BAE’s $10 Billion Howitzer Project Improves After Years of Flaws

(Bloomberg) -- BAE Systems Plc may win U.S. Army approval as soon as next month for full-rate production of self-propelled howitzers after the $10 billion program was hobbled by several years of delays over defects.

The company has been assembling the weapons system since October 2013 under low-rate contracts as it produced the vehicles late and with numerous welding defects. Deliveries were halted for six months in 2017 because of welding flaws that required the return for repairs of 50 of 86 vehicles already delivered.

Since then, London-based BAE has invested $200 million in improvements at its factory in York, Pennsylvania.

The 155mm Paladin howitzer and the ammunition carrier that accompanies it are the centerpiece of the Army’s artillery plans as it shifts its focus to countering Russia after 18 years of emphasizing the defeat of terrorists. It’s part of the service’s “Long-Range Precision Fires” capability, which tops its list of modernization priorities. The weapon is scheduled to be upgraded in the next few years with a new Extended Range Cannon designed to match Russian systems in Europe.

BAE Systems “is slowly making progress” by “providing high quality vehicles at improved production rates,” Army spokeswoman Ashley John said in an email. “Our confidence is increasing that” it “will continue to consistently deliver quality vehicles at increased production rates through the fall to support” a decision on full-rate production by year’s end, she said.

The Army’s senior leaders meet monthly and program managers meet daily with BAE Systems leadership “to continuously assess” progress, John added.

Lucrative Phase

Full-rate production is the most lucrative phase for a contractor. Last year, the Army last year increased planned quantities of the howitzer by 109 vehicles to 689. The Army plans to spend $8.9 billion on vehicle procurement for the Paladin Integrated Management program, or PIM, the system that consists of the howitzer and the ammunition carrier that accompanies it. About $3.9 billion has been appropriated to date.

BAE spokeswoman Alicia Gray said in a statement that the company “in partnership” with the Army and the Defense Contract Management Agency has leveraged “substantial capital investment” in “the team’s continuous improvement and production expertise.”

“We are delivering high-quality vehicles at improving production rates as we prepare for full-rate production later this year,” Gray said.

Then-Army Secretary Mark Esper said in March that BAE had “made progress, but they’re still not at the point where they’ve convinced us they are prepared to go into full-rate production.” Esper, who’s now defense secretary, said that phase would have to wait until the BAE showed “both a consistent rate and a consistent level of quality.”

Less Optimistic

A month later, program officials in their annual Selected Acquisition Report for Pentagon officials and congressional committees marked “For Official Use Only” were privately less optimistic about BAE.

“At this time the Army does not have confidence when BAE will be able to deliver a quality product repeatedly,” according to the document in mid-April. The “Army chief of staff does not recommend certifying the PIM program until BAE demonstrated the ability to produce quality vehicles on schedule,” it said.

Mark Woodbury, spokesman for the Defense Contract Management Agency, said in a statement last week that “at this time BAE is making deliveries of compliant vehicles.” He said the agency “has observed quality improvements, a positive culture change within the facility, and a leadership team that is committed to correcting issues and delays.”

Still, Woodbury said, even though BAE “has made significant progress in the delivery of contractually compliant products” it “is still experiencing manufacturing issues” and “trying to mitigate parts shortage issues and return to an on-time delivery schedule of deliveries.”

Sections of the howitzers are initially produced at the Pennsylvania facility with final assembly in Elgin, Oklahoma. The program has a strong advocate in Senate Armed Services Committee Chairman Jim Inhofe, an Oklahoma Republican.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net, Larry Liebert, John Harney

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.