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U.S.A.: Senator Asks Cost of Redoing U.S. Army-Boeing Deal

Sen. John McCain, R-Ariz., who chairs the armed services subcommittee that oversees Army and Air Force programs, said he had serious concerns about the suitability of an "other transaction authority," or OTA, as the contract vehicle for the Future Combat Systems, noting Congress approved such agreements for small research or limited prototype projects, especially those intended to attract nontraditional defense contractors.

by Andrea Shalal-EsaReuters
April 1st, 2005

WASHINGTON - U.S. Sen. John McCain has asked Army Secretary Francis Harvey to estimate the cost of converting a $20.9 billion Army modernization program led by Chicago-based Boeing Co. into a traditional defense procurement contract with better protection for taxpayers.

McCain, the Arizona Republican whose investigation led to the scrapping last year of a $23.5 billion Boeing tanker deal with the Air Force, raised concerns about the way the Army has structured the Future Combat Systems (FCS) project in a letter to Harvey dated March 31 and released on Friday.

The Army's own admission that the current structure of the agreement under an "other transaction authority," or OTA, did not contain protections included in more traditional contracts underscored "the need to revisit whether an OTA should continue to be used in this program," McCain said.

Congressional investigators last month said the Army project -- which aims to link troops to a family of 18 fast, light, manned and unmanned air and ground vehicles through advanced communications -- was at "significant risk" of failing to meet performance and budget goals.

Boeing and its junior partner, employee-owned Science Applications International Corp., won a $14.8 billion Army contract in December 2003 to oversee development of FCS over eight years. In July 2004, the Army added $6.1 billion to the deal as part of a restructuring that delayed full operational capability four years to 2016.

No immediate comment was available from Boeing or the Army about McCain's request.

McCain, who chairs the armed services subcommittee that oversees Army and Air Force programs, said he had serious concerns about the suitability of an OTA as the contract vehicle for FCS, noting Congress approved such agreements for small research or limited prototype projects, especially those intended to attract nontraditional defense contractors.

Those conditions did not apply in this case, he said, adding that the FCS OTA also did not include several key statutes, such as the Truth in Negotiation Act, intended to protect taxpayers on major defense programs.

McCain said Congress was continuing to investigate why these provisions were not included in the FCS OTA.

"Since the traditional protections for the public trust do not exist for OTAs, by not including these key provisions, I am concerned that the Army has not adequately protected taxpayers' interests," McCain told Harvey.

Critics say agreements structured as OTAs provide less oversight and accountability than a normal federal procurement contract, bypassing many statutes and regulations.

McCain asked Harvey to provide a cost estimate for converting the FCS OTA into a traditional contract under federal acquisition rules, no later than April 8.





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