Pentagon: Two Arms Programs Face Live-Or-Die Review After Costs Jump

By Reuters
Friday, April 18, 2014 6:28 EDT

An unmanned U.S. Navy helicopter built by Northrop Grumman Corp and a precision ship-landing system built by Raytheon Co face mandatory reviews that could lead to their cancellation after quantity reductions drove unit costs sharply higher in 2013, the Pentagon announced on Thursday.

Senior defense officials said the cost increases were largely due to cuts in the numbers of items to be purchased, but federal law required a careful look at program performance and other factors.

The Nunn-McCurdy law requires a mandatory, 60-day live-or-die review if weapons systems see an increase of more than 25 percent in their unit costs. In order for programs to survive, top defense officials must certify that the program is needed for national security and meets other conditions.

In this case, senior defense officials suggested that both programs would likely survive since the cost spikes were due to reduced orders, but they said final decisions would not be made until the reviews were completed on June 17.

The Defense Department’s annual “selected acquisition report” on the cost of major weapons showed a slight 0.3 percent, or $4.4 billion, drop in the combined cost of 77 programs for a total cost of $1.62 trillion.

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