A Change in US Defense Procurement?

Investment Analysis Clubs Macro Economic Trends and Risks
1

Usually the US government gives an open checkbook cost plus contract.

After taking a loss on the first lots of B-21 Raiders, Northrop Grumman has negotiated a higher cost ceiling on the next 19 aircraft, the company said in a June 18 release.

“Final terms, quantity, and pricing beyond the first 21 aircraft are subject to negotiation. The government and Northrop Grumman have established not to exceed pricing for an additional 19 aircraft. The average not to exceed value for the subsequent lots is above the average unit price of the five LRIP lots,” the company said.

Northrop has lost more than $1 billion on those first aircraft, which are part of five Low Rate Initial Production contracts whose fixed-price clause forces the company to eat cost overruns.

Northrop has skin in the game.

When Northrop bid on the B-21 program, the company lacked a mature design yet accepted a fixed-price production contract that has cost it $1.17 billion so far. That’s a mistake company officials won’t repeat, CEO Kathy Warden said in January.

But it suited Air Force negotiators, who will receive the first lots of stealthy bombers more cheaply than they expected.

At least in aircraft & naval ships there is never a mature design. Defense contractors promise the moon and hope to develop the needed technology on the fly.

“Final terms, quantity, and pricing beyond the first 21 aircraft are subject to negotiation.

So Northrup will make up the loss on subsequent sales.

After the stealth bomber took its first flight in November, the Pentagon gave Northrop a green light to start production of the B-21. Details about the stealthy aircraft remain scarce, but Air Force officials have said that flight testing is on track and “proceeding well.”

I hope so! The bulk of the USAF bomber fleet [B 52&B 1]is ancient.

2

Any bets that production ends with the initial 21? But the existence of the commitment to the additional 19, will result in Billions in cancellation costs, so Northrup will be just fine.

Steve

1 Like
3

Nah. The USAF does to freshen up its bomber fleet.

4

Well, maybe.

As miniaturized AI assisted tech accelerates into the Ukrainian War lots of cobwebs are coming loose. Bombers, especially manned (!!!) are becoming like the air craft carriers of the sky – useful for punishing primitives but stunningly ever more imperiled in case of a real hot war against a modern adversary.

d fb

3 Likes
5

That was what the B1 was supposed to do. But they only build a few, and the BUFF keeps flying. Then the B2 showed up. “stealth” they said. “ohhhh” went the mob. They only built a handful, and the BUFF keeps flying. I expect the same with the B-21: build a few, Government pays billions in “R&D” with next to nothing to show for it. And the BUFF keeps flying.

Steve

2 Likes
6

The BUFF is the perfect monster to dominate all but the big power players, and in our increasingly neo-colonial world that makes the BUFF practically perfect, at least for awhile longer.

d fb

1 Like
7

From what I have read, the BUFF is also a lot cheaper to operate than a B1 or B2.

Steve

1 Like
8

This and the F35 program are critical in the Pacific theater. Reports on problems are all sorts of things including disinformation.

Our arms won’t win the day as is. Basically both the US and China would blow up all the arms on each side pretty quickly.

We can not revert to nuclear war. Not if we want to live at all.

We need these weapon systems to deliver bombs at a distance to survive for future battle. The other aircraft can not compete.

9

In fiscal year 2018, the B-2 Spirit’s operating costs per aircraft worked out at just under $63 million, a figure that is also high due to the extra work required to maintain its low observability characteristics such as its stealth coating. Its counterparts in the bomber fleet, the close to 70-year old B-52 and the B-1B cost $25 and $23.7 million to operate per aircraft in 2018, respectively.

the B-52 could see service well into the 2040s. At that point, some of the older airframes could be approaching 90 years of age — likely to be the oldest aircraft in the history of the Air Force.

Amazing! But eventually metal fatigue must exact its toll.

According to Wikipedia the USAF still has 72 B 52s. 744 were made so I guess there are still spare in the USAF boneyard located at an Tucson AFB.

1 Like