Sen. McCain pushes for FCS contract revisions

The future of the Army’s key transformation program could hinge on a meeting today between Sen. John McCain and Army Secretary Francis Harvey, where the secretary is expected to agree with the Arizona Republican’s suggestions to revise heavily the Army’s contract with Boeing, sources said.
Patrick g. Ryan
Sen. John McCain (R-Ariz.)

The move marks a major shift for the Future Combat System (FCS) program, which has been governed under a so-called “other transaction authority,” or OTA, giving the Army and Boeing greater flexibility to manage the program than more traditional contract agreements would offer. McCain has been investigating the untraditional agreement and in recent weeks has publicly pushed for the Army to rewrite the contract to allow greater government oversight.

In a March 31 letter, McCain asked Harvey to give him an estimate by Friday of the cost implications of revising the two-year-old contract. The pact governs not only Boeing’s relationship with the Army but also that of several dozen contractors that have a stake in the FCS program.

The Boeing contract is likely to be the top agenda item during today’s meeting. The secretary, who took office in November, requested the meeting before he received McCain’s letter, sources said.

Harvey is “taking total control of this,” said Paul “Page” Hoeper, the Army’s former acquisition chief and a consultant to Boeing on the FCS program.

The inquiry into the contract again puts Boeing in the hot seat just as investigations into the company’s deal to lease aerial refueling tankers to the Air Force wind down. McCain, who led the probe into the tanker agreement, is presumed to be the next chairman of the Senate Armed Services Committee. He currently chairs the panel’s powerful Airland Subcommittee, which oversees more than $41 billion in Pentagon procurement dollars.

“Satisfying McCain is terribly important unto itself,” a former Pentagon official said. “If he is not satisfied, he is in a position to slow down the program anyway.”

The aerospace giant has said it will accommodate any required contractual changes.

“Boeing will work with our customer toward any contract structure that meets the Army’s requirements, provides necessary flexibility and the requisite oversight,” said Randy Harrison, Boeing’s spokesman for the program.

So far, McCain’s inquiry has been limited to FCS, for which the total price tag could exceed $120 billion. But he has expressed an interest in reforming the government’s acquisition laws if needed.

“The end runs of the acquisition process which prevent fraud and have served the interests of the taxpayers for decades must stop,” said a McCain aide.

FCS is by far the Army’s largest technical undertaking — a complex “system of systems” consisting of 18 air and ground systems tied together by a vast network.

McCain has expressed concern that the contract lacks several key clauses that require Boeing to submit cost and pricing figures to defense contracting agencies. Such an omission, he has said, does not give the government enough insight into the program.

“I am concerned that the Army has not adequately protected taxpayers’ interests,” McCain wrote in the March 31 letter.

Boeing has said the 81-page contract, plus addendums, contains more than 40 other provisions that hold the company accountable to the government.

The impact of changing the contract at this stage of the program is not yet certain. A spokesman for Harvey said Army officials are gathering information to answer McCain’s question.

Several current and former defense officials said a major contract revision could further delay the program, whose schedule already was pushed back four years at the Army’s request last summer. Rewriting the contract could force Boeing to renegotiate with the small army of contractors who are working on various pieces of the program.

McCain’s letter “on first blush smells like big change,” said a Pentagon official with knowledge of the program.

“They have piles of [sub]contractors,” said Jacques Gansler, Pentagon acquisition chief during the Clinton administration. “If Boeing’s not going to have an OTA, then [Boeing will] have to put [federal acquisition regulations] through every contract.”

Rewriting the contract could prove a turn-off to some of the suppliers, particularly any companies who are not accustomed to doing business with the government, Gansler said. Most of the major subcontractors are defense contractors, but that is not necessarily the case for several lower-tier suppliers.

The Army and Boeing have made major revisions to the contract in the last seven months to reflect the program’s schedule changes, Harrison said. Those revisions did not affect work on the program.