United States General Accounting Office

GAO Report to Congressional Committees

May 1997 ARMY ACQUISITION

Longbow Hellfire

Missile Procurement

Quantities Significantly

Overstated

GAO/NSIAD-97-93

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-276071 

May 14, 1997

Congressional Committees

In response to congressional concerns about the increasing cost of

weapon systems entering full-rate production, we initiated a review of the

Longbow Hellfire missile to assess its acquisition strategy and associated

costs. Specifically, our objectives were to determine if (1) the Army had

adequately justified the requirement and quantities of the missile and

(2) the missile had successfully demonstrated its requirements during

initial operational testing and evaluation (IOT&E). We conducted this

review under our basic legislative responsibilities and are addressing this

report to you because the matters discussed in it fall within your

committees’ jurisdiction.

Background Longbow Hellfire is an air-to-ground missile designed to be fired from a

modified AH-64D Apache helicopter. The Army plans to convert all of its

758 Apache helicopters so that they can carry a mix of Longbow Hellfire

and Hellfire II missiles. Both Longbow Hellfire and Hellfire II missiles are

complementary and can be employed singly or as a mixed load on the

Apache. Longbow Hellfire is to receive targeting information from a fire

control radar mounted on the modified Apache helicopters. However, only

227 of the 758 helicopters are expected to be equipped with the fire

control radar. Targeting information will be digitally transmitted from

these helicopters to those without the fire control radar.

The Army’s current acquisition strategy for the Longbow Hellfire missile is

contained in its December 1, 1994, Longbow Hellfire Cost-Reduction

Program plan. This strategy was developed in response to the Under

Secretary of Defense’s November 16, 1994, Acquisition Decision

Memorandum, which directed program cost-reduction efforts. The

strategy calls for a reduction in the length of the 13,311 Longbow Hellfire

missile procurement program from 10 to 8 years in an attempt to reduce

program costs by 25 percent or more. The Army plans to accelerate the

production schedule, increase production rates, award a multiyear

contract, and make numerous missile hardware and process

improvements. As a result of this strategy, the Army estimates it can

reduce unit costs from $234,000 to $169,000.

Since the Cost-Reduction Program plan was implemented, the Army

reduced the quantity of missiles from 13,311 to 12,722 based on

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B-276071 

across-the-board funding reductions. Program officials stated that the

Cost-Reduction Program plan will not be adversely affected by this

reduction. According to the Office of the Secretary of Defense, Program

Analysis and Evaluation (OSD PA&E) data, the annual full-production rates

will be around 1,900 a year instead of the originally planned 2,200.

The Longbow Hellfire missile is currently in its low-rate initial production

phase. The Army plans to award a full-rate production contract in

November 1997 and seek congressional approval for a multiyear contract

in fiscal year 1999. According to 10 U.S.C. 2306b, a military service can

award multiyear contracts for the purchase of weapon systems if certain

criteria are met. One criterion is that the minimum need for the weapon

system to be purchased is expected to remain substantially unchanged

during the contract period in terms of production rate, procurement rate,

and total quantities.

Results in Brief The Apache Longbow weapon system, which includes the Longbow

Hellfire missile, completed IOT&E in March 1995. The tests concluded that

the system was operationally effective and suitable. However, the Army’s

current Longbow Hellfire missile requirement of 12,722 may be overstated

by over 8,300 missiles. The Army made computational errors and a

questionable assumption in calculating missile requirements that resulted

in a potential overstatement of 7,145 missiles. In addition, test results

indicate that the missile quantity could be reduced by another 1,184

missiles. Moreover, significant cost reductions can be achieved with lower

missile quantities. While cost estimates for an 8,300 missile quantity

reduction are not yet available, OSD estimates that up to $500 million in

program cost savings can be achieved by reducing quantities by

approximately 4,000 units.

Table 1: Summary of Longbow Hellfire

Requirement Issues Number of

missiles

Current Army requirement 12,722

Less: computational errors and questionable assumption (7,145)

Less: test problems (1,184)

Alternative requirement 4,393

The Army’s method of computing the quantities contains three critical

errors. The Army used an outdated helicopter carrying capability of 

16 missiles instead of the current 12, double counted missiles when

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B-276071 

figuring the residual readiness portion of the requirement, and used an

unsubstantiated mix ratio between Longbow Hellfire and Hellfire II

missiles. Correcting these mistakes would potentially reduce the current

12,722 missile requirement for Longbow Hellfire missiles by 7,145 missiles.

In addition, the Army Material System Analysis Activity’s independent

evaluation of the Apache Longbow weapon system disclosed that the

Apache Longbow system’s weight needs to be reduced by almost 

600 pounds to achieve its vertical rate of climb specification. According to

Army data, the system’s current demonstrated capability is calculated

using 8 missiles instead of 12. If the Army lowers its missile carrying

capability to 8 to meet the Apache Longbow system weight limitation, this

would further reduce the missile requirement by 1,184.

Current Longbow

Missile Quantities Are

Significantly

Overstated

According to OSD PA&E and our calculations, the current Longbow Hellfire

missile procurement quantity of 12,722 missiles could be overstated by

7,145 missiles. Our work shows that the current Longbow Hellfire missile

requirement contained an outdated helicopter missile-carrying capability

and double counted missiles. In addition, the Army used an

unsubstantiated higher ratio of Longbow Hellfire to Hellfire II missiles

than previously used when determining the appropriate mix between these

complementary systems.

Department of Defense (DOD) instruction 4100.41 establishes the

capabilities based munitions requirement process as the method DOD and

the military departments are to use to compute requirements. According to

officials in the Office of the Deputy Chief of Staff for Operations and Plans,

the capabilities based munitions requirement process was used to

determine the requirement for both Longbow Hellfire and Hellfire II. The

Army then applied a ratio to the total combined requirement to determine

the appropriate number of each type missile.

According to data supplied by the Army, the combined requirement for

Hellfire II and Longbow Hellfire missiles for use on the AH-64D Apache as

of November 1996 was just over 19,700 missiles, excluding training and

testing requirements.1

 Our review of this data showed that the Army used

a helicopter carrying capability of 16 missiles instead of the current 12 and

double counted missiles when it calculated the residual readiness element

of the requirement. The residual readiness requirement is the munitions

1

The total Hellfire II missile requirement is greater than the Longbow missile requirement because in

addition to being launched from the Apache, it is also launched from Army Kiowa Warrior and Marine

Corps Cobra helicopters. The Army is to finish procuring Hellfire II missiles in fiscal year 1997.

Page 3 GAO/NSIAD-97-93 Army Acquisition
B-276071 

necessary to provide a combat capability beyond that required for the two

major regional contingencies. We determined that adjusting for these

corrections would reduce the combined total requirement for both

missiles to 11,153.

The Army representative who is responsible for developing munition

requirements confirmed that our adjustments were appropriate. He stated

that the Army’s current requirement was based on a helicopter carrying

capability of 16 missiles and that double counting did occur in the residual

readiness calculation. He explained that the double counting was caused

by the Army not applying the missiles designated as combat supply toward

its residual readiness calculation. Forty-three days of combat supply is

included in requirements to give operational flexibility during a conflict.

According to the residual readiness definition, these missiles should be

used to offset the residual readiness requirement. Failure to count the

supply missiles in the Army’s residual readiness calculation doubles this

quantity. He also stated that additional changes need to be made in how

residual readiness is calculated because expected aircraft attrition was not

factored in and it should be. He did not have the aircraft attrition numbers

available for us to calculate the impact this correction would have on the

requirement. However, he agreed this would further lower the recalculated

requirement of 11,153.

To determine the Longbow Hellfire and Hellfire II individual requirements,

the Army applied a ratio factor to the total requirement. The Army used a

three-to-one mix of Longbow Hellfire to Hellfire II missiles in determining

the appropriate requirement for each weapon. However, according to

agency officials, up until last year, the Army had used a one-to-one ratio to

calculate the requirement. Army and DOD representatives stated that there

is no support to justify either ratio and could offer no explanations for why

they changed the ratio. According to the Army officials, they used their

best judgment to determine the appropriate mix.

While there is no justification for either ratio, preliminary results from the

ongoing Deep Attack Weapons Mix study suggest that a one-to-one ratio

may be more appropriate than Army’s current three-to-one ratio. In

response to our 1995 report that raised questions concerning the number

of missiles required,2 DOD stated that the calculations were made prior to

the capabilities based munitions requirement process being included in the

Defense Planning Guidance and agreed to review the requirement in

2

Longbow Apache Helicopter: System Procurement Issues Need to Be Resolved (GAO/NSIAD-95-159,

Aug. 24, 1995).

Page 4 GAO/NSIAD-97-93 Army Acquisition
B-276071 

accordance with direction from the Secretary of Defense. Army officials

confirmed that the requirement is being reviewed. However, one study that

may change the requirements—the Deep Attack Weapons Mix study—is

not yet complete. Army and DOD representatives told us that preliminary

study results favor the use of the Hellfire II over the Longbow Hellfire.

These preliminary results suggest that the one-to-one ratio is more

appropriate than the three-to-one ratio. Applying the one-to-one ratio to

the recalculated combined requirement of 11,153 missiles for use on

Apache helicopters would result in a 5,577 Longbow Hellfire requirement

and a 5,577 Hellfire II requirement. Therefore, the current Longbow

Hellfire requirement of 12,722 could be reduced by 7,145 missiles.

In July 1996, OSD PA&E took an official position that the current Longbow

Hellfire missile requirement should not exceed 8,880 missiles. The

OSD PA&E official responsible for this analysis agreed with our calculation

of a combined Hellfire requirement of 11,153 missiles. The 8,880

recommended quantity would still give the Army the three-to-one mix it

desires using the newly recalculated total requirement. According to this

official, 8,880 Longbow Hellfire missiles are more than adequate for Army

needs. He stated that his office was not willing to take a position on the

mix ratio question since there was no support for either mix ratio figure.

He stated that OSD PA&E’s bottom line was to recommend a 30-percent cut

in the Longbow Hellfire missile program quantity.

Test Results and Army

Study Show Potential

Exists for Further

Quantity Reductions

Operational testing results and an Army study raise issues that should

further reduce the number of Longbow Hellfire missiles that need to be

bought. Although the Longbow Apache equipped with the fire control

radar successfully demonstrated its effectiveness and suitability in

operational testing, the tests raised serious concerns regarding the

effectiveness of Longbow Hellfire missiles on Apaches without the fire

control radar. Current Army plans call for each Apache company to

receive three fire control radar helicopters and five non-fire control radar

helicopters. The aircraft with radars are to locate and classify targets, then

digitally hand over some of the targets to the non-fire control radar

helicopters for engagement. According to the Director of Operational Test

and Evaluation’s October 1995 report, the handoff procedure had

significant problems during the test. Most of the crews in the radar aircraft

chose not to hand off targets because the one-at-a-time handoff process

was time-consuming and unreliable. Consequently, the non-fire control

helicopters did not expend their missiles. As a result, the report found a

Page 5 GAO/NSIAD-97-93 Army Acquisition
B-276071 

lethality difference between fire control and non-fire control radar

helicopters that was so great that the report recommended the Army

review its helicopter mix. These hand-off deficiencies raise questions

about the rationale for buying Longbow Hellfire missiles for use on

non-fire control radar helicopters.

The Army Material System Analysis Activity’s (AMSAA) independent

evaluation of the Longbow Apache helicopter weapon system revealed

that neither version of the airframe is meeting its vertical rate of climb

requirement. The report states that to meet this requirement, weight needs

to be reduced further. For example, AMSAA estimates that the Longbow

Apache without the fire-control radar would need to lose almost 

600 pounds to achieve its goals. In addition, the December 1995 Selected

Acquisition Report for the Longbow Apache system reported that the

system’s demonstrated capability was only eight missiles. If the Army has

to reduce requirements from 12 to 8 missiles to reduce weight, the

combined total Longbow Hellfire and Hellfire II missile requirement would

decline from the recalculated 11,153 missiles to 8,785. Using the

one-to-one ratio between the 2 missiles, the Longbow Hellfire missile

requirement would be lowered by an additional 1,184 missiles to 4,393; a

reduction of over 8,300 missiles from the existing 12,722 requirement.

Current Acquisition

Plans Overstate

Program Costs

OSD PA&E estimates that procuring its recommended reduced quantity of

8,880 missiles will generate possible program savings ranging from $100 to

$500 million (see table 1.1). The variability in savings results from using

different missile production rates. The most favorable cost-reduction

scenario assumes an annual multiyear production rate of 1,400 missiles,

only 500 fewer than currently planned. Although the average missile unit

cost would increase from $152,000 to $176,000, total program costs would

decrease from $2.1 billion to $1.6 billion, according to OSD PA&E’s estimates.

Page 6 GAO/NSIAD-97-93 Army Acquisition
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Table 2: Alternative Longbow Hellfire Program and Unit Cost Estimates

Total buy

Production

rate per year Buy period

Total cost

(billions of

then-year

dollars)

Savings

(millions of

then-year

dollars)

Unit cost

(thousands of

fiscal year

1997 dollars)

Current Army requirement of 12,722 1,900 Fiscal years

1996-2003

2.1 0 152

PA&E’s recommended quantity of 8,880 1,400 Fiscal years

1996-2003

1.6 500 176

PA&E’s recommended quantity of 8,880 700 Fiscal years

1996-2008

2.0 100 208

Source: Data provided by OSD PA&E.

The Longbow Program Office cost analyst stated he was unable to provide

a revised cost estimate for procuring 8,880 missiles or any significant

quantity revision. He stated that if the program quantity is reduced to 8,880

or below, the Cost-Reduction Program plan would have to be totally

revised and many of the agreements made with the contractor to reduce

costs would have to be renegotiated.

Recommendations We recommend that the Secretary of Defense direct the Secretary of the

Army to (1) reduce Longbow Hellfire missile procurement requirements to

reflect the current information on the number of missiles that the Apache

can carry, the correct residual readiness computational procedures, and

the appropriate Hellfire II to Longbow Hellfire mix ratio and (2) prepare a

new procurement strategy that reflects the reduced requirement and

recomputed expected cost.

Agency Comments In commenting on a draft of this report, DOD partially concurred and

acknowledged that we had highlighted significant issues regarding (1) how

the current Longbow Hellfire and Hellfire II requirements were

determined, (2) the Apache helicopter’s problem in achieving its vertical

rate of climb requirement, and (3) the time-consuming and unreliable

handoff process between radar and non-radar helicopters. Concerning our

recommendations, DOD commented that it would consider an updated

acquisition strategy for the Longbow Hellfire and the Hellfire II missiles

after the receipt and analysis of the results of the ongoing joint Deep

Attack/Weapons Mix study and the Quadrennial Defense Review Study.

DOD indicated that it does not expect to finalize its position on Hellfire

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B-276071 

missile quantities until the fiscal year 1999 budget submission. The DOD

response is included in appendix I.

Matters for

Congressional

Consideration

With the questions we have raised on the current Longbow Hellfire

requirement and the uncertain impact of the Weapons Mix study and the

Quadrennial Defense Review, every effort should be made to avoid

committing to the production of an excessive quantity of Longbow Hellfire

missiles. Congress may wish to consider limiting the fiscal year 1998

procurement quantities request to fiscal year 1997 production levels until

the Secretary of the Army recalculates the required quantities of Longbow

Hellfire and Hellfire II missiles and updates the acquisition strategy for

these missiles.

Scope and

Methodology

To determine if the Army had adequately justified its Longbow Hellfire

missile requirement and quantities, we reviewed the Army’s

Cost-Reduction Plan and the models used to determine the quantities of

missiles with officials in the Army’s Air to Ground Project Office, Redstone

Arsenal, Alabama. We also obtained information on the models and data

used by the Army Office of the Deputy Chief of Staff for Operations and

Plans, Washington, D. C., for calculating the quantities of missile. In

addition, we obtained models and data from the Office of the Secretary of

Defense, Program Analysis and Evaluation Office.

To determine if the Army had successfully demonstrated the Longbow

Hellfire missile’s requirements during IOT&E, we reviewed operational test

reports and Army studies. We discussed these documents with officials in

the Longbow Missile Program Office, the Longbow Radar Project Office in

St. Louis, Missouri, and with representatives from the Office of the

Director, Operational Test and Evaluation, Washington, D. C.

To determine if the missile was on schedule to achieve its planned cost

reduction, we reviewed the Army’s Cost Reduction Plan, current

estimates, and projected costs for reduced quantities with officials in the

Army’s Air to Ground Project Office, Redstone Arsenal, Alabama; the

Army’s Office of the Deputy Chief of Staff for Operations and Plans,

Washington, D. C.; and the Office of the Secretary of Defense, Program

Analysis and Evaluation Office.

We conducted our review from October 1996 to February 1997 in

accordance with generally accepted government auditing standards.

Page 8 GAO/NSIAD-97-93 Army Acquisition
B-276071 

We are sending copies of this report to the Secretaries of Defense and the

Army and the Director of the Office of Management and Budget. Copies

will also be made available to others upon request.

If you or your staff have questions concerning this report, please contact

me at (202) 512-4841. The major contributors to this report were Lee

Edwards, Laura Durland, and John Randall.

Louis J. Rodrigues

Director, Defense Acquisitions Issues

Page 9 GAO/NSIAD-97-93 Army Acquisition
B-276071 

List of Congressional Committees

The Honorable Strom Thurmond

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Ted Stevens

Chairman

The Honorable Daniel K. Inouye

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Floyd Spence

Chairman

The Honorable Ronald V. Dellums

Ranking Minority Member

Committee on National Security

House of Representatives

The Honorable C. W. Bill Young

Chairman

The Honorable John P. Murtha

Ranking Minority Member

Subcommittee on National Security

Committee on Appropriations

House of Representatives

Page 10 GAO/NSIAD-97-93 Army Acquisition
Page 11 GAO/NSIAD-97-93 Army Acquisition
Appendix I 

Comments From the Department of Defense

Page 12 GAO/NSIAD-97-93 Army Acquisition
Appendix I 

Comments From the Department of Defense

(707203) Page 13 GAO/NSIAD-97-93 Army Acquisition
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