DoD Buzz l Boeing may wind up with no profit on KC-46A

November 29, 2011 § Leave a comment

Bloomberg’s Tony Capaccio delivers good news and bad news for Boeing’s new KC-46A tanker program.

First, the good news: According to the latest information from DoD and Big B, development is “progressing well with no significant technical issues,” as of Sunday, with everything more or less on track.

Now, the bad news: Boeing’s cost estimates for this program have gone up again, and there’s a chance, Capaccio writes, that Boeing could hit its head on the cost ceiling it negotiated with the feds as part of its fixed-price deal. Here’s how it broke down:

The program manager’s most likely estimated price at completion is $5.3 billion and the contractor’s most likely is $5.1 billion,’’ according to the document obtained by Bloomberg News. “The government’s estimate is higher than the contractor’s due to the inclusion of schedule risk associated with the remainder of development,’’ it said. “The government’s liability is limited to $4.8 billion.’’

Program manager Brig. Gen. Christopher Bogdan said of Boeing in July that “if they get to $4.9 billion, they get zero profit.’’

Pentagon officials have insisted there’s no way for Boeing to wriggle out of this arrangement and bill the taxpayers for one dime above the cost ceiling, but stranger things have happened. Just the history of the tanker saga itself — so tawdry and convoluted it would embarrass the screenwriter of a Lifetime Original Movie — suggests that there are many more twists and turns in the road ahead.

By Philip Ewing
November 28th, 2011

DoD Buzz l Boeing may wind up with no profit on KC-46A

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