Thursday, November 13, 2008

Wow, this story is getting really good

Dick Mayer called my attention to the following article appearing in the Boston Globe and the British International Herald Tribune a couple of days ago. My webbots did not catch it:

"Obama urged to scrap some Pentagon programs"
By Bryan Bender The Boston Globe November 11, 2008

WASHINGTON: "A senior Pentagon advisory group, in a series of bluntly worded briefings, is warning President-elect Barack Obama that the Defense Department's current budget is 'not sustainable' and that he must scale back or eliminate some of the military's most prized weapons programs.

The briefings were prepared by the Defense Business Board, a [DoD] internal management oversight body. It contends that the nation's recent financial crisis makes it imperative that the Pentagon and Congress slash some of the nation's most costly and troubled weapons to ensure they can finance the military's most pressing priorities.

Those include rebuilding ground forces battered by multiple tours to Iraq and Afghanistan and expanding the ranks to wage the war on terrorism.

"Business as usual is no longer an option," according to one of the internal briefings prepared in late October for the presidential transition, copies of which were provided to The Boston Globe. "The current and future fiscal environments facing the department demand bold action."

The briefings do not specify which programs should be cut, but defense analysts say that prime targets would probably include the new F-35 fighter jet, a series of navy ship programs, and a massive army project to build a new generation of ground combat vehicles, all of which have been skyrocketing in cost and suffering long development delays...

But a series of forces are now at play that make such large expenditures untenable, according to the Defense Business Board, the Pentagon oversight group that includes about 20 private-sector executives appointed by the secretary of defense.

The board, which meets at least four times a year, has a full-time staff and is an official government body. Because the board's report has not been made public, a Pentagon spokesman would not comment on it...

A recent analysis by the Government Accountability Office, the investigative arm of Congress, assessed the Pentagon's 95 largest weapons programs and found that as of March 2008 they had collectively increased in cost by nearly $300 billion over initial estimates.

"None had proceeded through development while meeting the best-practice standards for mature technologies, stable design and mature production processes - all prerequisites for achieving planned cost and schedule outcomes," the GAO said in documents published last week to help guide the presidential transition.

It added: Over the next five years, the Defense Department "expects to invest more than $357 billion on major defense acquisition programs. Much of this investment will be used to address cost overruns rooted in poor planning, execution, and oversight."

...The navy, meanwhile, has continued to bust its budget for shipbuilding. The service's six most recent ship designs have experienced cumulative cost growth of $2.4 billion over original estimates, according to the GAO. Their delivery has also been delayed, on average, by 97 months..."

One day after the above article appeared, Senator Shelby (R-Alabama) preemptively issued the following press release. So far neither the Navy nor the contract bidders have verified this decision:

Press Room News Releases
"Shelby Applauds Joint High Speed Vessel Award to Austal"
November 12, 2008

Washington, D.C. -

"U.S. Senator Richard Shelby (R-Ala.), a member of the Senate Appropriations Subcommittee on Defense, today applauded the Navy’s decision to award the Joint High Speed Vessel (JHSV) contract to Austal USA, located in Mobile, Alabama. This award will sustain Austal’s current workforce in south Alabama.

“I am pleased that the Navy continues to recognize Austal’s tremendous shipbuilding capabilities,” said Shelby. “This $1.6 billion award for ten vessels is a testament to Alabama’s stellar workforce. This award enhances south Alabama’s defense community and complements our state’s service to our armed forces.”

The JHSV is a joint Navy-Army program for a high-speed, shallow draft vessel intended for rapid intra-theater transport of cargo. It reaches speeds up to 45 knots and allows for the rapid transit and deployment of troops as well as equipment and supplies. The JHSV will include a flight deck for helicopter operations and an off-load ramp that will allow vehicles to quickly drive off the ship. It will transport Army and Marine Corps company-sized units with their vehicles, or be a troop transport for an infantry battalion.

The Navy’s current acquisition plan calls for building ten vessels between fiscal year 2010 and fiscal year 2015."

Lastly, another blogger on the Big Island noticed something that I did not immediately piece together:

"Superferry Builder Austal Receives $1.6 Billion Navy Contract to Build Ten More Ships Like the Superferry"

"...Austal USA has won a $1.6 billion contract to build up to 10 high-speed transport ships for the U.S. military, U.S. Sen. Richard Shelby, R-Tuscaloosa, announced Wednesday.

Neither Austal nor the U.S. Navy would confirm Wednesday’s announcement…

I’m not real good at math… but if my numbers are correct, this would make each one of those ships worth about $160 Million dollars each.

If...the two Superferries...[were sold] the military for say $150 Million each, then that $300 Million could be put to the losses...already incurred as well as pay off any debt...toward the Superferr[ies to] this point...

I’m amazed the Unofficial Hisuperferry Blog hasn’t picked up on this."

Well, Shannon/Damon it's like trying to drink out of a firehose sometimes. The information is coming so fast that I can't respond to it all instantly.

Very interesting point, Shannon. Assuming this Shelby (R-Alabama) press release is accurate, the $1.6 Billion seems significantly more than the PEOS projections for the JHSV program. In the early years, this program is expected to build 1 ship per year; maybe they are figuring on a lot of inflation on the US Dollar to eventually get it up to more than $160 million for each ship later in the program. But you are correct, Shannon, right now, $160 million is close to twice what each of the first two similar finished HSV ships cost to build. If some of the difference could be realized between the 'reported' JHSV contract price and what the first two ships cost to build, then that could cover all debts and losses, and this whole thing would start to make a lot more sense for the investors, if not the State. Except that at $1.6 Billion for only 10 ships, the Federal Government would effectively be paying significantly more for these ships than they have been budgeted and built for in the past.

I think it is no coincidence of the non-binding Shelby (R) announcement one day after the article came out on the DoD Defense Business Board's recommendations to President-elect Obama (D).

Aloha, Brad

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