Looks like the Schwartz is strong with the KC-46 program...
The US Air Force has negotiated an exceptionally good deal for itself on the new Boeing KC-46 tanker from all appearances. If everything goes according to plan, this could work out very well for the USAF.
Though the program is costing more than
the negotiated contract price of $4.4 billion, the USAF and the Department of
Defense leadership have taken steps to strictly limit the US tax-payer's
liability for cost overruns and delays.
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.
The contract also mandates that Boeing is responsible for not only fixing future production aircraft if there are problems discovered in testing, but it also has to retrofit planes it has already built free of charge. And the USAF has the option of varying production rates at almost no cost penalty.
Thus, unlike in other previous programs,
the risk is borne largely by the contractor.
Maj Gen Christopher Bogdan, the US Air Force KC-46 program manager, is saying that Boeing has to deliver--or the service will walk away. Only time will tell how this will all play out.
Read my new KC-46 feature here.
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