Boeing's Integrated Defense Systems Restructuring: Significant and Preventable Cost Impacts to Army Aviation Programs

Abstract : The Boeing Company's 2002 corporate restructuring, creating today's Integrated Defense Systems (IDS), added tens of millions of dollars to current Army aviation program costs. The new IDS accounting structure enabled the company to shift expenses from inefficient to efficient programs. At the Boeing Philadelphia and Boeing Mesa facilities, where the Army's CH-47F/G (Chinook) and AH-64A/D (Apache Longbow) are built and remanufactured, the additional costs will possibly exceed $68M and $71M, respectively, over a six year period (CYs '03-'08). Within an environment where defense contractors wield increasing power, it is imperative that the Army/DoD exercise due diligence and leverage when required, to ensure the cost protection of Service programs. There are tools available to assist the Services in this undertaking, one such formidable alternative being the proactive application and enforcement of cost accounting standards. Applied appropriately, these flexible standards enable contractor agility while protecting Government interests.