Index

15 December 2001

Text: Defense Department Cancels Navy Area Missile Defense Program

(Cost overruns, poor performance cited as reasons for decision) (490)

The Defense Department announced December 14 that it is canceling the
Navy's program to develop an area missile defense system due to cost
overruns and poor performance of equipment built under the program
thus far.

Following is the text of a Defense Department press release announcing
the cancellation:

(begin text)

United States Department of Defense
NEWS RELEASE

December 14, 2001

NAVY AREA MISSILE DEFENSE PROGRAM CANCELED

Edward C. "Pete" Aldridge, under secretary of Defense for Acquisition,
Technology and Logistics, announced today the Navy Area Missile
Defense Program has been cancelled due to poor performance and
projected future costs and schedules. The cancellation will result in
a work stoppage at some contractor and governmental field activities.

The cancellation came, in part, as a result of a Nunn-McCurdy Selected
Acquisition Report breach of the existing program. A Nunn-McCurdy unit
cost breach occurs when a major defense acquisition program
experiences a unit cost increase of at least 15 percent. If the unit
cost increase is at least 25 percent, the secretary of Defense must
certify that:

-- The acquisition program is essential to the national security;

-- There are no alternatives to the acquisition program which will
provide equal or greater military capability at less cost;

-- The new estimates of the program acquisition unit cost or
procurement unit cost are reasonable; and,

-- The management structure for the acquisition program is adequate to
manage and control program acquisition unit cost or procurement unit
cost.

In the case of the Navy Area Missile Defense Program, the program
acquisition unit cost and average procurement unit cost exceeded 57
percent and 65 percent, respectively. The Department has decided not
to certify the program as currently configured.

"It's unfortunate we've reached this point," said Aldridge, "but
certification was impossible. We are still in pursuit of a sea-based
terminal phase capability as part of the overall missile defense
strategy, but we must now move forward from here."

Over the next several months, the Ballistic Missile Defense
Organization (BMDO) will address sea-based missile defense as part of
its plans to develop an integrated ballistic missile defense system
that provides a layered defense against ballistic missiles of all
ranges.

The following major defense contractors are affected by the action:
Raytheon, Tucson, Ariz.; Lockheed-Martin, Moorestown, N.J. and Middle
River, Md.; United Defense, Baltimore, Md. And Minneapolis, Minn.;
Orbital Sciences, Dulles, Va. And Chandler, Ariz.; And L-3
Communications, New York, N.Y. In addition, major governmental field
activities affected are Naval Surface Warfare Center (NSWC), Dahlgren,
Va.; NSWC, Port Hueneme, Calif.; The Applied Physics Laboratory, Johns
Hopkins University, Laurel, Md. and the Massachusetts Institute of
Technology, Lincoln Laboratories, Lexington, Mass.

A fact sheet on Navy Area Missile Defense Program can be found on the
web at http://www.acq.osd.mil/bmdo/bmdolink/pdf/aq9902.pdf.

(end text)

(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)

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