The Air Force is currently negotiating with Boeing to resolve critical issues on major contracts that could entail further financial penalties for the company, according to the service’s top acquisition official.
Speaking to reporters Friday, Air Force Assistant Secretary for Acquisition, Technology and Logistics Andrew Hunter said “consideration” discussions are underway for the contract for the VC-25B, where Boeing faces monetary consequences for its failure to meet delivery deadlines.
The contract for the two aircraft, which will replace the current presidential escorts in service, has so far incurred over $1 billion in charges for Boeing due to schedule overruns as well as rising inflation and pandemic effects.
Hunter previously testified there will be a two- to three-year schedule delay for the program, which he told reporters had not changed.
The predicament recently led Boeing President and CEO David Calhoun to remark the company “probably shouldn’t have taken” the “unique set of risks” associated with the contract.
“Because there is a schedule slip, we’ll have to have a dialogue with Boeing about what is the consequence of that because we have a contract that says they would deliver on an earlier date,” Hunter said.
The negotiations are driven by two incentives, Hunter continued. The first “positive” incentive is that Boeing is motivated to “finish as fast as possible, because it is a fixed price contract and every additional day they don’t deliver the airplane it costs them more.”
However, the contract language also offers the company flexibility to argue that certain specifications requested by the Air Force are not covered, which would enable the company to request more money from the service to build them.
Hunter called it a “problematic incentive.”
“You get this dynamic where they become very focused on, ‘We need to finish, we’re going to finish what’s in the contract, anything that appears to us to be in any way, shape or form not 100% required explicitly in the contract is an extra bill,’” Hunter said, adding that the situation also affords “the space for us to work together.”
Hunter did not specifically disclose what details needed to be hashed out with Boeing, though he said that discussions with the company centered on “core process system data issues.”
Similar problems persist with procurement of the F-15EX, Hunter said, referencing a recent provision of the fiscal year 2023 defense spending bill where House appropriators slammed the repeated use of undefinitized contractual actions for the aircraft’s procurement.
“Once you start down the UCA path, then the issue is we need to definitize,” Hunter said. “That’s not easy.”
Officials have since “struggled with Boeing on coming to agreement on all the details,” he said, though it is a situation that “is not unique” to the F-15EX.
“We are getting better together, and I don’t see anything that would cause me to think this is broken and we can’t make it work,” Hunter said. “I’m reasonably confident we will be able to get through the challenges we’re having right now and get to a better place.”
Other acquisition goals for the service have a better outlook, he said, such as the planned production of the B-21.
Hunter said officials expect rollout for the aircraft to occur by the end of the year, and that any perceived delays are due to aircraft manufacturer Northrop Grumman’s cost and schedule projections growing closer to that of the government, which anticipated a slightly higher cost and longer schedule than the company.
“We’re still where we want to be,” Hunter said of the B-21 program. “We’re still tracking at or below government’s cost and schedule estimates.”
Development of the service’s secretive Next Generation Air Dominance platform has also made progress, Hunter told reporters. The program’s fully digital design has allowed “more design maturity earlier in the process,” he said, adding that its acquisition strategy has yet to be determined.
“My inclination would not be to go to one company that does everything,” Hunter said in response to a question about whether the service would prefer to select one prime contractor to oversee its manufacturing.
“This is a space right now with a lot of competition and that’s a good thing,” he continued.
Air Force Secretary Frank Kendall recently announced the program entered the engineering and manufacturing development phase and expanded on those comments Friday by confirming the program is still in a competition, according to a report in Air Force Magazine.
In response to a question about how the service has coordinated with industry to cut down reliance on Chinese-supplied parts, Hunter said commercial partners are “much more focused on this than they have been in the past.”
“At this point,” he said, “I haven’t seen a system where it’s like ‘Oh my gosh, we can’t produce it because we discovered all this Chinese content and we have to take it out.’”
Hunter then pointed to the resourcing of parts for the F-35 engine following Turkey’s ouster from the program, which Inside Defense recently reported is slated to conclude by the end of the calendar year.
“When we had to remove the Turkish content from F-35, it was certainly painful, but we did not have to stop production,” Hunter said, largely because DOD permitted the program to continue accepting Turkish-made parts through the end of Lot 14 deliveries that will run through 2022.
But a reporter pointed out that the resourcing took longer than officials expected.
“Fair,” he replied.