SR. DEFENSE OFFICIAL: (In progress from source) -- pleased to be here. Actually, I really am. Today, the MRAP Joint Program Office is placing orders for 2,400 additional MRAP vehicles through our existing contracts. The Defense Department has already ordered roughly 6,400 MRAPs. This will increase our vehicles on order to 8,800. This next step is made possible through a lot of work by Secretary Gates and Secretary England working closely with the Congress, and the Congress taking the remarkable step of providing $5.2 billion in the continuing resolution for this very important program. 

 

            The orders are being placed with three vendors. Category II MRAPs are the larger variants, typically six-wheeled vehicles carrying two crew and eight passengers. We will order additional Category II MRAPs from Force Protection Industries, FPI, and British Aerospace, BAE. Category I MRAPs are typically four-wheeled vehicles carrying two crew and four passengers. We will order additional Category I MRAPs from International Military Group and FPI. Again, we are presently ordering these types of vehicles from these vendors. These are additional orders. Indeed, the BAE Category II vehicle was also recently selected through a mini MRAP competition as the preferred design for 400 ambulance versions or variants which the department is now purchasing.

 

            As we go forward, we are seeking to constantly improve the survivability of the MRAP design. Some of the explosively formed projectile or EFP armor enhancement concepts require significant excess payload capacity of the MRAP, though none of the current designs have as much payload capacity as the Defense Department would prefer. The BAE and FPI Category II vehicles provide the largest payload capacity in this class, the Category II class. Similarly, the IMG and FPI Category I MRAPs provide significant excess payload capacity for these armor enhancement concepts.

 

            Further, two of these vendors are currently producing at high and growing rates of production. Indeed, the vendors have delivered some vehicles ahead of schedule. Consistent with the department's goal of building and delivering MRAP vehicles as fast as possible, it makes sense to concentrate our efforts on fewer, more capable vehicle variants. This approach provides several benefits.

 

            First, the MRAP production capacity has reached the point where these three vendors can potentially produce the designs at a total rate of 1,200 MRAPs per month. Even at this rate, the department will have to manage potential conflicts in the demand for hardened and ballistic steel between MRAPs and other programs such as Strykers, Bradleys and Frag Kit 6 armor enhancements. 

 

            Second, we hope to succeed in the challenge of producing 1,200 vehicles a month. We are still working towards that goal. Those vehicles then must get radios and other items installed at the Navy's Space and Naval Warfare or SPAWAR Charleston (S.C.) facility. To improve the chances of modifying 1,200 vehicles per month and then quickly moving them to theater, we must reduce the number of MRAP variants moving through the SPAWAR production line.

 

            Third, our current efforts are meeting the most urgent, initial requirement for roughly 8,000 MRAPs. However, we are building at least eight vehicle variants from five vendors. With unique Army and Marine Corps equipment installations, this means we are fielding as many as 16 different vehicle designs. Going forward, we need to reduce the burden for training, maintenance and spare parts on our deployed forces. We can now maintain production rates and shift to fewer variants in an effort to provide better support for fielded MRAPs and reduce the training, maintenance and logistics burden in theater.

 

            Finally, this approach will mean our inventory in the end state has the highest quantity of the most capable MRAP vehicles. I want to note the continuing and near-heroic work of Secretary Etter, General Brogan, the MRAP program manager Paul Mann and the MRAP Joint Program Office. They have done a tremendous job here. And equally importantly, our industry partners have stepped up to the challenge and are meeting their delivery plans to date.

 

            The MRAP program continues to face challenges. This is a highly unusual program. These orders obligate roughly $1.2 billion for 2,400 MRAPs, roughly two months of production. We will need the support of Congress for additional funds at the beginning of December in order to place additional orders to continue the production lines. At this time, we would expect to order roughly 6,500 MRAPs in December. This would bring our total orders to about 15,200, meeting the current stated requirement.

 

            The Defense Department continues to evaluate the MRAP requirement in light of the experiences and needs from commanders in Iraq and Afghanistan as relayed to us. But we will have the opportunity and the production lines in place to continue production if that is the requirement from the field.

 

            With that, I'll take questions.

 

            Yes.

 

            Q     Can you just clarify a few things? Fifteen thousand two hundred -- that number is the total number of MRAPs that will be produced?

 

            SR. DEFENSE OFFICIAL: I'm trying to use round numbers, but the current stated and endorsed by the Joint Requirements Oversight Council number is 15,274 vehicles.

 

            Q     Can you break down the dollar amount for each company, how much each contract is worth?

 

            SR. DEFENSE OFFICIAL: Actually, I think I can. 

 

            (Off mike commentary.)

 

            We can give them the announcement?

 

            (Off mike commentary.)

 

            The announcement has the dollars and the numbers and the exact company names. Please check that, because I may not have -- like it's BAE Systems Land and Armaments. And I didn't get the exact company names. If you would please correct that, that would be great.

 

            Q     How many in Category I? How many in Category II?

 

            SR. DEFENSE OFFICIAL: I don't think this press release breaks it out, and that's the best way to let you get it if that's okay.

 

            Q     Do you know how many are in which category?

 

            SR. DEFENSE OFFICIAL: Well, IMG is being asked -- we're ordering 1,000 Category I vehicles from IMG. We are ordering 399 Category II vehicles from BAE and 112 of the MRAP Category II ambulance variants. So doing math on the fly does not work for me, so I'll just tell you what it says -- 553 Category I FPI MRAPs, and 247 Category II FPI MRAPs.

 

            Q     And this is all on that release? 

 

            (Cross talk.)

 

            Sir, you said earlier that there were 16 different variants, and you said that could be a problem. Are you working to drop that number of variants?

 

            SR. DEFENSE OFFICIAL: I promise to come back to you.

 

            Why are you shaking your head?

 

            Q     Because those numbers don't add up to anywhere near 6,400 do they?

 

            SR. DEFENSE OFFICIAL: No, because there's 2,400. We ordered 2,400 today. We already have 6,400 on order. That brings our total to 8,800. I'm sorry.

 

            Q     That's all right, sir. You've got 16 different variants, and you're saying that that could cause problems in the future.

 

            SR. DEFENSE OFFICIAL: (Inaudible.)

 

            Q     All right. Are you working to bring that number down?

 

            SR. DEFENSE OFFICIAL: Well, obviously, by placing these orders, we will make a dramatic step in these vehicles. And to give you an example, the FPI vehicles have been in production for some time, and they are coming up the ramp pretty well. SPAWAR has had some success in processing those vehicles very quickly -- you know, seven to 10 day kind of timelines. Other vehicles are newly coming in to SPAWAR. It takes time to design the package to install either the Army package or the Marine Corps package, proof that, do some initial tests and then set that as a process. So other vehicles have taken longer periods of time to get through SPAWAR. We want to consolidate -- well, first and foremost, we're going to buy the most capable vehicles. And the fact that particularly the Category II vehicles have the largest excess payload capacity, that serves us well for the long term. Making that choice to give vehicles a payload capacity and limit it to those two types will let us then let SPAWAR focus on processing two types of vehicles through the facility. And in general, the Army -- I mean, this isn't -- the Army would like to have, for example, particularly some of the IMG Category I vehicles. The Marine Corps has bought the FPI Category I and II vehicles. But I want to be clear with you, that's not what's happening. Right now, there is a joint allocation board, and it is allocating the vehicles that are produced to the most important areas in theater irrespective of service. So you know, in some cases, a vehicle that might have been intended to the Army is going to the Marine Corps or a Marine Corps is going to the Army. They're going where the theater says we face a threat and we want the vehicles.

 

            Q     You mentioned increased payload and increased EFP type armor protection and it brought MRAP II to mind. So I wondered where this stands in relation to MRAP II. Is that a separate procurement line, or is this kind related?

 

            SR. DEFENSE OFFICIAL: It's really a separate issue at this time. There are two things going on that are separate from this order process. The MRAP II competition which you're clearly aware of where we've gotten the proposals and we expect to get vehicles and get them in test, and then we've also allowed these existing vehicle vendors to propose changes to their vehicles that would try to bring them up to the MRAP II standard. And indeed, as we've put the vehicles we're buying today through additional developmental testing, we've found these vehicles have great capability and with some modest changes can get closer to that MRAP II standard or, more importantly, can be vehicles that provide us better protection. But there's a decision down the road as to whether we would shift and buy MRAP IIs. We will clearly make the decision, I think, if we can to cut in some of these change proposals. And again, consistent with what I said in the beginning, make the vehicles we are now ordering and then the ones we will order in December the most capable possible vehicles by cutting in change proposals that help their survivability.

 

            Q     You had talked about cutting down the number of variants going through SPAWAR. Has the program decided on two or three variants that it's now going to concentrate on; for example, the Cougar, the MaxPro and, say, the RG-33?

 

            SR. DEFENSE OFFICIAL: Well, that's what I told you today. We are, certainly with these orders, concentrating on the very vehicles I think you outlined -- the BAE Category II vehicle which is an RG-33, the FPI Category I and Category II vehicles which are Cougar derived and then the IMG or MaxPro Category I vehicle.

 

            Q     Is this going to be a continuing trend where you see that the future 6,500 that you're going to order, is it fair to say they will be distributed among RG-33s, Cougars and the MaxPro?

 

            SR. DEFENSE OFFICIAL: Well, we'll make that decision when we place that order. What will factor into that decision -- testing, theater feedback and a lot of different factors.

 

            Q     And I just didn't quite understand when you said you will be asking for more money in December for an additional 6,500. What is it that -- are you saying that that money's coming from another request?

 

            SR. DEFENSE OFFICIAL: Right. I believe that the department has drafted and is working with the White House to formally request the funds necessary to order those additional vehicles. And it should go over in the form of a budget amendment, you know. But the White House will make all those decisions in the final form.

 

            Q     And the 2,400, do you know when they are expected to arrive in Iraq?

 

            SR. DEFENSE OFFICIAL: I can't tell you that.

 

            Q     (Inaudible) -- decision, would that allow you to continue the production beyond May?

 

            SR. DEFENSE OFFICIAL: The orders we're placing today we expect, if we make the program plan -- and we have a lot who were cut out for us. People have done a tremendous job to this point. We produced 309 vehicles in September, and that was 34 vehicles ahead of the schedule for that month. And against the plan since February, we're four vehicles ahead of schedule. So we were behind in some months. We've now caught up, and we're on and really slightly ahead of the schedule. But the big months lie ahead of us. We have to produce 419 vehicles in October -- let me use round numbers -- just over 400 vehicles in October, almost 1,000 vehicles in November and 1,200 vehicles in December. That's a challenge that we've got to accomplish. If we meet that challenge then, to answer your question, these orders will deliver a few in February and the bulk of them in March and April. So that does get us to May. And that's why, given the roughly six-month lead time, we must order vehicles the first of December so that production lines can continue to march and deliver vehicles in May and out. 

 

            If we order that 6,500 vehicles in May, they should deliver out, and we should have that 15,200-plus number of vehicles by early October, have them delivered from the vendors to at least SPAWAR Charleston for outfitting.

 

            (Off mike commentary.)

 

            Of next year -- October of '08 -- sorry, 2008.

 

            Q     You had mentioned about 300 vehicles were produced in September of which 101 were flown to Iraq. Do you have estimates on --

 

            SR. DEFENSE OFFICIAL: I didn't say that.

 

            Q     I know you didn't say that. That's been previously reported. Geoff Morrell actually said that yesterday.

           

            SR. DEFENSE OFFICIAL: Okay.

 

            Q     So that's out there. Do you have estimates for October, November and December of how many you anticipate shipping to Iraq for those months?

 

            SR. DEFENSE OFFICIAL: Our current plan, which I reserve the right to adjust the plans to optimize things, is to fly vehicles to theater, to get them there as fast as possible, consistent with Secretary Gates' goal and my orders from him. And we will do that up to the capacity of airlift we have, which is roughly 360 vehicles a month. 

 

            Q     However, contracts have been awarded to do that. We've got two long-term contracts with the two Russian freight carriers. Poland Air and -- (inaudible) -- have yet to be awarded.

 

            SR. DEFENSE OFFICIAL: Right. I said our plan is to put in place the air capacity. We're using C-5s, C-17s. And then we will possibly contract for air. But TRANSCOM -- I can assure you I've talked to General Schwartz several times. He's making these decisions and plans. He understands the priority the secretary places on this program. And so we intend to -- until we get to 360 vehicles a month, they will go by air, and the intent under the current plan is that will continue. So roughly mid November, if we produce over 400 vehicles in October, allotting some time to outfit those vehicles at Charleston, in mid November we should broach this 360 number and start loading vehicles for sea lift into theater. And there's still a couple of different options being worked through, but we will send, you know, the production capacity above 360 a month. And certainly, if we make 1,200, it will get to that number by surface lift. And then we will transport them. The current plan is to transport the vehicles from port by airlift to the point where they can be de-processed, if you will, and put to use in the theater.

 

            Q     Not to belabor the point, what TRANSCOM says is they can fly 360 a month if they have 360 a month. They say what's happening is so many are transitioning through SPAWAR that they don't have those numbers to fly. How are you going to cut down on the time it takes them to transition through SPAWAR so you have that number to fly?

 

            SR. DEFENSE OFFICIAL: That's a great question, and that's what I told you we're working through. The FPI vehicles, we're having some success in processing through SPAWAR in as few as seven to 10 days. Some of the other vehicles are new variants. We've got to get down the learning curve and process them through more quickly, and we'll do that. We're going through the growing pains, but there are two or three things that are happening in that regard. We've built a tracking tool that tries to let SPAWAR, the program office and TRANSCOM see when vehicles come in the door and immediately assign a prediction to when they will be done and ready for shipment. And that lets TRANSCOM plan for vehicle delivery. 

 

            The other thing is we're moving the program office -- Paul Mann and the team are doing a good job. We're trying to move from monthly delivery estimates to weekly delivery estimates and folk those into the contractual requirements, because we've had a problem with vendors -- and I don't even want to say it's a problem. Again, the great news is we are ramping up to rate fairly quickly. But in meeting that rate, in most months they delivered some of their vehicles at the very end of the month to make the quota. So we are moving to weekly quotas to help smooth the flow of vehicles. That helps level the workload at SPAWAR, and then that helps TRANSCOM do efficient planning, exactly to your question.

 

            Q     And my final question. Thank you for taking all this time. Is the goal still 1,500 by the end of the year?

 

            SR. DEFENSE OFFICIAL: I think we -- I don't want to say that is a goal. I want to say what I believe the secretary said today is we expect to have 1,500, and we hope to have more than that. We're going to do everything we can to get as many vehicles in theater as fast as we can.

 

            Q     (Inaudible.)

 

            SR. DEFENSE OFFICIAL: Last time I gave you all an estimate on the fly, and it was wrong. And this is almost certainly what you should never do. Please don't quote the number I said on stage anymore. It was a bad estimate. I never should have done it. I made it on the fly on the stage. We can prepare an estimate, but it's very important to understand I have only built 309 vehicles in September. I've got to prove we're going to build 1,200 vehicles in December and roughly 1,000 in November. And if I do that, then I've got to try to get them there as fast and efficiently as I can. And so I don't want to create any false impressions.

 

            But I do want to tell you everybody's working as hard as they can. They understand, from Secretary Gates down, he wants every vehicle that can be built, outfitted and shipped to theater there as fast as possible. And I think we will make 1,500. I think we will exceed 1,500. But you know, since that's become a sensational press story, I don't want to quote a number anymore.

 

            Q     Up until now, you've had five companies building MRAPs. You just named four right now that will get additional contracts, and I'm blanking on the name of the fifth that's been doing up until that. Does that mean you're going down to four?

 

            SR. DEFENSE OFFICIAL: We're moving to three vendors. So two companies will not be getting orders today. But frankly, these two companies are involved in different ways in the production. We have existing orders with General Dynamics Land Systems for RG-31 vehicles. We won't order more from them, but General Dynamics has partnered with Force Protection Industries on the construction of those Cougar vehicles. We had ordered Armor Holding vehicles called Caimans, and we will continue to build those under the existing orders. Armor Holdings is paired with -- I believe British BAE has acquired Armor Holdings. I don't know the state of that acquisition, so I'd have to check. And indeed, BAE is building some of the RG-33s through Armor Holdings' facilities now modest numbers. I expect that when we don't order additional Armor Holdings vehicles, BAE will probably use that capacity to help build the RG-33s that we are ordering. But that's just something the company will have to decide.

 

            Q     When you get the 1,500, what is the total dollar amount going to be for the contract?

 

            SR. DEFENSE OFFICIAL: I should probably -- it's roughly -- I wonder if I should do this. I don't know if I have a money chart with me. 

 

            (Off mike commentary.)

 

            Can we give you an answer for the record? I know about what the number is, but I'd rather give you a little better record number. You know, it's certainly -- the moves a little bit as services changes their mix and they change some of the outfitting. And then I've got to give you some caveats with the number, because the number generally includes the vehicles, the GFE, two years of support, spare parts, and now it includes the EFP enhancement kits that we're planning to add to the vehicles. [Sic: Total MRAP program cost (spent and known future requirements) is $24.5B. Note, this only estimates the sustainment cost in FY09 for 15,274 vehicles]

 

            Q     Did you mentioned an approximate amount when you were talking about what will be requested of Congress in December for the additional 6,500?

 

            SR. DEFENSE OFFICIAL: We are trying to manage the program, frankly, in partnership with the Congress. And the Congress was tremendously helpful. You know, the $5 billion that they provided was hugely helpful, and it's what we needed in October to continue the production lines. And the bulk of that money, as you heard, we're using $1.2 billion of that money to place the orders today. The bulk of that money is to finish the 6,400 vehicles, provide the spares and logistics costs for those vehicles and the transportation costs to move those vehicles to theater. So that's one of those unique features of this program. We're cash flowing where we can in order to constantly order the maximum number of vehicles. The cash flow need of the program and the bulk of that money I believe does go to order vehicles in November, but some of it will be for spares and logistics again. But we believe to continue every aspect of the program -- spares, logistics and then orders -- we need about $8.2 billion on or about December the 1st.

 

            Q     So at what point will you start beginning to consider expanding beyond the 15,000 you have --

 

            SR. DEFENSE OFFICIAL: That's dependent upon a bunch of different features. And the good news is as we reach a point where we have to make that decision, we'll have a lot of vehicles in theater, we'll have feedback on how those vehicles are performing, we'll understand more about how the theater mission is changing and evolving. I expect that -- so the first source will be the theater will articulate whether they want more vehicles, different vehicles. And they'll articulate that through the joint staff and the joint allocation board. And then I expect to hear from the joint staff if they plan to adjust that requirement. Right now, it's not obvious to me that requirement will be adjusted. I do believe we've met -- you know, the important point is the first joint staff requirement which emerged from theater was to get 8,000 vehicles urgently. We're well on our way to that. A significant portion of these additional vehicles, and we can probably get that for the record, are vehicles that go to the Navy, the Air Force and other entities. So we're starting to fill out both the theater requirements and then some service-specific requirements.

 

            Q     You mentioned -- EFP kits. Is that something that's going on old vehicles or, you know --

 

            SR. DEFENSE OFFICIAL: Our intention right now is to design EFP enhancements and install them on all the vehicles. So our planning and budget numbers will include that cost.

 

            Q     Is that like a new kind of armor solution?

 

            SR. DEFENSE OFFICIAL: Those things that relate to helping the threat I'm not going to talk about. Sorry about that.

 

            Q      Just to be clear, the 6,500 you want to order in December, those are on top of the 15,000?

 

            SR. DEFENSE OFFICIAL: That's on top of the 8,800 that we've -- so 6,400 on order now, 2,400 being ordered today to 8,800, and then 6,500 to be ordered in December, which will take us to 15,200.

 

            Q     (Inaudible.)

 

            SR. DEFENSE OFFICIAL: I should have said 6,400 -- 64(00), 6,500, because the requirement's 15,274. This is a program that shouldn't be managed by onesies.

 

            Q     Can you explain in layman's terms why it takes different times for different vehicles to get through SPAWAR; for example, seven to 10 (days) for the Cougar and longer for others?

 

            SR. DEFENSE OFFICIAL: Well, yeah. They've been getting Cougars for several months now. So the first Cougars took an amount of time. I can only talk about that in general terms. You get the first vehicles and then you have to make installations in those vehicles -- radios and other items. You have to take the vehicle out and then test it for radio frequency interference. You have to drive it some, make sure you haven't changed any of the driving and performance properties of it. And I believe they actually take them to the test range for those driving. And so there is some time. So it takes several, several days to do the first install -- well, prepare the paper for the install, do the install, take it out and test it, verify the install's right, come back and change the papers if you decide to change things and then set that as the process that you want to make every one of those vehicles go through. So every vehicle's gone through those growing pains. It's just that the ones where we've gotten in quantity are through those growing pains. 

 

            And the good news is SPAWAR is successfully demonstrating that it can process vehicles quickly, you know, if they have a mature package, they get a consistent vehicle that's production-ready, if you will, then out it will go. These other vehicles are just coming in. You know, the IMG contracts were only awarded, I don't recall, but a couple of months ago. And so the first vehicles came in I think in August.

 

            Let's see -- yeah, the first IMG vehicles came in August, so it's probably not a surprise here at mid October I'm telling you they've gone through their growing pains, and SPAWAR's starting to be able to process those vehicles faster. But one challenge we've got to get behind us is the number of variants we're putting through there and then the fact that we're still installing some unique Army and Marine Corps features on each vehicle. So it's almost like doing two different vehicles. We've (knocked ?) that down some. The Army and Marine Corps, to their credit, agreed on common turrets. And there are a few other things they agreed to be common. But we probably need to go back and look at that one more time to ease the burden on SPAWAR so they can consistently install.

 

            Q     And the average time then through SPAWAR is now 22 days?

 

            SR. DEFENSE OFFICIAL: Yeah, 22, 23 days. But you know, that's kind of a good -- it's a sampling of, you know, the recent set of vehicles. So within that mix, there are some that have taken longer, as you can guess, and then some that have taken shorter periods of time. But the goal is seven days.

 

            Q     For all vehicles?

 

            SR. DEFENSE OFFICIAL: At a mature state. And frankly, we need it to be about that rate of processing when we get to 1,200 vehicles a month trying to go through there. Otherwise, it will become bottlenecked. And very anxious about that. SPAWAR's done a lot of work. I think we're going to continue to look at helping them and making sure we have every possible option to process 1,200 vehicles, because I haven't met the secretary's goal if I can't get those vehicles processed and into theater.

 

            (Cross talk.)

 

            Q     (Inaudible) -- notification Congress regarding buying high hardened steel from foreign sources. Have you gotten any kind of response from Congress, or what's the status of that now?

 

            SR. DEFENSE OFFICIAL: Well, I believe that waiver was signed, because this is -- as I think I said in my statement, at 1,200 a month, we do expect to have manageable but some conflicts in the demand for high hardened steel and in ballistic steel. And so we've processed a waiver that lets us buy from essentially all the sources that globally can produce these qualities of steel, and we have to have that. Without those waivers and those procedures, we will struggle to deliver MRAPs. And we need to continue to work with the Congress on these issues. They are tough issues. We cannot hinder the war fighter over these kinds of provisions.

 

            Thank you.

 

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