Pentagon spent $58 billion on weaponry it ended up canceling
By TONY CAPACCIO | Bloomberg | Published: October 28, 2016
The Pentagon has canceled 22 programs in advanced development after spending a combined $58.3 billion on them since 2002, according to the Defense Department's latest assessment of its acquisition performance.
Among the weapons scrapped were Boeing's ground-based vehicle network for the Army, a Northrop Grumman mini-submarine for Navy SEALs and a chopper from Textron's Bell Helicopter unit.
The tally published this week is the latest edition of a yearly report measuring the effectiveness of the process for spending billions of dollars annually to develop and build new weapons and outlining improvements. The updated list of canceled projects represents 17 percent of the 136 major weapons in advanced development for which the military had set cost, schedule and performance milestones from 1997 to 2015.
The individual cancellations all had been announced previously. The most recent was the Navy's decision this year to kill Lockheed Martin's underwater drone, which was supposed to hunt down mines for the service's Littoral Combat Ship. It was scrapped as unreliable even after the Navy spent $700 million, 44 percent more than its original development budget, according to the report.
Before that, the most recent cancellations were in 2012. The report directed by Frank Kendall, the Defense Department's undersecretary for acquisition, said that reflects improvements in crafting requirements for weapon systems up front, more realistic assessments of costs before an initial contract is awarded and tighter financial incentives to control costs.
Among the earlier cancellations was the Future Combat System developed jointly by Boeing and SAIC and canceled by Defense Secretary Robert Gates in April 2009. The FCS -- a network of wireless, on-the-move communications, drones and sensors -- accounted for 35 percent of the $58.3 billion. The RAH-66 Comanche helicopter, developed jointly by Boeing and Sikorsky and canceled by the Army in 2004, accounted for an additional 17 percent.
The research and development costs of the canceled programs represent about 3.4 percent of the $1.7 trillion budgeted in those years for developing the 136 programs and an additional 25 active programs in preliminary development, Mark Wright, Kendall's spokesman, said in an e-mail.
"It is also worth noting that sometimes the results and insights from the sunk costs on canceled programs are used on other related programs," Wright said.
The $58.3 billion "isn't much spread over a 20-year period," Loren Thompson, a defense industry consultant at the Lexington Institute in Arlington, Virginia, said in an e-mail. "Program cancellations arise from many causes, including changing threats and the appearance of new technologies. Also, programs sometimes get killed because rigorous testing reveals unexpected flaws."
The $58.3 billion "is still a lot," said Mark Cancian, a defense budget analyst at the Center for Strategic and International Studies and a former examiner of weapons costs for the Office of Management and Budget. Asked if a 17 percent cancellation rate indicated a poorly functioning Pentagon acquisition system, Cancian said, "Yes and no. Several programs went ahead with unready technologies," with the Future Combat System "being the most egregious."
"But decision-makers knew they were accepting risk and not following best practices," he said. "There's not much a system improvement can do in that case. We know what best practices are, we just don't always follow them."
The system that most exceeded its original research budget estimates before cancellation was an Army radio for ground combat. Boeing was developing the Joint Tactical Radio System's Ground Mobile Radios as part of a team that also included Northrop Grumman, Rockwell Collins, BAE Systems and Harris.
Kendall cited excessive unit-cost increases when he canceled the program in late 2011 -- after $1.8 billion was spent, exceeding its original research budget by 65 percent.
Northrop's mini-sub to carry Navy SEALs from a mother ship was canceled in 2005. It was at least six years late and $600 million had been spent, exceeding its original development budget by 5 percent.
The Armed Reconnaissance Helicopter from Bell was axed in 2008 after $600 million was spent, or about 40 percent over its original research and development budget.