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12 Jan 06. The Wall Street Journal reports that the U.S. Army is poised to cancel a Lockheed Martin Corp. spy-plane program valued at as much as $8 billion, in the face of competing budget priorities and problems in the aircraft’s development, according to industry and government officials. The Army suspended funding for the Aerial Common Sensor surveillance plane in September as a result of concerns about the plane’s cost and size, and asked Lockheed to offer alternative solutions. People familiar with the program said the Army is expected to announce the ACS’s termination as early as today, the end of a 60-day period during which Pentagon officials reviewed Lockheed’s four proposals. The decision would also be a blow to Lockheed’s main partner in the program, Empresa Brasileira de Aeronautica SA, or Embraer, the Brazilian aircraft company hoping to break into the U.S. defense market.

Spokespeople for the Army, Lockheed and Embraer declined to comment, saying they hadn’t been informed of a final decision about the spy-plane program. It is unclear whether the Army will seek to preserve some of the technology developed for the program for future use. The likely demise of the spy-plane program, valued at up to $8 billion over several years, underscores the complexity of Pentagon efforts to transform the way it develops weapons. The battlefield surveillance and eavesdropping plane was meant to serve the Army and the Navy, with the underlying premise that creating a joint-service program would bolster its support inside the Pentagon and on Capitol Hill. But it proved difficult to reconcile the two services’ missions and equipment specifications at the cost that Lockheed originally proposed.

Given the Pentagon’s budget pressures amid the military operations in Iraq, the Navy’s increasing ambivalence toward the Army-led spy plane and inevitable program delays and cost increases, the Army concluded it was a losing battle. “In the big scheme of things, ACS loses out,” said an Army official. “Anytime you have a wounded weapons program, the sharks circle.” The Army’s head of acquisitions recommended canceling the program in December, but Army Secretary Francis Harvey decided to extend the review by a month, this official said.

Lockheed, based in Bethesda, Md., the U.S.’s biggest defense contractor by sales, has conceded it made mistakes in projecting weight, power and technical issues for the proposed spy plane. It has been scrambling for months to salvage the program, which unraveled with unusual speed for a company that has supplied the Pentagon with surveillance, combat and cargo
planes for decades.

In August 2004, Lockheed beat out Northrop Grumman Corp. and won an $879 million initial-development contract for the spy plane by proposing a modified version of an Embraer 50-seat passenger jet. As it became clear that the array of sensors and radar would make the plane too heavy to fly, Lockheed proposed switching to a larger Embraer airframe or a modified business jet made by Canadian plane maker Bombardier Inc. In November, it also proposed to strip some equipment out of the original Embraer plane or to keep working on the electronics.

Army officials say the need for battlefield surveillance and eavesdropping remains a priority. The service is expected to focus on upgrading aging propeller-driven planes that perform the task under a contract led by Northrop.

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