Airborne Optical Adjunct (AOA) - Program

In August 1982, the Systems Technology Project Office initiated phase II of the Airborne Optical Adjunct Study in which a versatile, multimission threat acquisition system would be defined and a development program planned for a tactical prototype demonstration. In October 1983 the Under Secretary of the Army granted approval to proceed with Airborne Optical Adjunct airborne sensor project. On 11 December 1984 the Secretary of the Army approved the Airborne Optical Adjunct Program Charter. The project later became known as the Airborne Surveillance Testbed.

The Army awarded the AOA experiment contract to the Boeing Aerospace Company on July 31, 1984. The contract covered 5-years and required the contractor to provide (1) two separate optical sensors to be installed beside each other in the airplane, (2) data processing hardware and software, (3) an airborne platform, and (4) ground and flight tests. Boeing subcontracted the development of the sensors to Hughes Aircraft Company and Aerojet Electra Systems, and the data processing hardware and software development to Honeywell Incorporated. The total AOA experiment, including the prime contract and support from other contractors and the government, was estimated in mid-1986 to cost $524 million and was to be completed in late 1989.

The Army conducted a preliminary review of the AOA design in June 1985 and was closely monitoring Boeing's and its subcontractors' efforts to resolve these critical technoloqy issues. The Army was confident by mid-1986 that all critical technology issues had been identified and that resolution of them would be demonstrated when system ground and flight tests begin in mid-1988.

In July 1985, about 1 year after the AOA contract was awarded, Boeing informed the Army that its latest cost estimate was about $103 million more than the contract amount. Boeing attributed the increase to higher subcontract costs, higher staffing levels and labor rates, and a better understanding of the complexity of the development work.

After Boeing announced the potential cost overrun, the Army conducted a detailed review which confirmed the higher estimate. According to the AOA Project Manager, the potential cost growth occurred because of the competition and Boeing's failure to fully understand the technical complexity of the required'bork. He said that in the attempt to win the contract, Boeing reduced its subcontractors' bids, proposed inadequate skills and staffing levels in some areas, and did not provide for a required data processing capability. Boeing also omitted some required items such as certain environmental tests, cooling equipment, hardware spares, and a maintenance tower for access to the sensors when the aircraft is on the ground.

The Army had indications of a potential contract cost overrun before the contract was awarded. According to the AOA Project Manager it was not a question of whether there would be an overrun, but of when the overrun would occur and how much it would be. Boeing's proposed costs for the contract were significantly lower than the government's estimates -- l5 percent lower than the project office's estimate and 29 percent lower than an independent estimate prepared by the Strategic Defense Command's Cost Analysis Off ice. The Army considered the risk involved and elected to award the contract in light of the funding reserves programmed in future years.

In addition, the source selection cost evaluation team did not believe they had received an adequate explanation from Boeing on the subcontractors' costs and they questioned the labor rates and pricing factors proposed by Boeing. During its audit of the proposal, the Defense Contract Audit Agency found that certain labor rates and pricing factors proposed by Boeing were significantly lower than those recorded on other military programs of a similar nature and size. However, Boeing maintained that the lower rates and factors could be achieved through intense management of the program.

The Army restructured the AOA program to reduce the impact of the cost overrun. The Army initially required development of two sensors because it believed that competing sensor designs were important for reducing technical risk and for comparing sensor performance. Competing sensor contractors would also provide a broader technology base in the event a decision is made to develop and deploy a defensive system. After reviewing Boeing's revised estimate, the Army told Boeing to terminate the sensor being developed under a subcontract with Aerojet. According to the project manager, the only way to significantly reduce the program's cost was to eliminate one of the two sensors. The Army decided to continue with only the Hughes sensor because it was less risky: the Aerojet sensor, although more technically advanced, represented more of a technical challenge.

The initial decision was to permit Aerojet to continue development of an advanced technology detector material and to provide one module constructed from this material which could be tested in the focal plane assembly of the Hughes sensor. The Army wanted to retain the advanced detector module because it was likely to be more resistant to the nuclear effects that will be present during a ballistic missile attack, and offered the potential for providing the sensor with a longer detection range than the more conventional materials used by Hughes.

However, Boeing's proposal for the Aerojet advanced detector module was unacceptable to the Army. Aerojet's proposed schedule was incompatible with Hughes' schedule, the cost of the Aerojet module work was considered excessive, and there were significant technical issues that would have to be resolved. Based on these cost, schedule, and technical implications, the Army ordered work on Aerojet's advanced detector module stopped. Although the Army has lost the potential benefits of the advanced detector module development as a part of the AOA program, research on this technology is ongoing in other SD1 Army and Air Force research programs.

Two sensors would have allowed for demonstration of sensor-to-sensor correlation. Sensor-to-sensor correlation involves two sensors looking at the same object and knowing that they are looking at the same object. According to the AOA Project Manager, restructuring the program resulted in (1) loss of competition in designing optical sensors of the size and type needed for an airborne optical system, (2) loss of demonstrated validation of the sensor-to-sensor correlation technology issue (3) a smaller industrial base for this technology, and (4) no backup sensor if Hughes' design did not work. However, the project manager was confident that the major objectives of the experiment could still be achieved under the restructured program.

The contract modification for the restructured AOA program was finalized in December 1985. The program included development and fabrication of only one optical sensor, and a 4-month extension of the contract -- from 60 months to 64 months -- for technical performance. Total cost increased by about $108 million-- from $416 million to $524 million. In an effort to avoid further cost overruns on the AOA contract, Boeing had management structure to be more responsive should problems arise.

In addition, the restructured contract provides incentives for Boeing to control contract cost. For example, the original contract was a cost-plus-award-fee type. Under the restructured contract, the fee arrangements were revised to include, in addition to an award fee, incentive fees and a cost-sharing arrangement between Boeing and the government. Under these arrangements, Boeing's fee will be reduced unless it controls contract costs. According to the AOA project manager similar arrangements have also been incorporated in Boeing's subcontract with Hughes.