Federal Aviation Administration's Long Range Radar System ARSR-3

The Federal Aviation Administration's (FAA) acquisition of long-range radar systems, ARSR-3, involved a number of problems. FAA lacked a sound strategy leading to the award of the production contract for the system. It was unclear whether or not a prototype system was really required to demonstrate operational capability of the radar. The prototype contract was prematurely suspended with limited results obtained. Westinghouse submitted a proposal to build a prototype ARSR-3 radar that was clearly priced below its estimated costs. FAA permitted Westinghouse to buy into this program, in effect limiting competition by other qualified contractors. After accepting Westinghouse's offer to produce a prototype radar at a loss, FAA awarded a cost-type contract and did not monitor the costs. As a result, Westinghouse overran the estimated costs and did not deliver a prototype system. FAA did not independently develop a detailed cost estimate of the prototype system it planned to purchase. Although the rough estimates indicated a prototype would cost $7.8 million, the contract was awarded to Westinghouse at $3.5 million. Eight months after the contract was awarded, Westinghouse notified FAA that its cost estimate had risen about 100 percent. To minimize costs, FAA then reduced the scope of the prototype program and instructed Westinghouse to proceed at a reduced level of effort. The total paid to Westinghouse for the prorotype program was $4.4 million. FAA stated that no major technical risks remained and they had design drawings suitable for final fabrication. After 35 contract modifications, Westinghouse now has a contract to provide 27 radar units at $51 million.