$2B overrun - so far - on a $5B contract. Not bad going. Perhaps Congress should ask who assessed the risk and the estimated costs when awarding the contract?
Boeing Takes Another $201M Hit On KC-46 Tanker
WASHINGTON — Boeing on Wednesday announced a $201 million post-tax charge on the KC-46 tanker program, bringing cost overruns on the program up to more than $2 billion dollars.
Boeing is locked into a fixed-price contract with the Air Force that makes the company liable for any cost growth exceeding the $4.9 billion contract value. The company had previously paid more than $1.9 billion for cost growth induced by various technical issues during the tanker’s development. However, the $201 million charge incurred in the fourth quarter of 2016 stemmed from implementing changes to initial production aircraft, not a newly discovered problem, Boeing CEO Dennis Muilenburg said in a Jan. 25 earnings call.
“The charge we took in the fourth quarter is [centered] around the previously defined configuration changes, the wiring changes,” he said. “Now we are implementing those at the detailed level in the initial production aircraft.” Although that work is well defined, "We have some job categories that are taking longer than planned in terms of hours per job, and that’s what you see in the charge,” he said.
The wiring issue dates back to 2014, when a Federal Aviation Administration review discovered that some wiring bundles within the tanker met commercial, but not military requirements. The issue forced Boeing to redesign some KC-46 wire bundles so that redundant wiring was not grouped together. Today’s charge comes in at $312 million before tax, which is split between Boeing’s commercial and defense business segments.
Although the company was “disappointed” with yet another charge on the KC-46A, Muilenburg told investors that he believes the program has turned a corner as it moves from development into production.