKwill be equipped with essen-
                                                    tially the sameintegrated avionics system and avionics system upgrades
                                                    as the MH-47E helicopter.

Flm~ro 1.2: MHdOK Configuration

                                                                              Brake             T700-GE-701 C
                                                                               I                   Engines

                         External h

                                                                                                                                   I-“lull   ,y


           Wire Strike

                                                                                                           Fuel Tanks

                     I                                                                Machine Guns
                 Air-to-Air                           \
              Refueling Probe                     Integrated and
                                       I        I-y.....-”
                                                   lndatarl   ,Avinnicc
                                                                . ..-. ..“_
                             Infrared Sensor System


(393389)                                              Page 14                                          GAO/NSIAD-90-267 Army SOF Helicopter Program
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