Army Carbine Program May Waste $1.8 Billion, Report Finds

By Tony Capaccio and Danielle Ivory on March 19, 2013

The Army risks wasting as much as $1.8 billion developing a replacement for the M4 carbine that it may not need, according to the Pentagon’s inspector general.

The carbine replacement program is one the Army and Pentagon “may want to re-evaluate,” as the service is “seeking to acquire more rifles during a time when their total force structure will be reduced,” Lynne Halbrooks, principal deputy inspector general, said in a statement provided today to a House committee. The Pentagon plans to reduce Army ground forces to 490,000 by 2017 from about 560,000 in 2011.

Halbrooks’s office is auditing the program and “we expect to report concerns that” the Army “may not have an established need for this weapon nor developed performance requirements for the $1.8 billion acquisition,” she said. A draft of the audit is due to Army and Pentagon officials in about two months, she said.

Colt Defense LLC, based in West Hartford, Connecticut, is the primary supplier of the U.S. Army’s M4 rifle and would face competition under the replacement program.

The carbine replacement is among programs Halbrooks highlighted as having questionable value in the statement to the House Committee on Oversight and Government Reform.

The panel is reviewing opportunities to reduce waste and improve efficiency at the Pentagon as most of as its 800,000- person civilian workforce faces one unpaid furlough day per week, from late April through Sept. 30. The department is in line for $500 billion in spending cuts over a decade on top of $487 billion that was already planned.

Financial Management

The inspector general’s efforts are focused on deficiencies in financial management, acquisition processes, contract management, readiness, information technology security and equipping and training Iraq and Afghan security forces, according to a staff memo prepared for lawmakers.

Halbrooks said the Pentagon and the Army need to re- evaluate the carbine replacement program because they’re seeking to develop the new rifle at the same time as the service is modifying the current M4 weapon.

“It’s unclear what additional capability this new rifle will have over the modified M4,” according to the report. “Key performance parameters such as accuracy, reliability and lethality have not been established.”

Army’s Response

The Army is in the second phase of the rifle competition to determine “if there’s a carbine that can provide significant value over the M4,” Matthew Bourke, a spokesman, said in an e- mailed statement. “The greatest care and consideration is being placed in this process as we determine the next individual weapon system for the soldier.”

The Army carbine program is an example of decisions the Pentagon and military services face in culling savings from the projected $27 billion expected to be spent in fiscal 2012 on major acquisition programs.

“Challenges include obtaining adequate competition in contracts, defining contract requirements, obtaining fair and reasonable prices, oversight of contractor performance and maintaining contract documentation for payments,” Halbrooks said in the statement.

“As budgets continue to come under increasing scrutiny, the department must continue to evaluate the merits, additional capabilities and cost” of major acquisition programs, she wrote.

Boeing, United Technologies

Halbrooks’s statement summarized areas of potential savings in financial and contract management completed by her agency such as the finding in 2011 of spare parts overpricing by Boeing Co. (BA) and United Technologies Corp. (UTX)’s Sikorsky Aircraft unit to support the helicopter maintenance at the Army’s Corpus Christi depot in Texas.

Those overcharges, which were previously disclosed, are cases in which the Army “did not effectively use” existing inventory before buying overpriced parts from the contractors, Halbrooks wrote.

Boeing refunded $76,849 after the inspector general determined it sold the Army a dime-sized, plastic ramp gate roller assembly used on the CH-47 helicopter for $1,678.61 apiece when the Pentagon Defense Logistic Agency had them in stock for $7.71 each.

The Army issued new guidance as a result of the report requiring the use of exiting inventory before buying the same parts from companies, Halbrooks wrote.

Halbrooks today disclosed findings of an unreleased September 2012 audit that identified more than $2.5 billion in potential savings in a Raytheon Co. (RTN) “joint land attack cruise missile defense” program that lofts sensors on board aerostats to detect incoming missiles.

The Army-managed program remains in development testing. The program manager “agreed with our report and recommendations stating ‘the impact of the current fiscally constrained environment compels redirection of funding to other systems,’” according to the statement.

http://www.businessweek.com/news/2013-03-19/army-carbine-program-may-waste-1-dot-8-billion-report-finds