C-130J Acquisition Program Restructured
The privately-developed C-130J Hercules variant has been the subject of heavy criticism and a 2005 near-death budget experience, followed by its reinstatement by Defense Secretary Rumsfeld on grounds that cancelling the contract would be almost as expensive as completing it – though a later report established that its cancellation costs were wildly overstated.
The US has since issued a follow-on orders for the basic C-130J aircraft and some key variants (KC-130J tanker, EC-130J broadcaster, WC-130J weather, et. al.) in order to begin recapitalizing its decaying C-130 fleet, making the C-130J their successor by default. It has since been deployed into theater by the USAF, where its vastly improved performance in “hot and high” environments has come in very handy. Unlike the pending Airbus A400M, however, the C-130J doesn’t solve the sub-survivable 20-ton armored vehicle limit that has stymied multiple US armored vehicle programs from the Stryker IAV to Future Combat Systems. As such, it represents an improvement that fails to address US tactical airlift’s key bottleneck limitation.
Air Force officials recently announced that the multi-year procurement contract for the C-130J Hercules has been changed…
In order to comply with the FY 2006 National Defense Authorization Act, Air Force Print News reports that the C-130J contract has been converted from the existing commercial item procurement to a traditional military procurement to purchase aircraft in fiscal year 2006. In technical terms, it was converted from a Federal Acquisition Regulation Part 12 to a FAR Part 15 contract, which includes much more extensive Congressional oversight and cost reporting requirements. In bottom line terms, this also involved repricing 39 aircraft, resulting in net savings anywhere from $170-245 million (reports vary). Under the restructured contract, the Air Force said Lockheed will cut the program cost by 8% for the remaining 26 Air Force C-130Js and nearly 12% for 13 Marine planes – many of which are KC-130J aerial refueling planes.
The Wall Street Journal noted this as a decision by Lockheed to cut its profit margins on the plane, after investing $1 billion in private funds to develop the aircraft. Lockheed spokesman Tom Jurkowsky was quoted as saying that “national defense outweighs the continued recovery of funds we invested in its development.” It’s widely suspected in reports from Associated Press et. al. that direct criticism of the Far Part 12 contract by Sen John McCain [R-AZ], who looks set to become the Chair of the US Senate Armed Services Committee, played a role as well.
The C-130J has also served successfully for several years with a number of other air forces; the UK signed a $3 billion long-term maintenance contract in June 2006, and all customer countries except the USA recently banded together in a joint upgrade program.