Equitable Cost Sharing Questioned on NATO's Airborne Early Warning and Control Program

A $1.8 billion airborne early warning and control program funded by the North Atlantic Treaty Organization (NATO) has been placed on a cooperative basis wherein the costs will be shared by participating countries. The United States will pay about 42 percent of the acquisition costs and the recurring operations and support costs of the program. The Department of Defense (DOD) estimates that when the cost of the United Kingdom's contribution of aircraft is included the United States share of the program will not exceed 33 percent. Factors which are delaying the successful negotiation of a production contract or otherwise contributing to potential funding shortfalls include: the prime contractor's not-to-exceed estimate is approximately $147 million over the agreement figure, non-participation by Belgium or other nations, expenses associated with British aircraft interoperability, termination of the planned sale of aircraft to Iran, failure of participants to pay an agreed fair share of inflation on the base year costs, and any reduction in Air Force aircraft buy. The program currently faces substantial potential funding shortfalls and the United States could be faced with absorbing these costs. Several countries qualified their program commitments in the agreement expressing reservations relating to financial issues, force employment issues, need for national approval, and refusal to pay more than their stated fair share of all acquisition, operations, and support costs. The linkage to several separate offset arrangements to the aircraft program could affect its successful completion. GAO believes that the United States has not put great enough emphasis on obtaining commitments from participating NATO allies to equitably share in any program cost increases over and above the amounts provided for in the basic agreement. Congress may wish to require a full reporting from DOD on the status of the overall NATO program. It might require DOD to identify any conditions or caveats placed upon the aircraft purchase by participating countries, total U.S. program costs including waivers and other identifiable concessions, unresolved program issues, and any potential funding shortfall with an explanation on how the shortfall is expected to be absorbed.