Air Force Warns Lockheed on Rising Costs

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Air Force Warns Lockheed on Rising Costs
Associated Press | September 26, 2007


WASHINGTON - Senior Air Force officials on Monday warned that rising costs for military transport planes being built by Lockheed Martin Corp. could lead the government to terminate the multibillion-dollar program.

The Air Force and Bethesda, Md.-based company are still assessing how much Lockheed has exceeded initial costs of the program, which calls for 108 C-5 aircraft. In May, Lockheed Martin submitted its proposal stating the average price of each aircraft would be $83 million.

While there is a large disparity between the Air Force and Lockheed Martin on cost overruns, Wynn said the company is believed to have gone over by about $17 million per plane.

"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."

Costs on the C-5 have risen in the range of 15 percent to 25 percent, according to Wynne. The Air Force will consider terminating the program if the upper end of that range is exceeded.

The Pentagon is required by law to notify Congress when costs on a major defense acquisition program increase by at least 15 percent. Under the so-called Nunn-McCurdy law, 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.


Rest of article at: http://www.military.com/features/0,15240,150622,00.html