WASHINGTON — The total acquisition cost of the U.S. Marine Corps' new heavy lift helicopter has increased from $26.1 billion to $27.7 billion — a result of growing labor costs and the move of its production line, the service's program manager said in an exclusive interview with Defense News.
Col. Hank Vanderborght, program manager for U.S. Marine Corps and U.S. Navy heavy lift helicopters, confirmed that the CH-53K King Stallion program has run a 21 percent cost overrun against its 2006 baseline as of this month's Milestone C decision. That puts it 9 percent away from a Nunn-McCurdy breach that would trigger a decision from the Defense Department on whether to re-baseline the program.
But as the program moves into production, Vanderborght is confident that cost-saving initiatives that the Marine Corps plans to put into place going forward can keep the King Stallion on track.
"I am not concerned about [the cost growth] because we're doing a lot of good things to control it," he told Defense News. "And I think that the things that we're doing to control it are working."
News of the cost growth was first reported by Bloomberg, which obtained a memo related to the Milestone C decision. But even before that, the CH-53K, manufactured by Lockheed Martin subsidiary Sikorsky, had come under fire amid questions from lawmakers about the price of the program.
According to Vanderborght, this is the estimated cost of the program as of Milestone C:
- While the CH-53K’s average recurring flyaway cost stayed stable at $87.1 million, the "program acquisition unit cost" — the total price per unit of the aircraft, when ancillary expenses and research and development costs are factored in — has grown from $131 million to $138.5 million.
- Total research and development costs now stand at $7.3 billion, up from the $6.9 billion figure Vanderborght cited at the Navy League’s Sea-Air-Space conference earlier this month.
- Procurement has increased from $19.2 billion to $20.4 billion.
- Total acquisition costs for the 200-helicopter program of record have shot up to $27.7 billion, from $26.1 billion.
But those figures don’t tell the whole story, Vanderborght said.
Two factors outside of the government’s control have driven the cost growth on the program: the increasing costs of labor and Sikorsky’s move of the helicopter’s final assembly line from Florida to Connecticut, he said. Under the Marine Corps’ current cost-type contract agreement with the company, the government is left footing the bill for those added expenses.
As the CH-53K moves from its research and development phase to procurement, Vanderborght believes he will have more opportunities to hold Sikorsky responsible for cost growth. The service intends to switch to a fixed-price contract during production, which will offload some risk onto its contractors.
'The war on cost'
The Marine Corps is aiming to knock about $1.5 billion off the $27.7 billion total program cost by working with Sikorsky to implement affordability initiatives. The service has isolated about 160 initiatives so far, and about half of those have already been approved to be put into practice.
Vanderborght estimates those cost-saving measures will shave off about $500 million during production and reduce costs by $1 billion during the operations and sustainment phase.
"[It’s not like] we’re sitting on our butts, just accepting that it’s going to cost this much. It’s like a war. We fight the war on cost every single day to get things at the best, absolute value for the taxpayer," he said.
On the production side, many of those tactics involve breaking parts of the contract away from Sikorsky and managing them independently. For instance, beginning with the first production contract, the Marine Corps will begin buying CH-53K engines, manufactured by General Electric, separately from the rest of the aircraft. That will cut the engine’s cost by 14 percent, Vanderborght said.
"We are looking at other things like that to break out and go contract direct with the manufacturer and provide it as [government-furnished equipment]," he said, adding that avionics equipment or structural equipment could be good candidates.
"We weigh the risk very carefully because if you break it out and it shows up at the production line and all of a sudden it doesn’t fit or it doesn’t work, then the government is liable. So we have to be very surgical when we make those decisions and really think through the problems."
The program office is also looking for opportunities to push as much work down the supply chain as possible, directing second- and third-tier suppliers to do tasks that would otherwise be performed later on by the prime contractor at a higher expense. For example, instead of having Sikorsky install a wiring harness on an aircraft, the cabin manufacturer could have that already done before it moves to final assembly.
"You can do that with fuel lines, you can do that with hydraulic lines. You can do that with some mounting hardware, or connecting hardware — rivets and things," he said. "It reduces the chaos on the final assembly line and it makes it more efficient."
Other initiatives involve scrutinizing the King Stallion for parts or subsystems that could be more cheaply bought. For example, Sikorsky has already canceled plans to buy hydraulic winches for $325,000 a piece and will instead buy electronic winches for $800 per unit.
"When you roll it out to 200 aircraft — I’m not even talking about spares here — you’re talking about $60 million already, right off the bat, that we took off the bill," he said. "We’ve loaded a 7,000-pound vehicle last week with it, and it’s working great."
For the operations and sustainment piece, the service can use the aircraft’s myriad health and monitoring systems to do maintenance more quickly. The Marine Corps also plans to use data from that system to optimize conditions-based maintenance, which would allow maintainers to replace parts only when they have degraded, not after a certain number of flight hours.