Raytheon [RTN] is urging the National Research Council (NRC) to correct a report where a math error on the long-term costs of the Army’s Patriot Weapon System the company believes is overstated by “a factor of 15.”
The well-circulated Sept. 11 NRC draft report on ballistic missile defenses drew headlines because of huge support costs for the Patriot PAC 3/MSE system based on what the company called faulty math. If it cost hundreds of millions to keep Patriot fielded, then many wanted to know why the follow-on Medium Extended Air Defense System (MEADS) program, the U.S., German and Italian effort, was terminated.
Yesterday, one of those shocked by the sticker price, Loren Thompson at the Lexington Institute, withdrew his Sept. 24 blog with an apology: “In retrospect, I shouldn’t just have been shocked by the high cost estimate in the research council’s report–I should have realized it was wrong.”
Patriot prime contractor Raytheon reviewed the NRC’s math, pointing out that on page E-58 in the preliminary draft report the NRC projected that the 20-year costs “for operating and maintaining one fully configured Army Patriot battalion” are “between $14.7 and $16.2 billion.”
Based on this assumption, the NRC estimates that the per-year operation and sustainment (O&S) costs for a single Patriot battalion will be between $735 million and $809 million.
“But the NRC’s 20-year, $14.7-16.2 billion cost figure is actually an estimate for the entire Patriot force of 15 battalions–not for one individual battalion,” the company said.
Additionally, the Army’s Lower Tier Project Office (LPTO) reviewed the estimates in the NRC draft report, and in an information paper said it determined the “full force O&S cost estimate was inappropriately used as a per battalion cost estimate thus grossly overestimating the true annual Patriot system O&S requirement.”
The inappropriate use of a full force cost to represent a single battalion meant the annual O&S requirement was “orders of magnitude” greater than the data supported, the LPTO paper said. “This erroneous calculation of Patriot O&S requirements is now being used to support acquisition of other weapon systems,” the information paper stated, pointing to Thompson’s Early Warning Blog as using incorrect calculations.
The NRC itself clearly states on page E-57 that the total estimate from Fiscal Year 2010 forward is for the full force, not a single battalion: “The sustainment funding for operating and maintaining the entire force of PAC-3/MSE batteries over a 20 year service life.”
Therefore, the annual operation and sustainment costs for a single Patriot battalion are between $49 million and $54 million, the Raytheon statement said. The minimum figure of $14.7 billion spread over 15 battalions is $980 million. That $980 million divided over 20 years produces the $49 million annual figure. The maximum figure of $16.2 billion spread over 15 battalions is $1.08 billion. Dividing that $1.08 billion over 20 years is $54 million annually.
Raytheon said the preliminary NRC report on the Patriot system overstates a single battalion’s annual operations and sustainment costs by a factor of 15–$49 million to $54 million compared to $735 million to $809 million.
Meanwhile, the LTPO has developed an O&S Cost Savings Integrated Process Team “actively pursuing cost savings initiatives that will further decrease the Patriot O&S requirement and logistics footprint.” Those efforts include Radar Digital Processor Modernization, reducing 432 total hardware modules to12; the Modern Man Station, an upgrade replacing 221 obsolete parts in 41 assemblies, and the Recapitalization Program.
The LPTO expects those three efforts increase capability, reliability and continue to reduce overall life cycle costs.