Air Force spokesman Doug Karas says that theoretically a budget shortfall can happen to any organization. In reality, it happened to the Air Force's Avionics Modernization Program (AMP) to upgrade nearly 500 C-130 transport aircraft. The program is on schedule to run out of money in about two weeks, by the latest count on September 9, 2005, according to Karas.
Although Karas said the program will likely find money somewhere and be refunded in the fiscal year 2006 budget, the financial shortfall is the latest in a series of difficulties for the program. The $4 billion C-130 AMP (not to be confused with the newer C-130J model) drew some flak last year when former Air Force acquisition official Darleen Druyun confessed that she was not “objective” in awarding the AMP contract to Boeing. A court statement of facts said that Druyun admitted she selected Boeing from a list of four qualified competitors because she was “influenced by her perceived indebtedness to Boeing for employing her future son-in-law and daughter.”
Druyun's admission set off an ugly chain of events for Boeing and the AMP, including a formal protest filed with the Government Accountability Office by the three losers in the competition. Although GAO did not order the Air Force to rebid the entire contract, it asked the Air Force to do an analysis as to what can be done. Karas said it's likely that Boeing will retain the Engineering and Design portion, but there will be another competition for the remaining $3.3 billion production and installation phase slated to begin in 2009.
Karas could not explain the reason for the shortfall, but he predicted the program probably won't experience any work stoppages as a result. “It's not the end of the program or it doesn't mean it's a failure,” Karas said.
While some in the defense acquisition community say that shortfalls do happen from time to time, these days they make people more nervous than usual. Procurement money is very tight due to such factors as low-ball initial weapons systems cost estimates, costly schedule and testing delays, and misguided business and contracting strategies.
“I've seen it (budget shortfall) happen before, but not very often,” said one source. “But money is harder to come by now, almost to the point of saying, 'let's have a bake sale,' or 'hey guys pick up every nickel and dime you see on the street.'”