The $2.04 Billion Mystery of JCA

DOD’s contract announcement for the Joint Cargo Aircraft says that the L-3 Communications team will be paid an “estimated” $2.04 billion to deliver “up to” 78 C-27Js.

That is not very clear, nor very accurate, and the facts that I discovered yesterday raise some serious questions about the US Air Force’s real level of interest in the JCA program.

Let me explain.

First, when I saw that $2.04 billion number, it seemed too low to me. Sure enough, when I divided $2.04 billion by 78 aircraft, the number was too low. According to my calculator, that’s $26 million per aircraft, including contractor logistics support. The C-27J sticker price starts at $32 million per aircraft, which is the purchase price quoted to recent customer Bulgaria.

When I asked Giuseppe Giordo, CEO of Alenia North America about this, he agreed that $2.04 billion is too low to buy 78 C-27Js (and, as the manufacturer of the aircraft, he should know). Giordo told me he believes the contract award pays for 54 aircraft, which is the amount quoted in the army’s original request for proposals for the fiscal years 2007 to 2011. My calculator says the purchase price rises to $35 million with 54 aircraft, which is in fact a rational number.

But here’s where it starts getting more complicated.
The reference to 78 aircraft in the contract award is supposed to include 24 aircraft for the air force and 54 aircraft for the army. So the $2.04 billion figure for 54 aircraft may represent an Army-only amount. I don’t have this confirmed quite yet, but it appears that no air force aircraft are included in the amount cited in the actual contract award.

I hope everybody’s still following me here.

I next checked with L-3 Communications, which is the prime contractor for the C-27J team. They checked with the contracting officer, who then confirmed that the $2.04 billion was actually for 55 aircraft. Indeed, 55 aircraft was the number in the army’s original acquisition plan through FY11, but the US Congress last year cut that amount by one, leaving the 54 aircraft figure.

I have always seriously questioned the air force’s real commitment to the JCA program. My skepticism will increase if it is confirmed that the air force has committed no funds to buy aircraft in the actual contract award, whatever they say they intend to buy. The air force is still conducting an analysis of its airlift fleet requirements, with the results scheduled to be ready by December 2007. It is then, I believe, that we will find out the measure of the air force’s true commitment to the program.

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