Analysis of Benefits Realized From Multiyear Contracting for the Black Hawk Helicopter

In response to a congressional request, GAO reviewed the potential monetary savings and other benefits attributed to the Army's multiyear contract for Black Hawk helicopters.

GAO noted that this 3-year $950 million Army contract was one of the first multiyear awards for a major weapon system under the Department of Defense's (DOD) enhanced multiyear contracting authority. GAO estimated that the net savings to the Government for this multiyear contract would be about 4.6 percent, although the Army and the contractor estimated a savings to DOD of about 7.9 percent less than the cost of three annual buys. The Army and the contractor believe that, besides cost savings, other benefits of this multiyear program include: (1) an enhanced defense industrial base; (2) availability of materials in much larger quantities; (3) stabilized production; (4) reduced material costs by procuring common parts for other DOD helicopter programs; (5) accelerated deliveries; and (6) lowered administrative costs. GAO concluded that the substantiation of savings and other benefits were complex and inexact and that the inherent uncertainties associated with these estimates and assumptions justify a cautious approach to approving multiyear contracts.