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DoD Special Briefing on Award of Presidential Helicopter Contract

Presenters: John Young, Assistant Secretary of the Navy for Research, Development and Acquisition; and Thomas Laux, Program Executive Officer
January 28, 2005 5:00 PM EDT

            STAFF:  Okay, thanks, everybody, for coming to today's announcement on the source selection of the presidential helicopter. In a moment I'll introduce the two people who will be speaking with you today.


            If I could, just at the beginning, we only have about 30 minutes to do this, and a topic that has a lot of interest.  I'd like to keep this single subject:  the presidential helicopter.


            With that I will introduce -- the announcement today will be made by Secretary John Young, he is the assistant secretary of the Navy for Research, Development and Acquisition.  After he's completed his announcement, Mr. Tom Laux will also be available.  He is the program executive officer who will be responsible for oversight of the presidential helicopter.


            So, with that, Secretary Young.


            MR. YOUNG:  Well, I thank you all for joining us today.  I'd like to make a brief statement, then I'll turn this back over to you for questions.


            I know there have been a mix of reporters covering today's event, some who have been covering this story for quite some time, others who have come to the story more recently.  So before I get to our source selection decision, I'd like to briefly review how we got to this point.


            We first solicited proposals in December of 2003 for an April 2004 source selection.  The source selection team reviewed the initial proposals and determined that a contract award could not be made based on the initial offers.  Industry and the government needed further discussions to evaluate the requirements and their impacts on the respective helicopters.


            Both teams and the government needed time to understand the key technology, integration, weight and performance risk items; define plans to reduce each risk; and outline a realistic schedule.  Thus, the source selection was delayed for the benefit of both teams and the government, seeking to commit taxpayer dollars only to a program we understood very well.


            Detailed updates of those February proposals were received this past November, anticipating a December 18th source selection.  While both industry teams turned in quality proposals, there were areas of concern again.  Using a model typical of major Navy source selections, we continued discussions, outlining the government's specific concerns with each of the offerers.  The ultimate goal of this process is to get the best quality proposal from each team with a thorough government understanding of each proposal.  This process ensures the best decision for the taxpayer.  Thus, for each team to address the final areas of concern, the Navy-Marine Corps team extended the proposal final submission period and shifted the source selection announcement to today.


            The results were, I believe, worth the effort.  We were able to accomplish a great deal of risk reduction during this period of time. We built high-fidelity cabin mock-ups, outlined detailed plans for design tests and production, and there were limited flying quality demonstrations and subsystem evaluations.  Both teams then submitted very thorough, high-quality proposals.


            As you know, each team starts with an existing helicopter and significantly alters this design, largely relying only on the airframe.  Each team replaces the engine, rotor and drive train to meet the speed and range requirements.  Each team must install in a helicopter communications systems which would rival the equipment on Air Force One, a 747.


            Each team must make modifications to ensure the security of the president and his team.


            The extra risk reduction time has allowed each team to fully identify the required program steps, determine the risk, identify mitigation measures and define a schedule that allows us to measure our progress each day.


            The requirements of the program are very demanding.  The volume of work to be completed in this program is substantial.  The extensive modifications to be made to the airframes and the complex equipment to be integrated into either helicopter carry substantial risk for changes in cost or schedule.


            However, the need to improve the capability and security level provided to the president is urgent and demands that we move expeditiously.


            Both the Sikorsky and Lockheed teams did an excellent job of addressing the extremely demanding requirements and defining a plan to deliver the capability for the president.  Each team could deliver the required product for the president.  However, the government team must make a best value selection, which controls the risk and cost to the taxpayer, while delivering the capability demanded by the White House mission.


            Consistent with government procurement rules, the government acquisition team evaluated the proposals solely on technical, past performance, experience and cost factors.  Each industry team submitted a proposal compliant with the solicitation and applicable procurement statutes and regulations.  The government team evaluated the proposals solely on the merits, and the only guidance issued -- other than -- to the team was to pick the helicopter providing the best value for the presidential support mission.


            I'm here to tell you the government team has completed this task of selecting a team to develop and build the new presidential helicopter.  Today we are announcing the selection of Lockheed Martin to begin the system development and demonstration phase of the VXX program.


            As I discussed above, the government's requirements were very challenging.  The Lockheed streamlining proposal was selected because it was judged more likely to meet these government requirements on schedule, with lesser risk, and at a lower cost.  This effort will deliver a new helicopter that provides essential improvement in the range, speed, communications capability and survivability necessary to efficiently and securely transport the president of the United States.


            I want to thank the industry teams for the tremendous thought and effort they dedicated to presenting very good proposals to deliver new capability for the president.  I'm also grateful for the long hours devoted to the risk-reduction and source-selection efforts by Tom Laux, the program executive officer who will join me, and the VXX Program Office, led by Colonel Frank Mazur.  The government acquisition team and both offerers have put forth an incredible effort to get us to this announcement.  They worked a lot of holidays and weekends through the Christmas period, and I want them to know that I appreciate very much what they've done, and I know the White House does as well.


            And so with that I've completed the statement and would be happy to ask Tom to join me and take questions if you have them.


            Yes, ma'am?


            Q:  There was -- in the six months leading up to this, both companies have done an awful lot of briefings to reporters, and in it the theme kept coming back:  "made in America, team USA."  And Sikorsky really emphasized their all-American team.  Augusta Westland and Lockheed Martin obviously has more prominent foreign participation.  Did that figure in at all to your decision?


            MR. YOUNG:  That's really not a factor in the source selection because both teams were required with their proposal to submit a certification that they were compliant with the applicable provisions -- statutes and regulations, as I said, included in the "Buy America" provisions.  Both teams have done that, and beyond that it's not a factor in the source selection.


            Q:  Can you bound the value of the program in terms of what the SDD phase is roughly going to be worth, and then what the total program for 23 choppers is going to be worth?


            MR. YOUNG:  The cost to go in the program is, in research and development, which includes the procurement of three test aircraft, five pilot production aircraft, which form the increment-one initial capability to be delivered in 2009, and also three of the increment- two aircraft as a low-rate procurement purchase.  That's $3.5 billion of effort, to be followed by procurement of the remaining increment-two aircraft, 15 helicopters, for $2.5 billion.  So the cost to go to the government is $6 billion -- $6.1 billion.


            Q:  One-point-seven of $6 billion is committed today?


            MR. YOUNG:  Committed on the contract today.


            Q:  Can I ask you one quick follow-up on work shares?  How much work will be done in Italy and the United Kingdom?


            MR. YOUNG:  Not sure.


            Do we want to -- I don't -- let me ask Tom to take a shot at some of the pieces of that.  We didn't ask for that kind of breakdown.


            MR. LAUX:  In their proposals, Lockheed advised us that they were going to send approximately -- two-thirds of the work was going to be done in the United States and approximately one-third of the work was going to be done overseas, split between the U.K. and Italy.


            Q:  What overseas will be? Components or parts of the helicopter -- fuselage?  Any sense of that?


            MR. LAUX:  The plan is to build initially the primary fuselage components and the main rotor blades in England.  We're going to build the dynamic components, including the bulk of the gear boxes, in Italy.


            Q:  Secretary Young, how does the Navy respond to the latest DOT&E report, which criticizes the acquisition strategy and schedule for the program as being too aggressive and so forth?


            MR. YOUNG:  I think, as I said, we recognize we have to move expeditiously because in the current world situation, the president finds himself in a helicopter that already we don't have the payload he would like to have, and we don't have the ability to add any additional equipment on the helicopter we have.  This new capability will substantially enhance his ability to work while he travels, but also add security features that we can't get on the existing helicopter.


            So that urgency drives us to lay out a program and march toward it, and hopefully work off the risks that we've identified through the time we've had in laying out the schedule.  We need to work with DOT&E to show them how we plan to test as we go, but we can't let the traditional acquisition process impede the need to meet the president's security requirements now.


            So we're working with them; understand, and they understand we have an aggressive program.  They've indicated they'll work with us. And we're going to lay a lot of testing on the table as we go because we, as a Navy team, are obviously not going to put the president in a helicopter that hasn't been fully tested.  And indeed, both companies' proposals will have them providing company assets to begin flight testing almost immediately.  And so we're going to very quickly move to flight testing and getting experience with these helicopters.


            Yes, sir?


            Q:  There were about $77 million given to each team for risk- reduction efforts throughout last year.  What did that money go to? What exactly were these risk-reduction efforts?


            MR. YOUNG:  I'll let Tom offer details.


            MR. LAUX:  The bulk of the money was to identify those key technologies which are crucial to identifying and, obviously, mitigating the risk in going forward.  So there were a number of trade studies that were done.  In addition, as Secretary Young pointed out, we did build high-fidelity mock-ups -- obviously, the cabin is an essential part of this procurement.  We did continued trade studies for the engine development and the main rotor blade developments, the dynamic components required for the increased performance between this aircraft and what each offer is currently marketing.


            Q:  How many aircraft overall and the total price?


            MR. YOUNG:  The objective of the program is 23 aircraft.  And then, as I -- the cost to go on that program is about $6.1 billion, split between research and development and procurement.


            Yes, ma'am?


            Q:  Thanks.  One of the things that came up during the lead-up period was that some versions of the 101 in Canada and the U.K. were grounded at various times because of problems with a tail rotor piece that kept cracking.  The Merlin in the U.K. crashed and was grounded for four months in Canada.  They're still on some type of flight restriction while they try and figure out what's causing this.  How did that factor into your decision?


            MR. LAUX:  We are very aware of the technical issues that are being worked.  We have in our plan a very focused activity to further understand and to participate in understanding the redesign activities that are going on.  And it is our expectation that we're likely to carry that redesign even further as we continue to mitigate the risk areas in the aircraft.


            Q:  So you're going to redesign this part from scratch, then, so that you don't have to worry about this concern?  Is this one of the parts that's going to be replaced?


            MR. LAUX:  It's not going to be redesigned from scratch.  There's a healthy amount of design work and testing and qualification and understanding that has gone into the current configuration.  We're looking for more robustness than the current design has, and we're going to work towards that end.


            MR. YOUNG:  Yes, ma'am, on --


            Q:  Two questions.  One, Sikorsky made very clear with reporters before the competition was announced that this was a competition for global dominance in the marketplace, for lack of another way of putting it.  Can you give us a sense of how you think this decision impacts the industrial base?  And also, secondly, the Italian prime minister was here today.  Did Secretary Rumsfeld discuss this with him?


            MR. YOUNG:  I'll take the last one first.  I don't know what Secretary Rumsfeld discussed with him.  I think at the appropriate time, later in the day, Secretary Rumsfeld was made aware of the decision.


            This is a program to build 23 helicopters and comply with a very stringent requirement in terms of payload range, speed and the features the White House needs in a helicopter to support the president.


            These requirements are not likely to be duplicated elsewhere, so I don't really see this -- I see this as a fairly unique opportunity. And to give you one example, the Air Force is anticipating a combat search and rescue helicopter competition.  Well over a year ago, Tom and the team sat down and talked with the Air Force to see if there were opportunities to do these things jointly.  I'm typically a fan of that.  But the requirements are very different in this space, and so the decision was there was no real opportunity to have a joint program here.  And so the Air Force program will proceed.  I expect Sikorski and others to be extremely good competitors for that program.  This very specialized program is going to be one based on the ability to deliver within a very tight time schedule against pretty stringent requirements.


            Q:  Can you say what Lockheed Martin did since December 18th in their approach to the bid that helped gain your confidence in their approach?


MR. YOUNG:  Well, I don't think a lot changed in that extension period.  It was just we had areas of concern we communicated to both teams, and we're probably not able to talk about that, but both teams had to make amendments, if you will, to their proposals to get across that last hurdle of us clearly understanding what they were proposing and us understanding exactly what they said they'd do so we could evaluate them.


            And again, the proposals were very good.  Both teams could deliver this product.  It's a matter of assessing, frankly, against those stringent requirements and the schedule that the White House has asked us to meet.  Both teams started with helicopters, and the Lockheed team probably started with a helicopter that needed less -- they more closely met the requirements we had laid out, and that allowed them to table less work that had to be completed to get to the finish line and deliver a product.


            And that was certainly a factor in the source selection decision.


            Yes, sir?


            Q:  Can I ask you, during the public debate between the companies over the past year, a lot's been made of the fact that the Sikorsky helicopter had two engines, the Lockheed entry had three, and was a larger helicopter.  Were those two things factors in the decision?


            MR. YOUNG:  Why don't I let Tom talk about this?


            MR. LAUX:  The factors had to do, from a performance perspective, how far can you go and how much can you carry; range/payload kinds of questions.  And obviously, there are trade-offs with the sizing of the aircraft and the rotor to accomplish that.


            Regarding the three engines versus two, three engines obviously burns more gas per hour than two does.  Those came into play.  How big the gas tanks are.  You can lift more because you have more horsepower.  So, all the design trade-outs were very, very thoroughly evaluated.


            Specifically from a safety perspective, we took a look to see if in fact a three-engine platform offered potentially more safety, and we could find no data.  And we operate both three-engine and two- engine aircraft that do.  So that didn't turn out to be a specific advantage.  But the overall size of the 101 clearly was a factor in terms of their capabilities.


            MR. YOUNG:  I think Tom and I discussed in advance, the S-92 offers a cabin that's pretty comparable in size to today's VH-3D.  The 101 cabin is a larger cabin, so it offers a little more flexibility. That was something that we considered.  But both cabins met the requirements, so that wasn't a total discriminating factor.


            Yes, ma'am?


            Q:  You said there's some specific technologies in this helicopter, like security, communications, things that the president required.  Is that technology available today in the military sector, or is that new technology entirely that has to be developed from scratch? 


MR. YOUNG:  You want to offer --


            MR. LAUX:  Sure.


            We have a technology insertion plan.  We're certainly taking advantage of everything that's available today and will be integrated with the known technologies.  Over time we expect to be able to further integrate and collapse, if you will, four boxes into three, that kind of thing, as we go.  But there are no communications technologies development as part of this program right now.  We're starting off with stuff -- equipment that's within the state of the art today.


            MR. YOUNG:  Yes, sir, in the back?


            Q:  I have two questions for you.


            One is on the security clearances.  There was some question whether Lockheed's team could get enough people with the high security requirement.  Is the government going to do anything in particular to facilitate that and to help them get the workforce?


            And the second one being, you talked about cost and indicated that the Lockheed bid was lower cost, and intuitively the 101 is a more expensive platform with the additional engine.  So can you kind of bound for us what you're talking about in cost?  Are you talking program cost, fly away cost, what cost?


            MR. YOUNG:  Can I take -- I'll take the second one and tell you, you know, on the cost factor, what I said was we had a stringent requirement, two helicopters that had to be modified to meet that requirement within a time frame.  Lockheed started at a point that was closer to the requirements and let them -- they had less work to do, so that obviously let them bid a cost that was potentially lower.


            I don't really want to say any more about the cost differential between the two teams because the bulk -- more of the cost is in the development, the integration of the subsystems.  The basic cost of the helicopter, we believe the pilot-production aircraft are about $75 million a copy, then to be modified.  The increment-two aircraft are about $87 million a copy.  They have more capability, and the modifications to the engines and all.  And the helicopter with all the modifications we estimate to be approximately $110 million a copy. 


MR. LAUX:  You asked about security and if we're going to facilitate Lockheed's clearances.  Absolutely.


            They're now our industry partner, and we're going to do everything we can to facilitate the personnel that they need to get the clearances and get them deployed into the right places.


            The secretary asked me to amplify regarding the staffing plan that Lockheed submitted -- they've identified the number of personnel in each of the locations, including Italy and the U.K and the various U.S. locations.  We've identified at each of those places the number of security personnel appropriate to the activity that's going on to make sure that we have the appropriate oversight and the protections that are required for this very sensitive mission.


            Q:  Can you say how many of the people are overseas?



            MR. LAUX:  I don't think it's appropriate to comment on the specifics of the security at this time.


            MR. YOUNG:  Yes, ma'am?


            Q:  Congress is already starting to react.  Senator Lieberman called this decision, quote-unquote, "outrageously wrong," and says he will fight to right this wrong, that it's just a, you know, slap in the face to Sikorsky, which has earned the right.  What do you say to the sort of political fallout that is already happening on Capitol Hill?


            And then also, if you could clarify the numbers -- the 6.1 -- is 6.1 the total figure, of which 1.7 is a piece?  Or is it more than that?


            MR. YOUNG:  We're awarding a contract today valued at $1.7 billion to Lockheed Martin.  We believe the cost to go in development is about $3.5 billion.  We've already spent some funds on the program, as was noted.  And then the cost to go in procurement is about $3.6 billion -- in development -- $2.5 billion in procurement for a total cost to go to develop the helicopter system and deliver the 23 airframes and fully modified at about $6.1 billion.


            Q:  So it's 1.7 plus 6.1.


            MR. YOUNG:  Yeah.  And within the -- you know, the cost within R&D beyond the contact value, the government has allocated funds for government tests, government activities.    There are some government-furnished items that go on these helicopters.  And then we have funds against anticipated software and other hardware issues that we've got to deal with as we go through development.


            Q:  Okay.  I'm sorry.  Do you --


            Q:  So it's almost 9 billion  --


            MR. YOUNG:  No, it's 6 period --


            Q:  Okay.


            MR. YOUNG:  Six-point-one (billion dollars) to go -- costs to go --  total program costs to deliver the entire program -- 3.6 (billion dollars) in R&D and 2.5 (billion dollars) in procurement.  And some of the R&D funds buy the initial helicopters.


            Q:  So it isn't 1.7 (billion dollars) plus 6.1 (billion dollars); it's 1. --


            MR. YOUNG:  One-point-seven (billion dollars) is within the 3.5 (billion dollars) -- 3.6 (billion dollars) of R&D costs.


            Q:  And then if you can just get to the political fallout and "outrageously wrong" –


            MR. YOUNG:  As I commented, within the government procurement rules and regulations, we conducted a best value competition.  Both teams did a great job of submitting proposals that were compliant with the requirements, compliant with the statute and regulations.  And so the burden on us was to evaluate the proposals and make a best value recommendation for the helicopter to serve the presidential mission.


            I don't -- we don't have a lot of flexibility to drive it in any direction based on politics or industry aspects, as long as people comply.  And that was the case.


            So I come back to the point we're prepared to say, and it's difficult to talk a lot further.  Given the requirements and given the schedule, both teams started with very capable helicopters and explained to us what modifications they needed to make to meet those requirements.  The Lockheed team has less work to do to accomplish and meet those requirements, and that means they were able to offer a different cost and less -- and more manageable risk to us.


            So we believe it's a good source selection decision.  We're obviously going to immediately debrief the industry teams, and we'll make information available to members of Congress that are interested. I'm sure there will be a lot of discussion.  But I think the team has spent a lot of time.  That was the importance of that risk reduction phase, so both teams provided schedule, both teams understood fully what we were asking of them, we understand fully what they're proposing, and we were able to assess very well their cost, their risk and their likelihood of succeeding.


            And we think both teams would succeed, as I said in my statement, but at some point you have to discriminate and choose the best value, and that's the decision the team made.


            Q:  Can I follow up on that?  It's been widely reported that both Prime Minister Blair and Prime Minister Berlusconi spoke to the president and urged him to buy this helicopter.  Can you just say for the record, was there ever any contact from the White House or from any politicians, when you were making your decision - that influenced the decision in any way?


            MR. YOUNG:  Well, that's a broad question.  I regret to report to you the president did not call me about this helicopter.


            Q:  (Laughs.)


            MR. YOUNG:  And beyond that, I'll tell you no one at the White House has contacted me.  We provided some initial briefings about how we were proceeding with the program, made sure we understood their requirements.  We told them some requirements that were tough to meet and talked that through, just as I do in my Navy programs with the Navy requirements community.  But at the end of the day, once we agreed on those, we marched. And I got no other vectors from the White House to pick -- to do anything other than pick the best value choice for the mission.  And that's what we did.


            So I don't believe there are any political influences in -- I mean, there are not political influences in this.  And I can tell you I have not been asked by anyone to pick a particular one.  I was not the source selection authority, so that there wouldn't be a political appointee making this decision.


            A member of my team was the source selection authority.


            We have a very rigorous process in the Navy.  There's a Source Selection Evaluation Board.  Tom outlined previously to Secretary England there are about 100 technical experts in various fields that sit on that board, evaluate the proposals and assess them.  That's fed up to a Source Selection Advisory Committee that consisted of flag officers and SES, senior executives in the government.  They evaluated that information, had a chance to reassess any information or evaluate the recommendations made by that and coalesce them down to a scoring. That scoring was recommended to a source selection authority who made the final decision, and again had chances to review, ask questions, do as they will.


            So we have a three-tiered process.  I would suggest to you it's fairly isolated from political influences and others.  It's evaluation on the technical, past performance, experience, and cost factors, and they were weighted in various ways.  And out of that comes a scoring and a decision as to the best value for the government.


            STAFF:  We've got time for one more question.


            MR. YOUNG:  Yes, sir?


            Q:  Can you -- first, can you give us a better sense of how this helicopter will expand the president's capabilities when he's in the air?  What kind of things can he do -- will he or she be able to do that he or she – he can't now?


            And also, is there going to be a significant difference between the early, the first -- the 2009 helicopters, the first tier, whatever, and the second one, a significant difference in capability?


            MR. YOUNG:  Let me say a few things and then open it to Tom to expand, because I think we have some good things to tell you there.


            There are differences.  Increment one is a desire to respond to an urgent need to get a more capable helicopter in the hands of the president.  That helicopter, though, will come with about -- a range of about 250-mile range capability, which is -- the current VH-3D, to put that in context, has a range of about 100 miles.  Currently, while it was designed to carry 16, it's generally been limited now to carrying 10.  And so -- and that's because of the equipment that's been added over time.  You all know what kind of communications capability is out there, and the White House desires to have real-time communications capability that Tom can probably expand on.


            The increment-two helicopters come with more capability and push that range up to 350 nautical miles.  So we get significant real-time capability for communications, dramatically enhanced range.  The VH-3 is about a 114-knot helicopter; this helicopter will be a 140-knot helicopter with 14 passengers and four crew.  So in every area we expand the capability for the president to meet his mission and work while he's doing that.


            Tom, maybe you want to add some more details.


            MR. LAUX:  I would simply amplify what the secretary said regarding the range and the payload.  That buys flexibility that allows the currently developed technology to be installed on the aircraft, which we cannot do because we are so severely weight-limited with the existing platforms that we're flying.


            So as the security needs change over time, we can address those by adding to the aircraft as opposed to adding and subtracting, which is the mode that we're in right now.  We will continue to be able to carry the passengers on board.  The communications not just for the president, but also for the passengers on board -- more and more today everybody needs to have real-time communications.  That has been substantially increased.  And the ability to do all these things all at the same time is really what adds to the complexity of the communications system and the capability that we're now going to have with the 101 platform.


            Q:  Will this be ready in time for President Bush to take a ride on it?  You say fiscal '09, but that could theoretically still --


            MR. YOUNG:   Well, we anticipate being -- having this available for the president in October of 2009.  That's the current schedule we've laid out.


            STAFF:  Okay.  Thanks a lot, everybody, for coming.  Appreciate it.



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