Pentagon's Lord blames KC-46A's fixed-price contract structure for further programme issues

by Pat Host

The Pentagon’s top acquisition executive blames the Boeing KC-46A Pegasus aerial refuelling tanker’s fixed-price contract structure for the programme’s ongoing issues.

Senator Jeanne Shaheen of New Hampshire said during a 1 October hearing that Boeing cancelled a 2 October KC-46A delivery to the 157th Air Refueling Wing (ARW) in New Hampshire due to electrical problems with the aircraft. Ellen Lord, under secretary of defense for acquisition and sustainment (A&S), said in response that the root cause of the KC-46A’s problems is the contract type that was awarded to Boeing.

A KC-46A pictured on 24 January 2019. The Pentagon’s top acquisition executive blamed the KC-46A’s fixed-price contract structure for the programme’s ongoing issues. (Janes/Pat Host)

A KC-46A pictured on 24 January 2019. The Pentagon’s top acquisition executive blamed the KC-46A’s fixed-price contract structure for the programme’s ongoing issues. (Janes/Pat Host)

Lord said that one issue is the technical solution that was the aircraft’s original design, which is now being redesigned. The programme, she said, also has a myriad of manufacturing issues including ongoing foreign object debris (FOD) problems. The programme, Lord said, has an engineering design and execution issue as well as a manufacturing problem.

Boeing’s fixed-price contract structure, previously lauded as an example of improved government contracting, means the company pays the Pentagon for cost overruns. The contract structure was considered an improvement over cost-plus contracting, where the government reimburses the contractor for cost overruns.

One expert said that Boeing paying for cost overruns on the KC-46A disincentivises the company from improving its performance. Doug Birkey, Mitchell Institute for Aerospace Studies executive director, told Janes

https://www.janes.com/defence-news/news-detail/pentagons-lord-blames-kc-46as-fixed-price-contract-structure-for-further-programme-issues

The Pentagon’s top acquisition executive blames the Boeing KC-46A Pegasus aerial refuelling tanker’s...

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