Why The Army’s New Combat Vehicle Is DoomedThe U.S. Army has wasted an inordinate amount of money on failed technology projects over the past 10 years. An airborne sensor designed to seek out hostile emitters was canceled after the contractor failed to pick a plane big enough to carry the equipment. An armed reconnaissance helicopter said to be the “quarterback of the digital battlefield” was killed after years of delays, and then the helicopter picked to replace it was killed too. A family of networked fighting vehicles consumed $18 billion and then was terminated because policymakers concluded it wasn’t suited to current combat needs. And a sophisticated ballistic weapon the Navy was counting on to arm future warships was canceled by Army managers even though program development was nearly complete.
https://blogs.forbes.com/beltway/2010/12/02/why-the-armys-new-combat-vehicle-is-doomed/?boxes=financechannelforbes
You’d think after making so many mistakes, and wasting so much money, the Army would have learned something useful about how to buy weapons. Maybe it has, but you’d never guess that from looking at its latest efforts to replace Cold War tactical vehicles. The Government Accountability Office recently estimated that a next-generation jeep the service plans to buy could cost $800,000 per vehicle, making it too pricey to replace the thousands of aging Humvees in the current fleet. And earlier this week the service unveiled the revised plan for a next-generation Ground Combat Vehicle that could cost over $10 million per copy (the Army’s target is $9 million to $10.5 million). As chance would have it, the same week the costly new vehicle concept was revealed, the Navy Department was moving to cancel a Marine amphibious vehicle that cost a similar amount, mainly because the price-tag was too high.
There’s a strong case to be made for developing the new Army vehicle, based on recent operational experience in Iraq and Afghanistan. Army leaders say they want the protection of a “mine-resistant, ambush-protected” truck like the ones used in Afghanistan today, the mobility of a Bradley infantry fighting vehicle, and the versatility of a Stryker wheeled personnel carrier. Unfortunately, the program they have kluged together from these aspirations will yield a system that costs as much as three of the aforementioned vehicles combined. And that’s before the cost increases and delays that inevitably accompany any technology development program. In a world where armored vehicles are frequently destroyed by improvised explosive devices costing America’s enemies only a few hundred dollars each, the notion of a ten-million-dollar combat vehicle is politically and operationally doomed, as the Army will soon discover.
But a big price-tag is just the beginning of what’s wrong with the Ground Combat Vehicle. The Army says it wants the first production version of the new vehicle available within seven years, which is an aggressive schedule when all the required prototyping, testing and integration are included. In order to facilitate a fast-track schedule, it proposes to give up to three industry teams funding to carry out a 24-month technology development phase leading to competitive assessments. That’s two years to develop a design, conduct necessary engineering, secure inputs from suppliers, and carry out the myriad other activities required so the Army can pick a winning design. According to one industry insider, the real amount of time available when other features of the solicitation are factored in is 18 months, which is a lot less time than General Motors would spend on developing a new vehicle concept like the Volt.
Theoretically, such accelerated development plans can yield good results if contractors are properly incentivized to apply the resources needed to get things done quickly. In practice, though, the government customer often derails those plans by continually tweaking requirements after contracts are signed, forcing contractors to go back and redo tasks already thought to have been completed. The Ground Combat Vehicle will be no exception. In the case of GCV, though, the Army has coupled an aggressive development schedule with a harsh structure of incentives that could spell major losses for the competing companies. For instance, the contracts awarded for technology development will have a fixed price with companies having to absorb any cost overruns, despite their lack of visibility as to what changes the government customer might make after proposals are accepted. The normal practice in weapons purchases is to transition to fixed pricing only after technologies and designs are sufficiently mature so that cost estimators can anticipate possible deviations from the plan.
The proposed structure of incentives also doesn’t reward contractors much for saving money. Although they must absorb 100 percent of all the costs incurred above the fixed amount the government provides, if they should manage to deliver their vehicle concepts for less than the amount allotted, they only get to keep 20 percent of savings. However, the real issue for each of the competing industry teams is how much of their own money they will need to commit beyond that provided by the government in order to be positioned at the end of the technology development phase as a plausible winner. Only one team will prevail, and the competition is expected to be intense since the Army plans very few new program starts in the years ahead. In other words, if companies like General Dynamics and BAE Systems don’t secure the Ground Combat Vehicle contract, they may have to wait a long time before comparable opportunities materialize. Meanwhile, GCV will be undercutting demand for their existing combat vehicles.
The dilemma the companies face is that they are making a lot more money on existing, mature vehicle lines than they are likely to make during the early years of the new program. And given the Army’s recent track record of failing to keep technology projects on track, there’s a high likelihood the whole effort could collapse long before winners break even on the program. So the Army has managed to combine in one program a politically controversial price-tag and risky development plan with an unattractive structure of incentives that gives contractors little reason to support its most important new vehicle initiative. Add to that the declining availability of funding for new weapons as Washington heads into a prolonged season of budget cutting, and the Ground Combat Vehicle looks doomed before it even gets going.