Senate Armed Services Committee Chairman Carl Levin, a Michigan
Democrat, criticized the Navy's plan to "break" the multi-year
purchase agreement during a hearing on the Navy and Marine Corps
"This action would result in the government having to pay
termination charges of at least $250 million but get nothing in
return," he said.
The cut in MH-60 helicopters is one of a number of controversial
proposals sent by the Navy and other U.S. military services to U.S.
lawmakers, who have the ultimate control over the Pentagon budget.
Navy officials said deep budget cuts agreed by Congress had forced
them to make difficult choices across various portfolios in shaping
the fiscal 2015 budget.
Levin dismissed the Navy's claim that scrapping the fiscal 2016
order of helicopters was related to the planned retirement of the
USS George Washington aircraft carrier, noting that each carrier had
only five MH-60 helicopters on board.
The Navy had no immediate comment on the amount of the projected
termination fee. Such fees are generally negotiated between the
government and industry.
One Navy official said the fiscal 2015 budget included the advanced
procurement funding needed to maintain the multi-year contract for
now. The reductions planned in fiscal 2016 were linked to the
potential cut of an aircraft carrier and coastal combat ships, said
Sikorsky, a unit of United Technologies Corp, signed an $8.5 billion
contract with the Army and Navy in July 2012 to buy 653 Black Hawk
and Seahawk helicopters through December 2017, a deal that generated
significant discounts given the larger order quantities.
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By reneging on the agreement, the Navy was jeopardizing those
savings, Levin said.
One industry source familiar with the issue said it was rare for the
military to break a multi-year contract because they resulted in
savings of 10 percent or more, and violating such agreements
generated costly termination fees.
One congressional aide, who was not authorized to speak publicly,
said lawmakers were considering measures to prevent the Navy from
cutting the funding in its fiscal 2016 budget.
Jim McAleese, a Virginia-based defense consultant, said the Navy had
cut funding for the MH-60 and other aircraft programs to preserve
money for higher priority shipbuilding programs.
(Reporting by Andrea Shalal; editing by Kenneth Maxwell)
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