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E-3 Sentry (AWACS) NATO AWACS Mid-Term Modernization Program [NMT]

The E-3 AWACS represents the standard for the world for the airborne early warning systems. Equipped with a "look-down" radar, the AWACS can separate airborne targets from the ground and sea clutter returns that confuse other present-day radars. The NATO AWACS surveillance system is integrated into 18 commercial Boeing 707-320B aircraft, modified to accommodate the mission equipment and crew of 17. The NATO Airborne Early Warning and Control (AEW&C) Program Management Organization (NAPMO) who normally meets in Brunssum, the Netherlands, was established to manage the acquisition of the 18 aircraft and supporting equipment and trainers.

In November 1997, the U.S. Air Force Electronics Systems Center (ESC), acting as an agent for NAPMO, awarded Contract F19628-97-C-0112 to Boeing for the engineering and manufacturing development (EMD) phase of the NMT program. Boeing, supported by contractors from participating NATO nations, was contracted to integrate major system-related enhancements to computers, displays, communications, navigation and target identification. ESC established contract F19628-97-C-0112 as a fixed-price incentive-firm target effort with a ceiling price of $452 million and expected Boeing to complete the effort within 46 months.

The NATO AWACS Mid-Term Modernization Program consists of a set of improvements to expand the performance and flexibility of the existing NATO fleet of 18 aircraft. The U.S. Air Force Electronics Systems Center, acting as a procurement agent for the NATO Airborne Early Warning and Control Program Management Organization, awarded Boeing a contract for the engineering and manufacturing development phase of this program.

Boeing encountered performance problems on the contract and a contract modification was developed to resolve those problems. A contract modification which occurred in calendar year 2002 restructured the NATO Airborne Warning and Control System (AWACS) Mid-Term Modernization Program that became known as the "Global Solution."

The "Global Solution," restructured the initial contract and addressed the performance problems, thereby reducing program risk for developing the enhancements to the NATO AWACS. The Global Solution modification, which increased the contract amount from $551.3 million to $1.34 billion, included future options for production and retrofit. The $1.34 billion also included $.02 billion for added follow-on spare parts and costs for other unresolved contract issues that were not included in the contract negotiations.

The Global Solution contract modification resulted in a program with less risk for NATO than the original contract to develop and test enhancements to NATO AWACS aircraft and avoided litigation to adjudicate an equitable price adjustment request proposed by Boeing.

The negotiation of the Global Solution contract modification focused mainly on two cost areas: the increase in the ceiling price of EMD, valued at $100 million, and priced options for NMT production and retrofit, valued at $472.9 million. The $472.9 million consists of $449.5 million for the NMT program and $23.4 million for diminished manufacturing sources options. Consequently, the contracting officer developed two price negotiation memorandums, one for the increase in ceiling price of EMD and one for the priced options for NMT production and retrofit.

The Mid-Term Program enhancements include:

  • Five new operator consoles
  • Flat panel situation displays with a Windows-like environment to support the interaction between operators and sensor systems increasing the operator's situational awareness
  • A new mission computing system implementing advanced Multi-Sensor Integration which will improve the reliability and accuracy of target tracking and identification, automated recording and replay of mission data; An open-system architecture supporting cost-effective future upgrades to hardware and software
  • Digital communications systems to improve crew management and use of radio links
  • Satellite communications that will be integrated into the mission system for over-the-horizon communications links
  • Broad-spectrum VHF radios that will support improved interoperability with Eastern European nations' air and ground forces
  • Improved Identification Friend or Foe systems that will be compatible with emerging international air traffic control systems requirements
  • New capabilities for Identification Friend or Foe interrogation
  • Upgraded aircraft navigation that takes advantage of the new Global Positioning System.

On December 18, 2003, the Secretary of the Air Force, through the Deputy Assistant Secretary of the Air Force for Contracting, requested a review of the negotiations of a contract modification which occurred in calendar year 2002 to restructure the NATO Airborne Warning and Control System (AWACS) Mid-Term Modernization Program that became known as the "Global Solution." The focus of the review was to determine whether correct business and contracting procedures were followed. Since the former Principal Deputy Assistant Secretary of the Air Force for Acquisition and Management who was also the Chairman of the NATO Airborne Early Warning and Control Program Management Organization Board of Directors conducted the negotiations, the Secretary of the Air Force was also concerned that the negotiations were properly conducted.

The US Air Force Electronics Systems Center, acting as a procurement agent for the NATO Airborne Early Warning and Control Program Management Organization, awarded Boeing a contract for the engineering and manufacturing development phase of this program. Boeing encountered performance problems on the contract and a contract modification was developed to resolve those problems.

The "Global Solution," restructured the initial contract and addressed the performance problems, thereby reducing program risk for developing the enhancements to the NATO AWACS. The Global Solution modification, which increased the contract amount from $551.3 million to $1.34 billion, included future options for production and retrofit. The $1.34 billion also included $.02 billion for added follow-on spare parts and costs for other unresolved contract issues that were not included in the contract negotiations.

The draft schedule, "Global Solution Phased Development / Initial Production Overview 8a," January 7, 2004, scheduled operational test and evaluation to begin August 22, 2005, almost 24 months later than the original baseline schedule to reduce program risks. The extra time will be used to complete hardware and software design, systems testing, specification compliance verification, and logistics support before the operational test and evaluation. Contract modification P00068 included 14 contractor performance events, with completion dates between December 2003 and March 2008.

On 29 April 2004 Boeing Information, Seattle, Wash., was awarded a $524,040,890 fixed price incentive fee contract modification. This undefinitized contract action for the production and retrofit phase of the global solution for NATO AWACS mid-term modernization program. It includes long lead items, initial spares, follow-on spares, resolution of diminishing manufacturing sources issues and time and materials support activities. At the time this modification was awarded, $201,040,890 of the funds had been obligated. This work will be complete by September 2008. The Headquarters Electronic Systems Center, Hanscom Air Force Base, Mass., is the contracting activity (F19628-97-C-0112).



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