AIR FORCE
The Boeing Co., Long Beach, Calif., is being awarded a $500,000,000 firm-fixed-price and cost-plus-fixed-fee contract for the C-17 transition to post production, which will provide for orderly transfer of C-17 production assets. The location of the performance is Long Beach, Calif. Work is to be completed by July 5, 2022. ASC/WLMK, Wright-Patterson Air Force Base, Ohio, is the contracting activity (FA8614-12-D-2049, Order 0001).
Least it may keep Long Beach out of bankruptcy for awhile.
Porn, you’d think it might. Not sure how much of that half billion actually arrives in Long Beach, though.
Wonder if anyone would pay me to not start making stuff in the first place. I’d think that would be worth more because there’s a lot less waste, and then you get to skip the whole transition-to-post-production phase.
What actually happens when a city goes bankrupt? Presumably first thing they do is default on their bonds. But it’s not as if the bankruptcy court can sell off the streets and public parks and the town hall to pay off the creditors. taxes will continue to be collected, so they are going to need staff to remain on payroll to do that. And they won’t simply shut down the police or the fire department, or the water treatment. I’m guessing municipal flowerbeds, libraries, road repair, all the more ‘optional’ bits of local civil life will stop. And lots of people get fired.
Sounds like San Bern. should start with their accountants, though. Allegations flying that they’ve been cooking the books for 16 years.
Ah, but San Bern it seems that bonds weren’t the issue, it’s the pensions. Taxes will continue to be collected as long as people are working, and as long as people actually remain there. Keep cutting the optional bits, and fewer and fewer remain. Except that those who can’t afford to leave, not your biggest source of revenue.
http://www.latimes.com/news/local/la-me-0711-san-bernardino-20120711,0,5646419.story
Maybe whatever bit of it makes it to Long Beach will help.
http://www.latimes.com/news/local/la-me-bankruptcy-20120628,0,6615646.story
They won’t be exactly not making things anymore, they’ll just be doing it in a different way. Airplanes cost a lot of money for a lot of reasons but they mostly boil down to the attention they demand throughout their life cycles.
They cost a lot to think about before they’re designed.
They cost much more to design, and the prototypes for any respectable plane cost at least a billion or so (they have to made by hand, from parts made by hand, and it takes a very long time to build and [especially] test them).
Then you get the so-called cost of production, which does include what every industry calls the cost of production but also a big hunk of just keeping the companies that make them running; this is all lumped together in the general category of “overhead” but it goes far beyond the scope of the overhead required to keep the local diner running. This happens because the DoD can’t buy airplanes the way Wal-Mart buys roller skates (at so many $$ the dozen). They basically have to pay for each plane (and a projected lifetime’s worth of spares), plus they rent the makers’ capacity to build them for the duration of the production run. This is the phase of the C-17 life cycle that has just ended.
But that’s just the start. Now you have to keep them running, and refit them with the occasional improvement (avionics, for example, wear out fairly quickly and are always being upgraded). The cost of keeping any airplane, from little Cessnas to B-52s, in flying condition on the ground is relatively huge (compared to the original cost of ownership) and the cost of actually flying them is simply immense. And these costs only grow as the fleet ages. (Think of that well-known tipping point where it costs more to keep that 12 year old car running than to buy its replacement.) The makers’ share of these costs fall into the category of “post-production” – hello, Long Beach – but they ain’t the half of it.
Eventually, of course, there are the always significant “end of life expenses”: airplanes have to be taken out of service and embalmed or dissected, bases have to be closed or refitted and large numbers of people have to be moved and retrained.
Anybody – anybody at all, including me – who tells you that any particular airplane costs or will cost or should cost so much per unit is misleading you. “They may not mean to but they do,” as the poet said. They are invariably talking about some huge but limited portion of the total cost that they’ve sliced up in some unspecified way, and they are often comparing that slice to somebody else’s preferred slice that was cut up differently. Often they do this with the best of intentions (if they’re me, for instance) but often they’re doing it to minimize or maximize to the cost, in order to make a (usually political) point. It’s probably an insoluble riddle who does the slicing game better, the DoD or Congress (though Congress gets my vote).
This is especially true at two times. First, when they ask for (Dod) or pass (Congress) the initial program budget: then you get what are called the “direct costs” only with a few miscellanies thrown in. Second, when they decide (DoD) or try (Congress) to kill a program: then they suddenly discover the total life cycle costs of procurement and ownership and divide them by the number of aircraft already procured. This may sound like the truer cost but they never, ever subtract the costs of contract termination, which would be saved if the program continued – and of course these costs are enormous, we’re not talking about terminating somebody’s health insurance or confiscating their pension, are we? – or the cost of keeping, maintaining and flying the elderly planes the cancelled program was meant to replace; these costs will inevitably be even more than the cost of termination but they’re always a matter for next year’s budget.
And on top of all of that, i think i remember reading that it takes $6 million or so to train a fighter pilot.
But if the program had not been cancelled then -presumably- the DoD would have been paying some larger or perhaps equivalent sum to Boeing for the ongoing manufacture and/or maintenance contract. which is now, presumably, going to be replaced by the transition contract. It does seem odd that that savings seems not to be mentioned or taken into account.
I’m sure as you say there is far more to the story, but even so it’s a very strange and almost perversely succinct way to announce half a billion (which is a suspiciously round figure) dollar fee.
Oh, i’m not going to even try to comprehend the machinations of the defense industry. I’ll leave that to Natty for the inside baseball view.
Bluth,
The program hasn’t been cancelled in any normal sense of the word; it has wound down about as originally intended, which means, as usual, that Congress and the DoD extended it well beyond the originally planned procurement. As this case is typical, it’s also usefully instructive:
–Original procurement contract (through 2007): 190 aircraft.
–Supplemental procurement (FY2008 War Supplemental Act): 15 more (total, 205).
–April 2009: Secretary Gates announces that 205 is positively, absolutely it.
–May 2009: Supplemental war funding bill adds 8 (total, 213)
–December 2009: FY2010 (non-supplemental) war funding bill adds 10 more (total, 223, with final delivery in 2013).
So there are still a few on order to the Air Force and Boeing is pursuing the international market (India has 10 on order). The plant has been reduced to one shift and could go either way in the future, depending on Boeing’s success in getting international orders.
What has been cancelled (in 2010) is a long term, incentive based contract to Boeing for ongoing maintenance, very profitable work that the Air Force has taken in house. This is an good article about that particular move and the Gates era’s general trend toward de-profitizing ongoing “sustainment.” A half-billion for upgrades is chicken feed compared to what that would have brought in, and man is the industry howling.
I don’t doubt that half a billion is a drop in the bucket when it comes to defense contracting. And all of our right wing friends would be the first to remind about that.
Of course when it came to half a billion in loan guarantees to try to get Solyandra up and competing head to head with the Chinese— then it was Socialsim!
As Mr Cohen said so well…