16 August 2016
Air Force Ballistic Missile Upgrade Said to Be Stalled Over Cost
By Anthony Capaccio


The U.S. Air Force’s program to develop and field a new intercontinental ballistic missile to replace aging Minuteman III weapons is stalled over Pentagon concerns the service underestimated the cost by billions of dollars, according to a defense official familiar with the program.

The service is grappling with a substantial gap between the cost estimate its officials prepared for an Aug. 3 meeting of the Pentagon’s Defense Acquisition Board and one crafted by the department’s office of independent cost assessment, said the official, who asked not to be identified because of the internal debate.

The Air Force last year estimated that the new ICBM program would cost $62.3 billion for research, development and production of as many as 400 missiles as well as command and control systems and infrastructure. Lockheed Martin Corp., Boeing Co. and Northrop Grumman Corp. are all competing to build the new ICBMs.

The uncertainty over costs stems from the fact that the U.S. has not built new ICBMs, which are designed to carry nuclear warheads, for decades. The funding dilemma will likely add to debate over whether coming administrations can afford a “bow wave” of surging nuclear and non-nuclear weapons spending after 2021. Nuclear spending alone could surpass $1 trillion over 30 years if operations, support and construction are included.

‘Level of Complexity’

Air Force Secretary Deborah James last week signaled during a “State of the Air Force” news conference that more work needed to be done to prepare the program for Pentagon approval, without giving additional details.

“If there was something that we learned” from the Defense Acquisition Board meeting it is “the magnitude of this type of ICBM work,” James said. “There is a level of complexity that has to be worked through.”

The latest debate is largely about which data is used to estimate the total cost of the program -- older data which includes information based on programs from the 1960s or only the latest estimates compiled by the Pentagon’s cost analysts, the official said. The Pentagon’s separate assessments are mandated in order to prevent a military service from starting a program with insufficient funds that have to be later shifted from other programs or appropriated by Congress over the Pentagon’s objections.

Reconciling Differences

The Pentagon is prepared to go forward with the missile program but the Air Force needs to reconcile the differences between the independent estimate and what the service thinks it will cost in 2020 and 2021 to develop and procure the program, the official said.

The Air Force and Pentagon are working “to try to ensure that we all have a common understanding of the assumptions” behind the service’s cost position, James said. “We’re working that through.”

There are a number of variables in the Pentagon’s estimate, such as different inflation assumptions that make estimating the program’s cost difficult, the official said. Still, the Air Force estimate is more optimistic in its methodology than the Pentagon’s when it comes to future costs, the official said.

Complicating the issue, a new procurement law requires that at this point in a weapons program -- a so-called Milestone A decision -- the military service chief and secretary must concur with Pentagon acquisition officials on cost, schedule, technical feasibility and performance tradeoffs that have been made to keep it affordable.

The Air Force is currently weighing whether to accept the direction to fund the ICBM program at the higher estimate and where to find the extra money, the official said. The service must agree to the higher forecast or it won’t move forward -- unless the Pentagon allows the Air Force to underfund it, which is unlikely.

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