Defense Acquisitions:

Howitzer Program Experiencing Cost Increases and Schedule Delays

NSIAD-00-182: Published: Jul 28, 2000. Publicly Released: Jul 28, 2000.

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Pursuant to a congressional request, GAO provided information on the Marine Corps' development of the 155mm lightweight howitzer, focusing on: (1) whether the program is on schedule; (2) whether costs have increased and if there is sufficient funding; (3) what the extent of design changes is and how these changes have affected system testing; and (4) what effect the exclusive production of the howitzer by a foreign contractor could have on the Marine Corps' and Army's ability to maintain the weapon following its procurement, particularly during wartime.

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.

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