From all appearances, it seems that the US Air Force has negotiated an exceptionally good deal for itself on the new Boeing KC-46 tanker.
While the programme is costing more than the negotiated contract price of $4.4 billion, USAF and Department of Defense leaders have taken steps to limit the taxpayer liability for cost overruns and delays - which are both all too common in defence procurement.
The USAF is only liable for $500 million above the negotiated price tag - there is a firm contract ceiling of $4.9 billion. So even though current cost estimates peg the development cost of the new tanker at $5.3 billion, anything over the ceiling price is Boeing's problem.
Boeing is also responsible for not only fixing future production aircraft if problems emerge in testing, but also retrofitting aircraft already built, for free. And the USAF can vary production rates at almost no cost penalty. Risk is borne largely by the contractor.
While in many respects the KC-46 is a model programme, it is probably not something that could be replicated on a new developmental programme which advances the state of the art. The KC-46 is a derivative of an existing, mature, civilian design, and most of the risks are known. On a completely new programme for which new technologies would need to be developed, the risks are far too nebulous and the costs too great to be borne by any other entity than the US government.
The US Navy and the USAF have taken the first steps towards developing a new generation of fighters to replace the Boeing F/A-18E/F Super Hornet and Lockheed Martin F-22 Raptor. Such aircraft would require technological leaps in propulsion, airframe design, sensors and stealth technology that individual contractors do not have the wherewithal to develop at their own risk. Publicly traded defence contractors have a fiduciary duty to their shareholders, and cannot sign up to open-ended risks. Forcing contractors to do so would stifle innovation: private industry would be reluctant to place bets on promising but unproven technologies that may not provide guaranteed return on investment.
Only the US government has the resources and risk tolerance to develop and mature those game-changing technologies. But the DoD must place its technological bets more wisely rather than continually overreaching.
The DoD must allow advanced technologies to mature to a more reasonable level before incorporating such advances into a developmental aircraft, or it will be forever doomed to repeat past failures.
(This article first appeared as the main Comment article in 24 April issue of Flight International)