Military History | How To Make War | Wars Around the World Rules of Use How to Behave on an Internet Forum
Fighters, Bombers and Recon Discussion Board
   Return to Topic Page
Subject: Boeing KC-46 Tanker Already 6% Over Budget!
giblets    7/5/2011 4:36:06 AM
Looks like Boeing clearly sold their tanker at below cost in order to get this contract, however, the good news (as I understand it), is that Boeing will be responsible for any cost over-runs. "After the contract was awarded, Boeing revealed ?that it proposed a ceiling price that is less than its actual projected cost to execute the contract,? according to an Air Force statement from spokesman Lieutenant Colonel Jack Miller" http://www.bloomberg.com/news/2011-06-24/boeing-projects-about-300-million-overrun-on-tanker-contract.html ?We completely understand our contractual requirement to pay above the ceiling and we are prepared to do that,? Barksdale said. ?We are comfortable with how we bid. We had to be competitive.? So they question is, how long before Boeing go cap in hand the government (like Airbus with the A400M) to help offset the costs?
 
Quote    Reply

Show Only Poster Name and Title     Newest to Oldest
Hamilcar21    Next FY after 2014   7/5/2011 5:55:16 AM
when the current Thug is out of office. POLITICS.
 
Quote    Reply

phrank       7/5/2011 4:08:32 PM
I worked at a shipyard and saw this all the time. We had another shipyard underbid us all the time and then go over budget over and over. Stunned me that the next time during bidding that the government would accept with a straight face the bid from them. But they did.
 
Quote    Reply

WarNerd       7/7/2011 5:59:58 AM
It is the same everywhere, not just in military or government contracts.
 
Everyone submits underbids, then plans on making up the difference in the first Change Order. (There is always one, no matter how set in stone management says the requirements are, and the government and military are the worst at it.)  This has become standard practice by necessity, any company that does not do it goes out of business.
 
Typically the total cost will increase 30% to 100% in the 1st Change Order, and 10% to 20% over revised estimated costs in subsequent Change Orders, in addition to the cost of the changes. A smart project Manager will negotiate with his superiors to limit and consolidate changes with a hard deadline to stop subsequent changes to limit the compounding effect of multiple change orders. (It usually does not work, because your own management reneges on their pledge and undercuts your efforts.)
 
The other thing to do is develop a highly experienced bid evaluation and review team, that can identify the costs being left out in the preliminary bids and then force the bidders to include them in the finals bids, and then be prepared to fight straight percentage increases in the Change Orders. The process is as messy and frustrating as it sounds, and management complains bitterly because it increases the initial contract cost, but total costs come down because you are starting from a point that both parties can live with.
 
Quote    Reply

phrank       7/7/2011 11:57:50 AM
I think we have gotten to the point where it might be cheaper to accept it the way it is and then fix what you don't like vs making changes. But the government shoots themselves in the foot. The LCS shows that, the one is falling apart and it's barely in service. Who is it that comes up with these things. I am not sure why the tanker is going to take so long and cost so much to develop as Boeing is selling a tanker to several countries. But we will spend several billion making a few changes that amount to almost nothing because we want to make sure it is designed just for us. They talk about off the shelf and I think what they mean is the really expensive shelf that way up high.
 
Quote    Reply

Hamilcar21       7/7/2011 3:01:11 PM


It is the same everywhere, not just in military or government contracts.

 

Everyone submits underbids, then plans on making up the difference in the first Change Order. (There is always one, no matter how set in stone management says the requirements are, and the government and military are the worst at it.)  This has become standard practice by necessity, any company that does not do it goes out of business.

 

Typically the total cost will increase 30% to 100% in the 1st Change Order, and 10% to 20% over revised estimated costs in subsequent Change Orders, in addition to the cost of the changes. A smart project Manager will negotiate with his superiors to limit and consolidate changes with a hard deadline to stop subsequent changes to limit the compounding effect of multiple change orders. (It usually does not work, because your own management reneges on their pledge and undercuts your efforts.)

 

The other thing to do is develop a highly experienced bid evaluation and review team, that can identify the costs being left out in the preliminary bids and then force the bidders to include them in the finals bids, and then be prepared to fight straight percentage increases in the Change Orders. The process is as messy and frustrating as it sounds, and management complains bitterly because it increases the initial contract cost, but total costs come down because you are starting from a point that both parties can live with.


Quoted for truth. The screwballs at Lockmart are notorious for this.

H. 
 
Quote    Reply

giblets       7/8/2011 5:24:18 AM
It has to be said, you are always going to be at a far higher risk if you submit a paper aeroplane!
 
However, if you are truely immune from these costs, then I shouldn't affect your decision to purchase.
 
I am sure most of you will agree that it is refreshing to see more governments around the world enter into fixed price competitions (even if, as in Europe, they end up having to dip into their pockets later, at least they reduced the pain) 
 
Quote    Reply



 Latest
 News 		  Most
 Read 		  Most
 Commented		  Hot
 Topics