The Schwartz is strong with the USAF’s KC-46 program…

Looks like the Schwartz is strong withthe KC-46 program…

 The US Air Force has negotiated anexceptionally good deal for itself on the new Boeing KC-46 tanker from allappearances. If everything goes according to plan, this could work out verywell for the USAF.

 KC-46.jpgThough the program is costing more thanthe negotiated contract price of $4.4 billion, the USAF and the Department ofDefense leadership have taken steps to strictly limit the US tax-payer’sliability for cost overruns and delays.

 The USAF is only liable for $500million above the negotiated price tag–there is a firm contract ceiling of $4.9billion.  So even though current costestimates peg the development cost of the new tanker at $5.3 billion, anythingover the ceiling price is Boeing’s problem.

 The contract also mandates that Boeingis responsible for not only fixing future production aircraft if there areproblems discovered in testing, but it also has to retrofit planes it hasalready built free of charge. And the USAF has the option of varying productionrates 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 AirForce KC-46 program manager, is saying that Boeing has to deliver–or the servicewill walk away. Only time will tell how this will all play out.

 Read my new KC-46 feature here.

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