A recent five-year, $3.4 billion multi-year contract for Boeing [BA] AH-64E Apache gunships not only saves the Army and Saudi Arabia money for each helicopter, but establishes a relatively swift onramp for additional allied armies to purchase the aircraft.
The contract, announced March 16, has a base value of $3.4 billion. That base contract includes 244 AH-64Es for the U.S. Army and a concurrent option for another 24 exercised by Saudi Arabia as part of the multi-year procurement agreement.
It is the first multi-year agreement for the most-sophisticated “Echo-model” Apache. Overall, the contract includes options for up to 450 Apaches for a total value of about $7 billion, Hoecherl said.
The remaining 182 aircraft options are up for grabs and both Boeing and the Army foresee foreign military sales (FMS) interest in at least five other nations that operate Apaches.
“We intend to see additional interest and growth as a result of this multi-year contract award and the contractual vehicle that is in place with those options that will allow for an expedited and more efficient process,” Boeing’s Attack Helicopters Vice President Kim Smith told reporters March 22 via a conference call at Boeing’s Arlington, Va., outpost.
Whereas a typical FMS contract award could take years to complete, Smith said having the multi-year agreement in place could result in additional FMS sales within months.
The Army’s Apache program of record is 690 E-model Apaches. So far, Boeing has delivered 181 AH-64Es to the Army since, which makes up five battalions. The contract commits the Army to buying a minimum of 244 AH-64Es over the next five years, or through fiscal 2021, Army Apache Project Manager Col. Joseph Hoecherl said.
Smith said the multi-year contract will grease the gears for future foreign military sales customers to upgrade legacy Apaches or purchase new E-model aircraft during the period of the contract. Smith and Hoecherl spoke to reporters via video conference from Mesa, Ariz.
The multi-year agreement “will allow expedited award for additional options by our U.S. Army customer or … other international customers,” she said.
“I am thrilled with the stability that it affords industry,” Smith said. “To have minimum quantities for five years … is phenomenal. As a business leader it gives me a chance to better plan my business, my hiring, my retention strategies, my investment strategies for additional cost-reduction efforts.”
The E-model provides a variety of enhancements over the legacy AH-64D, including composite main rotor blades, manned-unmanned teaming capabilities, improved targeting and night vision systems, greater speed and range and improved diagnostic and maintenance.
“This commitment provides stable funding, the ability for Boeing and our other prime contractors to plan and make financial commitments to countless suppliers across the period of the multi-year contract,” Hoecherl said. “This helps ensure stable employment and garners greater efficiencies.”
As a result of the multi-year commitment, the Army stands to save about 10 percent on the base contract and potentially more if either it or foreign military sales customers purchase more aircraft, he said. Initially that savings work out to $330 million.