US Army seeks to avert cost rise on Lockheed plane

WASHINGTON, Oct 3 (Reuters) - U.S. Army Secretary Francis Harvey on Monday said he was working hard to avert increased costs associated with a spy plane program being overseen by Lockheed Martin Corp.but described the restructuring of the program as "ugly."

In mid-September, the Army gave Lockheed two months to resolve issues in its $870 million part of the program to build the new spy plane after concluding that Embraer SA's ERJ-145 regional jet, that Lockheed planned to use as a platform, was too small to carry all the equipment needed.

Edward Bair, the Army executive overseeing the program last month said the need to shift to a larger aircraft could add $600 million to the design and development phase of the program, which is valued at around $1.2 billion.

"I have not accepted that yet," Harvey said of that cost estimate, saying the review process was still underway. "It's ugly, but it's a work in process," Harvey told reporters at the Association of the U.S. Army convention.

Harvey said he had asked Army and Navy program officials to carefully re-examine military requirements for the Aerial Common Sensor program to ensure that all the electronics and radars being put aboard the aircraft were truly necessary.

At the same time, Harvey, a former corporate executive, said he was confident Lockheed would put its best engineers to work to help lower the weight of the electronic payloads.

The Army will issue a decision on the contract 30 days after it receives Lockheed's submission.

Lockheed has evaluated a larger Embraer, the ERJ-190, the Gulfstream 550, built by General Dynamics Corp. , and the Boeing Co. 737 as possible alternatives.

Northrop Grumman Corp., which lost the common sensor contract to Lockheed last year, has urged the Army to terminate Lockheed contract and launch a fresh competition.