There is a good chance the Defense Department will slash the total number of V-22 Osprey aircraft it plans to buy over the next several years, even though DOD's fiscal year 2007 budget request to Congress suggests otherwise.

When discussing the defense budget last week, Pentagon Comptroller Tina Jonas told reporters DOD is making “substantial investments” in the V-22 and other aviation programs. Some news reports have suggested the V-22 program fared well in the budget, noting funding would increase to $2.3 billion for 16 aircraft in FY-07 compared to $1.8 billion for 11 aircraft in FY-06. But the Navy's budget does not tell the whole story about where the Osprey program is headed.

As Inside the Navy first reported last December, the Pentagon cut $1.1 billion from the Navy Department's portion of the program during the FY-07 budget process. The cut was not announced publicly at the time because the budget had not yet been released. Marine Corps leaders became concerned the cut would force naval officials to curtail production plans in the coming years by 19 aircraft, as ITN reported.

But when Pentagon officials released DOD's budget request last week, there was no mention of reducing the number of Ospreys the department would buy. In fact, the aircraft procurement chart in the Navy's FY-07 budget book shows virtually no change in the planned V-22 production rate for the next several years.

“The program of record remains unchanged, with no reduction to the number of aircraft to be procured,” said Navy V-22 spokesman James Darcy.

Yet the $1.1 billion cut to the V-22 program is in the budget, according to defense officials. The rationale for the cut, ITN reported last year, was an unusual situation: the Office of the Secretary of Defense's Cost Analysis and Improvement Group (CAIG) had a cost estimate for the program that was about $1.1 billion less than the Navy's estimate. Typically, the CAIG is known for its higher, more conservative cost estimates. Pentagon acquisition chief Kenneth Krieg directed the Navy to use the lower CAIG estimate, cutting funding from the program.

“The direction out of that milestone was that the program be funded to the CAIG estimate,” Darcy said. “We are working together with the CAIG to bring program costs into alignment with their model.”

How can the Navy cut the program by $1.1 billion without reducing the quantity of V-22s it plans to buy? It turns out the precise implications of the funding cut remain unclear because the Navy Department has not yet negotiated a V-22 multiyear production contract with Bell Helicopter Textron and Boeing.

Through those negotiations, the government and industry could reach a firm, mutual understanding of how many V-22s the contractors will produce over several years for a given amount of money.

There is still concern in the Marine Corps that 17 to 22 Ospreys could be slashed from the program, depending on the outcome of the talks. But until the talks produce a production pact between the government and industry, DOD's official position is that no major changes have been made to the V-22 production plan.

In an interview with ITN last year, then-Navy acquisition executive John Young questioned the wisdom of awarding a V-22 multiyear contract to Bell-Boeing, arguing the contractors might not provide enough savings. Still, the program office is scheduled to commence talks on a multiyear deal with Bell-Boeing this summer.

The Osprey program plans to receive a multiyear proposal from the contractors in August, said Darcy. Officials plan to award the multiyear contract around the first quarter of calendar year 2007, for long-lead and economic-order-quantity investments to support the purchase of aircraft in lots 12 through 16, pending congressional authorization and appropriate notifications, he said.

Also this summer, the program will receive a proposal for lot 11, he said. The program expects to have this lot of Ospreys under contract by January 2007. This lot of aircraft would be delivered to the Navy in 2009, Darcy said.