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Sunday, March 1, 2009

Rotorcraft Report: Understanding Nunn-McCurdy

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Cost overruns in the VH-71 presidential helicopter project, the canceled Armed Reconnaissance Helicopter (ARH) contract and the U.S. Marines’ UH-1Y/AH-1Z acquisition have run afoul of the Nunn-McCurdy Amendment. But what precisely is Nunn-McCurdy, and why did it force all three projects to be reported to Congress?

Here’s the history: Fed up with defense contract overruns, Sen. Sam Nunn and Rep. McCurdy sponsored an amendment to the Defense Authorization Act of 1982. Under their amendment, Congress must be officially notified any time a defense project exceeds its acquisition unit cost budget by 15 percent; with the notification coming from the service secretary responsible for the project. Should the project exceed its unit cost budget by 25 percent — it now costs 25 percent more to purchase each item than originally authorized by Congress — the Nunn-McCurdy Amendment allows Congress to kill the project unless convinced by the Secretary of Defense that the project is critical to national security and there’s no alternative that will provide equal capability at less cost.

"Nunn-McCurdy is designed to serve as an alarm bell for military contracts that might be going awry," said Peter Sepp, V.P. of communications for the National Taxpayers Union, a taxpayers’ lobby group. As a watchdog law, "Nunn-McCurdy is well-constructed. The problem is what happens when the politicians get involved. The problem is that the secretary of defense can usually win congressional support for overruns by arguing that the program in trouble is indeed ‘in the national interest’. Once this happens, Congress is not likely to turn him down."

One easy-to-justify Nunn-McCurdy violation can occur when a project is expanded beyond its original scope. This is the case with the Marines’ UH-1Y/AH-1Z acquisition: They need more helicopters than originally planned for, due to an expansion in the Marines’ overall manpower. In the case of the VH-71, cost overruns are related to packing all the goodies the Pentagon wants into the EH101/AW101 airframe. Because the fleet of VH-71s will be used by the president — including during national emergencies — cost is not likely to be an issue; even though the project is billions of dollars over budget. The ARH program, however, was killled.

The bottom line: Nunn-McCurdy is a hurdle that the Pentagon has to clear whenever project budgets get out of hand. But it is not an insurmountable obstacle.

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