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article imageLockheed Martin Warned By Airforce - Rising Costs On Military Planes Causing Concern

By Pamela Jean     Oct 6, 2007 in Business
The Air Force and Lockheed Martin in discussions regarding the huge cost overruns in the production of the 108 C-5 aircraft. Initial cost estimates were stated at $83 million a piece, but the final cost is now closer to $100 million, 21% over budget.
Air Force Secretary Michael M. Wynne has stated that they are aware of the situation, admitting that the costs are coming in somewhere between 15-25% over budget. However, they are still in discussions with Lockheed Martin to determine just exactly how much over budget they are, and the reasoning behind it.
"We see the disparity," Air Force Secretary Michael M. Wynne, told reporters at an industry conference. "We see that no matter who's costs we use."
The Air Force will consider terminating the contract if the upper level, namely the 25%, is exceeded. (Apparently they are OK with a 21% overrun?)
Under the Nunn-McCurdy law the Pentagon is required by law to notify Congress when costs on a major defense acquisition program increase by at least 15 percent. According the Nunn-McCurdy guidelines the Pentagon is required to seek approval by Congress for continued funding and to get certification by the Office of the Secretary of Defense, or else the program is terminated.
Lockheed Martin indicates that they have received no notice regarding the Nunn-McCurdy law, and are continuing to work with the Air Force to determine the true cost of the aircraft.
"We have confidence in our cost estimates and are currently working with the Air Force to further redefine those estimates," Jim Grant, a Lockheed Martin vice president of its aero business development said. "We stand ready to continue that dialogue as both sides seek to understand each other as much as possible."
Sounds awfully cozy to me. Sort of a "you scratch my back, I'll scratch yours" situation. Both sides working together in an effort to make the numbers work. Seems more like ongoing meetings to "cook the books" from my vantage point.
Who'd have imagined that one plane costs $100 million. This is just beyond belief. A lot of people are making a lot of money off of the "War On Terror".
Unfortunately I don't think you'll find too many of your average taxpayers on the list.
More about Air force, Lockheed martin, Cost overruns
 
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