Defense Acquisitions

This report discusses the Marine Corps' development of the 155 mm lightweight howitzer. Procured for use by the Marine Corps and the Army, the lightweight howitzer is intended to provide greater mobility and improved operational characteristics. A contract with a target price of $33.5 million was let in March 1997 for the development and manufacture of eight howitzers. The program is in the engineering and manufacturing development phase, and the Defense Department (DOD) plans to make a decision to go to full production in March 2002. This program has experienced contracting and manufacturing problems that have caused schedule delays that may not provide DOD with enough information with which to make an informed decision to begin full-rate production. Time may also be insufficient before the decision date to adequately validate production processes and management controls that are consider necessary to avoid unacceptable cost and schedule risks. In addition, cost growth in the development contract represents a significant part of the total $142.6 million development costs. Projected costs for producing the howitzer cannon barrels have more than doubled since the original 1996 cost estimate. Several design changes have been made to the lightweight howitzer; however, testing of the intended production configuration that incorporates these changes will not be possible until the third of eight development units is manufactured and delivered. The program office is adjusting its test plans to complete the testing needed to verify system performance and initial operational capabilities before the production decision.

GAO noted that: (1) the lightweight howitzer program has experienced several schedule delays, and schedules may not provide the Department of Defense (DOD) sufficient information by March 2002 to make an informed decision to begin full-rate production; (2) there has been significant cost growth in the lightweight howitzer prime development contract; (3) this cost growth represents a significant part of the total $142.6 million development costs; (4) in June 2000, the program office projected the cost of the lightweight howitzer prime development contract to be about $43.4 million--$9.9 million over the contract target cost; (5) this estimate prompted BAE SYSTEMS to propose restructuring the development contract from a cost-plus-incentive-fee arrangement to a firm fixed-price arrangement, under which the company would be responsible for costs exceeding a new presumed higher fixed price, which would be negotiated; (6) in addition, projected costs for producing the lightweight howitzer cannon barrels for the Marine Corps have increased; (7) the Marine Corps is procuring the barrels from the Army's Watervliet Arsenal, which is required to include all costs, including overhead, in prices charged to non-Army customers; (8) because of increased Watervliet overhead rates, as of March 2000, unit cost estimates for the barrels for the Marine Corps had more than doubled--from $106,000 to over $260,000--since the original 1996 cost estimate; (9) by May 2000, DOD cost cutting measures had reduced these overhead estimates, but the Marine Corps still expects costs to exceed its original budget by $20.5 million; (10) several design changes have been made to the lightweight howitzer--however, testing of the modified weapon will be delayed by the late delivery of the howitzers to the program; (11) the program office is adjusting its test plans to complete the testing needed to verify system performance and initial operational capabilities before the production decision; (12) the effect of production by a foreign contractor on the Marine Corps' and Army's ability to support the howitzer cannot be assessed until the contractor determines where production models will be built; and (13) to provide assurances that the howitzer can be supported in wartime, program officials are requiring BAE SYSTEMS to provide a plan to manufacture 100 percent of the howitzer's parts in the United States.