U.S. Air Force Sheds Some Light on Coming LRS-B Contract

 - March 10, 2015, 2:07 PM
Shown is a past Boeing concept drawing of the Next Generation Bomber, an effort that became known as the Long-Range Strike Bomber.

The U.S. Air Force shed a little more light on its secretive long-range strike bomber (LRS-B) this month, suggesting it will award a “cost-plus,” contract in which the government would shoulder the risk of a cost overrun. The service indicated that it will make a contract award to begin the development program this summer, months later than it planned earlier.

In testimony before the House Armed Services Committee subcommittee on seapower and projection forces on March 4, William LaPlante, assistant secretary of the Air Force for acquisition, contrasted the coming procurement with the service’s acquisition of the KC-46A tanker, which is based on Boeing’s 767-2C commercial freighter derivative. The Air Force awarded Boeing a fixed-price, incentive fee contract for KC-46A engineering and manufacturing development in 2011.

“If you’re in a fixed-price contract, it’s really important to have a good estimate of what you think it is going to cost,” LaPlante said. “Let’s say you’re wrong 50 percent one way or the other, somebody is going to really get hurt,” either the contractor or the government, he explained. “For KC-46, the government made a decision and that said, ‘Look, this is based as much on a 767.’ We think we have a pretty good idea on what the cost estimate should be. We’re going to do a fixed-price—that’s actually unusual. Most development programs are cost plus. My belief on the LRS-B is it’s going to be more traditional in the sense that we are doing a little bit more cutting edge [development]. It’s not based upon a commercial item, and so I think more likely it’s going to be in the cost-plus regime.”

In 2010, the Department of Defense under Secretary Robert Gates established an average unit procurement target of $550 million in then-year dollars for the bomber, with a requirement for 80 to 100 aircraft to replace aging B-52 and B-1B bombers by the mid-2020s. LaPlante acknowledged that the target cost has risen with inflation but said it still provides a number for the winning contractor to build to. “Fifty-five dollars in 2010 is 57 or 58 dollars today. We know that,” he said. “But we put it in as a requirement—to build 100 airplanes, it’s going to cost $550 million [each]. What that does is, that drives the design. Industry has to design to that number and we’re going to assess against that number.”

The Air Force started funding the LRS-B program in the FY2013 budget; it released a request for proposals (RFP) to industry last July, keeping details of the program classified. For FY2016, which begins in October, the service is seeking $1.2 billion in research, development, test and evaluation (RDT&E) funding for the LRS-B, increasing from $913 million in the current fiscal year. The service’s budget lists the program start in the first quarter of FY2016.

The projected LRS-B budget in the Pentagon’s Future Years Defense Program rises to $3.7 billion in RDT&E funding in 2020. Assuming RDT&E costs then begin to level off and gradually decline in subsequent years, the total development cost would be roughly $24 billion, the independent Center for Strategic and Budgetary Assessments estimates. Assuming the Air Force buys 100 bombers by the mid-2030s, its total procurement cost would be roughly $66 billion in then-year dollars, bringing the overall cost of the LRS-B program to $90 billion, the institute said.

Northrop Grumman and the team of Boeing and Lockheed Martin are contending for the LRS-B contract award, which the Air Force now expects to make in the summer. When it announced the RFP release, the service said it expected to make a contract award by this spring.