Congress attempts to clap a stopper over the ballooning acquisition costs of the F-35 Joint Strike Fighter:
Future Pentagon purchases of the F-35 Joint Strike Fighter from Lockheed Martin will have to be based on fixed-price contracts under a defense authorization measure approved on Monday by a joint congressional panel.
The provision, part of the National Defense Authorization Act, would require fixed-price contracts beginning with the sixth low-rate production batch of fighters from Lockheed Martin Corp .
The Pentagon is currently trying to finalize a contract for 30 fighters – its fifth lot of aircraft being produced even as final testing of the radar-evading jet fighter continues.
The Pentagon entered into an initial contract with Lockheed on Friday for production of Lot 5 aircraft. The agreement established an initial price ceiling of $4 billion for the planes, but a final contract will not be concluded until sometime in 2012.
Lawmakers inserted the fixed-price language into the bill after learning about Lot 5 contract, angered that the decision had been taken even as the Senate was debating whether or not to require the deal to be a fixed-cost contract.
The advantage to the taxpayer of a firm fixed price contract vehicle is that all of the risk is shouldered by the vendor. It’s generally suitable for commercial off-the-shelf equipment with casual value added, but for bleeding edge technologies, that risk can become unbearable. Should the vendor find a way to reduce per unit cost of manufacture, whether through efficiencies in time or by cycles of learning, the “extra” cash goes straight to the corporate vault and thence to stockholders.
On the other hand, a “cost plus fixed fee” contract places the risk on the government, as the vendor may – within the constraints of the total contract value – charge for whatever additional labor, manufacturing and non-recurring engineering work is required, while being guaranteed a profit.
If the F-35 is as mature as its proponents profess, this could be a good deal for Lockheed Martin. If it’s not, well: It’ll be a dog’s breakfast.
I think the parties involved also need to pay very close attention to the terms concerning cancellation of any contracts for the F-35s. Given the likely blitzkrieg on defense spending, huge costs like the F-35 will inevitably be targets.
After all, gotta keep up the “stimulus” investments and welfare payments as long as China will loan us the money.
1 F-35 ($135M) = 2.5 F/A-18E/F ($55M)
Long overdue, IMO. We saw with the F-22 what can happen with cost-plus: LockMart works out the various airframe problems at their leisure, while taxpayers pick up their tab plus a guaranteed profit. If LM can’t quote a fixed price for the F-35 by this point in the program, it’s time to pull the plug.
If you want to give a Contracting Officer the shakes, sneak up behind them and say “change order”.
I’ve always liked this photograph, to illustrate your point.
Love it.
That is hilarious because it is true.
Great photo. So true! This gets forwarded to some COTRs I know.
Fuster, meet Cluck.
Breakfast not fit for a dog.
A critical design review in 2007 certified the F-35C as good to go with all kinds of glowing statements.
This month, we find out that the tailhook is located in the wrong place on the aircraft. It has failed all of its rolling hook tests.
No trap for this dog.
I’m waiting for F-35 to be taken out back and shot.
The only question now is how many we actually build so that the fools in Congress that authorized this abomination can claim that, despite its flaws, the plane was a “success”? That’s pretty much the road taken with the F-111. “Yeah, it had problems, but hey, we actually built some, right? That makes it a success, right?”.
Meanwhile, I hope Boeing keeps the Super Bug improvements coming. Whatever the Super’s faults, it’s useful and we can actually afford them, and are probably going to have to buy more of them. Didn’t GE claim than an even more powerful, improved version of the F414 is on the way?
How the Congress Critters get rich..
http://www.opensecrets.org/news/2011/12/buying-the-joint-strike-fighter-caucus.html
LRIP 5 on FFP? Fair enough. But guess who’s gonna pay for changes resulting from any of the half-dozen risk areas recently identified by USD(AT&L)?
“Oh, you wanted an intake system that doesn’t crack?”
TC
problem with fixed price is that ballooning requirements (which of course aren’t fixed) cause the contractor to lose major money.
We see it a lot in our business, customer demands fixed price but refuses fixed features and requirements, saddling us with the cost of them demanding ever more before they’re finally satisfied (if ever).
Buffet over a larger range than other aircraft is one thing. Well, even if wing fences or other appliances may kill its L.O. quality.
Buffet when you NEED the helmet to display critical combat flight info cueing is a large issue.