U.S. Army’s Prized $8.1 Billion Howitzer Hits Roadblock on BAE Output

(Bloomberg) -- U.S. Army officials have delayed a decision on moving BAE Systems Plc’s new self-propelled howitzer into full production, possibly as late as November, until the service sees more improvements in the $8.1 billion program that’s one its highest priorities.

“They have made progress, but they’re still not at the point where they’ve convinced us they are prepared to go into full-rate production,” Army Secretary Mark Esper said in an interview. “There’s some thresholds they have to meet” for the service and for the Defense Contract Management Agency, which is monitoring the company’s progress in improving quality.

The new self-propelled 155mm howitzer and accompanying ammunition carrier are the centerpiece of the Army’s artillery plans. It’s part of the “long-range precision strike” capability that tops the service’s list of modernization priorities. The category is due for a major increase in the new five-year budget plan to be released next week.

U.S. Army’s Prized $8.1 Billion Howitzer Hits Roadblock on BAE Output

The decision on a contract for full-rate production was to have have been made last July but was delayed until December over problems in quality and delivery, including past problems in welding. Then the service decided to wait again because “BAE failed to consistently deliver vehicles in accordance with scheduled quantities,” according to Army spokeswoman Ashley John.

She said the service is likely to award a smaller contract this month to acquire parts needed to prevent a halt in the production line.

‘Consistent Rate’

Esper said full-rate production will have to wait until the U.S. unit of London-based BAE can show “both a consistent rate and a consistent level of quality.”

John added that “BAE is delivering vehicles of an acceptable quality. However they have yet to demonstrate consistent delivery of vehicles at a rate that demonstrates the program is ready” for full-rate production.

Howitzer sections are initially produced at BAE’s York, Pennsylvania, facility with final assembly in Elgin, Oklahoma. The program has a strong advocate in Senate Armed Services Committee Chairman Jim Inhofe of Oklahoma. The defense policy bill for this year authorized spending $110 million more than the $351.8 million requested.

Contracts for 162 sets of howitzers and ammunition haulers have been awarded so far, and $1.46 billion has been obligated to BAE across multiple contracts. If full-rate production were approved today, it could be mean as $842 million more for 120 vehicle sets.

The Army eventually wants to buy 576 howitzers and ammunition carriers.

BAE spokeswoman Kelly Golden said in an email that “we have enhanced the weld and fabrication processes across our entire manufacturing network, to include our suppliers. As part of these improvements, we implemented a 100 percent in-station weld inspection across our facilities and are now delivering defect-free vehicles to the Army at a higher rate.”

The company has invested $200 million in improvements including a new robotic weld capability installed last year at the York facility .

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