Reforming Weapon Systems Acquisition in the Department of Defense: The Case of the U.S. Army's Advanced Attack Helicopter

In July 1986, the U.S. Army activated the first AH-64 Apache attack helicopter battalion at Fort Hood, Texas.¹ Designed to destroy Soviet tanks in the event of a conventional war in Europe, the Hughes AH-64 served as the Army's premier anti-armor helicopter, equipped with laser-guided Hellfire air-to-surface missiles, upgraded engines and advanced avionics for nap-of-earth (terrain following) flight, and all-weather and nighttime flying capabilities. The introduction of the Apache marked the culmination of a long development process that began in 1972, when the Army issued a requirement for the advanced attack helicopter (AAH). This requirement, however, did not emerge suddenly. It evolved from the remnants of the Army's earlier, abortive attempt during the Vietnam War to acquire a high-speed, heavily armed helicopter gunship—the Lockheed AH-56 Cheyenne—to provide fire support for ground combat units and protect rotary-wing aircraft transporting infantry, weapons, and supplies to forward battle areas.

Rather than award separate contracts for research and development (R&D) and production to structure the Cheyenne program, as it had done for other weapons programs in the past, the Army used a new contracting mechanism called total package procurement (TPP). Secretary of Defense Robert McNamara had adopted total package procurement from the Air Force in the mid-1960s to prevent weapons makers from underestimating the costs of R&D to obtain noncompetitive, sole-source production contracts that set prices sufficiently high to guarantee returns in excess of any losses incurred during development. Although it looked good on paper and satisfied McNamara's predilection for more centralized control of military planning and weapons acquisition in the Office of the Secretary of Defense (OSD), total package procurement lacked the flexibility to accommodate the technological risks built into the Cheyenne's design and the concomitant costs and schedule delays necessary to eliminate them as the program evolved. Frustrated by cost growth at Lockheed and the firm's failure to abide by the requirements of the TPP contract, the Army canceled production of the Cheyenne in 1969, one year after McNamara had left the Department of Defense. The demise of the Cheyenne and other similarly structured weapons programs prompted President Richard Nixon's new secretary of defense, Melvin Laird, and his deputy—business executive David Packard—to dismantle total package procurement in favor of a decentralized acquisition process that mandated a return to separately negotiated contracts for R&D and production and also shifted more programmatic control of weapons procurement from OSD back to the military departments.

This study will examine the evolution of the Apache helicopter from two different but related perspectives: reform of the weapons acquisition process by the Office of the Secretary of Defense between 1969 and 1971 to avoid the problems that beset the development of the Cheyenne and other similarly structured TPP programs; and, given this restructuring, the ongoing challenges that the Army still faced throughout the 1970s and early 1980s to control costs and maintain development and production schedules while pushing the technological state-of-the-art in the Apache program. Initially, the Army expected the Apache to be a less technologically ambitious and cheaper alternative to the Cheyenne, in part to reduce the likelihood of another programmatic failure and also to accommodate the impending cancelation of the original armed escort and fire-suppression requirement (known as air assault) as doctrinal planning began to shift from counterinsurgency warfare in Vietnam to mechanized combat against concentrated Soviet armor in central Europe. Because the military departments executed the policies established by the Office of the Secretary of Defense, the Army controlled the extent to which OSD-initiated acquisition reforms structured weapons programs. As the Apache program evolved, costs escalated and schedules slipped because of required design modifications and the Army's decision to add more advanced weapons and avionics systems to the helicopter airframe. Congressional hostility to the Apache's rising cost, however, forced the Army leadership to restructure the program and reduce the total number of helicopters...