Boeing Co. is projected to exceed its cost ceiling by as much as $300 million — about 6 percent — on the initial contract to develop and build U.S. Air Force aerial refueling tankers, according to government officials. Air Force officials this month briefed congressional defense committees and Pentagon officials on the projected increase on what’s now a $4.9 billion engineering, manufacturing and development contract that includes four tanker aircraft. The contract calls for 14 more tankers to be delivered by September 30, 2017.
The $300 million projection was obtained by Bloomberg News from government officials who spoke on condition of anonymity because they weren’t authorized to comment publicly.
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. “There is no legal barrier that prohibits pursuing a below-cost proposal strategy and Boeing’s met all rules.”
“Boeing is responsible for all costs over the $4.9 billion ceiling price,” according to the Air Force statement. The contract would allow the government to save 60 cents and Boeing 40 cents of every dollar below the target cost.
Boeing spokesman Bill Barksdale confirmed the company projects it will exceed the $4.9 billion ceiling and is prepared to absorb the extra costs.
“We are not there yet. It’s a projection,” he said in a telephone interview. Barksdale declined to comment on the $300 million or outline when the company concluded it would exceed the ceiling.
