4 hours ago, brabus said:

I get it from the company perspective. But, also there are some significant portions of industry that can eat a big bag of dicks (and the gov to, to be fair). The taxpayers getting fucked because company X can’t (or doesn’t try hard enough) to meet their promises of capabilities on timeline has to end (F-35 is a great example). Maybe the middle ground is fixed-price, but with carve outs for things out of the company’s control - black swan event, unobtanium REM price goes above X value, etc. @ClearedHot You appear fairly deep in industry: what are your thoughts from that perspective AND as a taxpayer?

Maybe the government actually needs to figure out what requirements they want by, I dunno, talking to operators and maintainers who fly and work on aircraft? Stop letting retard aquitition officers and civilians throw bullshit in RFI/RFPs, then get pissy when it's almost impossible to keep a timeline due to moving or impossible requirements. This is coming from someone who worked on the KC-46 contract, drafting contract change proposals, engineering change proposals, basis of estimates, responding to RFI/RFP/PCOLs, and currently works on the F-16 program.

4 hours ago, Sua Sponte said:

talking to operators and maintainers who fly and work

No way, not possible. Some acquisitions LT knows better.

I am fully retired now, but throughout my career, I generally preferred Firm-Fixed-Price (FFP) contracts for everything except situations like this.

With FFP contracts, I was driven to find efficiencies that could increase profitability. Improvements in manufacturing efficiency, supply chain management, engineering processes, and labor productivity directly improve margins.

The problem arises when the government has shifting priorities and requirements, as it did with the T-7. The program is a perfect example of how winning a competitive FFP development contract is not necessarily the same thing as winning a profitable program.

The Air Force made three significant changes to the T-7 program and, in my view, attempted to push much of the associated cost onto Boeing. I suspect SNC is concerned the Navy will do something similar.

1. Expanded pilot accommodation requirements

The Air Force expanded the required pilot accommodation range, primarily affecting the crew escape system. At contract award, the requirements were based substantially on a 1967 male pilot survey. Two years after the award, the Air Force changed the requirement to accommodate the central 95% of the U.S. recruiting population, including women weighing as little as 103 pounds.

This was a significant and expensive engineering change to the aircraft.

2. Evolving training performance requirements

The training performance requirements were not fully defined at the outset. To its credit, the Air Force wanted a platform that was not simply a replacement for the T-38, but a better training aid for fourth- and fifth-generation aircraft.

Initial testing revealed that the aircraft did not meet the sustained-G performance metrics and exhibited significant wing rock at high angles of attack (AOA).

The Air Force offered to pay the increased engineering costs to address these issues, but those costs were not fully burdened, and Boeing lost significant money implementing some of the fixes. Ultimately, the Air Force lowered some of the performance requirements.

3. Changes to the procurement strategy

When a company bids on a contract, particularly an FFP contract, much of the anticipated profit comes in the out-years as production ramps up.

If you slip the schedule by a year and reduce the number of aircraft purchased each year, the financial impact on the vendor can be devastating.

Based on the original schedule, Boeing purchased many long-lead items in advance to reduce costs and meet delivery requirements. When the Air Force changed the procurement strategy, Boeing was left holding the bag on much of that supply chain commitment.

From a taxpayer perspective, FFP contracts are generally a good thing. You budget for a capability and spend within that budget unless you change the requirements.

They also incentivize companies to invest their own money in Independent Research and Development (IR&D), which drives innovation throughout the U.S. defense industry.

The situation under Trump has been different because the government injected significant amounts of money into defense programs all at once. Prior to that, the Department of Defense was increasingly asking industry to assume all the risk, only to occasionally cancel programs after companies had invested tens or even hundreds of millions of dollars in development.

The Light Attack program is a perfect example. The Air Force spent relatively little while promising to purchase hundreds of aircraft, a commitment that never materialized.

I know several CEOs who went to the Pentagon after that and a few other similar incidents and essentially said, "We won't play this game again." Justifiably so. They have a fiduciary responsibility to their shareholders.

I know of two occasions when my former company flat-out said, "NO THANKS" when the Air Force asked us to bid on something. The service was incredulous, and the Secretary of the Air Force eventually engaged our CEO directly. His response was essentially: Either you fund the development upfront or give us a contract. If not, adios.

I highly suspect that was the same calculus SNC used in making its decision.

37 minutes ago, ClearedHot said:

Either you fund the development upfront or give us a contract. If not, adios.

I highly suspect that was the same calculus SNC used in making its decision.

It does seem like the competition boiled down to the Navy asking the vendors to take on too much risk for a fixed firm price contract.

It's been a long time since Acquisition 101, but isn't this why you have a "Technology Maturation and Risk Reduction" (TMRR) phase? In aircraft development, isn't this the point where you fund a handful of companies to do development, burn down risk, build prototypes, then do a fly-off? Announce the winner, and move on to Engineering and Manufacturing Development (EMD)?

It seems like in this case, the Navy wants to skip the TMRR phase, and go straight to EMD. Which would work, if there wasn't so much risk still baked into their requirements.

I speculate because the Navy (like the AF) wants a new trainer, but they want to do it on the cheap.

Edited yesterday at 01:26 PM1 day by Blue

48 minutes ago, Blue said:

I speculate because the Navy (like the AF) wants a new trainer, but they want to do it on the cheap.

The old acquisition adage, we all fly into combat in platforms built by the lowest bidder...

Contractors usually make a good portion of their profit with contract modifications (e.g., KC-46 RVS 2.0). Even then, it’s usually only 8-12% profit, in my experience.

12 hours ago, ClearedHot said:

I am fully retired now, but throughout my career, I generally preferred Firm-Fixed-Price (FFP) contracts for everything except situations like this.

With FFP contracts, I was driven to find efficiencies that could increase profitability. Improvements in manufacturing efficiency, supply chain management, engineering processes, and labor productivity directly improve margins.

The problem arises when the government has shifting priorities and requirements, as it did with the T-7. The program is a perfect example of how winning a competitive FFP development contract is not necessarily the same thing as winning a profitable program.

The Air Force made three significant changes to the T-7 program and, in my view, attempted to push much of the associated cost onto Boeing. I suspect SNC is concerned the Navy will do something similar.

1. Expanded pilot accommodation requirements

The Air Force expanded the required pilot accommodation range, primarily affecting the crew escape system. At contract award, the requirements were based substantially on a 1967 male pilot survey. Two years after the award, the Air Force changed the requirement to accommodate the central 95% of the U.S. recruiting population, including women weighing as little as 103 pounds.

This was a significant and expensive engineering change to the aircraft.

2. Evolving training performance requirements

The training performance requirements were not fully defined at the outset. To its credit, the Air Force wanted a platform that was not simply a replacement for the T-38, but a better training aid for fourth- and fifth-generation aircraft.

Initial testing revealed that the aircraft did not meet the sustained-G performance metrics and exhibited significant wing rock at high angles of attack (AOA).

The Air Force offered to pay the increased engineering costs to address these issues, but those costs were not fully burdened, and Boeing lost significant money implementing some of the fixes. Ultimately, the Air Force lowered some of the performance requirements.

3. Changes to the procurement strategy

When a company bids on a contract, particularly an FFP contract, much of the anticipated profit comes in the out-years as production ramps up.

If you slip the schedule by a year and reduce the number of aircraft purchased each year, the financial impact on the vendor can be devastating.

Based on the original schedule, Boeing purchased many long-lead items in advance to reduce costs and meet delivery requirements. When the Air Force changed the procurement strategy, Boeing was left holding the bag on much of that supply chain commitment.

From a taxpayer perspective, FFP contracts are generally a good thing. You budget for a capability and spend within that budget unless you change the requirements.

They also incentivize companies to invest their own money in Independent Research and Development (IR&D), which drives innovation throughout the U.S. defense industry.

The situation under Trump has been different because the government injected significant amounts of money into defense programs all at once. Prior to that, the Department of Defense was increasingly asking industry to assume all the risk, only to occasionally cancel programs after companies had invested tens or even hundreds of millions of dollars in development.

The Light Attack program is a perfect example. The Air Force spent relatively little while promising to purchase hundreds of aircraft, a commitment that never materialized.

I know several CEOs who went to the Pentagon after that and a few other similar incidents and essentially said, "We won't play this game again." Justifiably so. They have a fiduciary responsibility to their shareholders.

I know of two occasions when my former company flat-out said, "NO THANKS" when the Air Force asked us to bid on something. The service was incredulous, and the Secretary of the Air Force eventually engaged our CEO directly. His response was essentially: Either you fund the development upfront or give us a contract. If not, adios.

I highly suspect that was the same calculus SNC used in making its decision.

I gotta ask how did the contractor get into this deal without seeing this?

Fickle indecisiveness of the government especially after the requirement changes that screwed up the KC-46?

How are the vendors not self protecting or putting contractual language in the deals guaranteeing full compensation for said changes?

Edited 12 hours ago12 hr by Clark Griswold

12 hours ago, Clark Griswold said:

I gotta ask how did the contractor get into this deal without seeing this?

Fickle indecisiveness of the government especially after the requirement changes that screwed up the KC-46?

How are the vendors not self protecting or putting contractual language in the deals guaranteeing full compensation for said changes?

Have you heard of a thing called the U.S. Government? They ALWAYS change the rules...

1 hour ago, ClearedHot said:

Have you heard of a thing called the U.S. Government? They ALWAYS change the rules...

That’s true but what I’m asking is how could Boeing not see this coming in the T7 and not sign unless they were protected from the good idea fairy / staff guy’s last minute change whose cost is gonna be sent to them.

As a private company they can say no, counter their offer or propose a totally different deal. Maybe that’s naive but I’d rather be that than in a deal where I lose money because my customer is acting like Vader

Edited 7 minutes ago7 min by Clark Griswold