MIC ghouls are somehow not satisfied with the massive amount of money they're getting (archived)

No more ‘must-wins’: Defense firms growing warier of fixed-price deals

WASHINGTON — Lockheed Martin chief executive Jim Taiclet offered a warning during a quarterly earnings call this week, The government, he said, is putting too much risk on defense companies by flexing its muscle as the sole buyer of military hardware, and his firm is changing its approach. “We don’t have any must-win programs with Lockheed Martin anymore,” Taiclet said.

I, uh... what? Ah yes, the US government, famed for flexing its muscle against the private sector! Okay, I'm linking the damn nuclear missiles article post again, but it's just such a good example of the actual reality that it's the private sector flexing its muscles as sole supplier, rather than the other way around:

On 14 December 2019, it was announced that Northrop Grumman had won the competition to build the future ICBM. Northrop won by default, as their bid was at the time the only bid left to be considered for the GBSD program (Boeing had dropped out of the bidding contest earlier in 2019). The US Air Force said: "The Air Force will proceed with an aggressive and effective sole-source negotiation." in reference to Northrop's bid.

anyways, back to the new article

Taiclet was one of several defense industry executives who this week aired their angst about the government’s contracting practices. Many were particularly concerned about fixed-price contracts. Under these agreements, meant to secure the least risk for taxpayers, companies pick up the bill when costs run higher than expected. Such cases can be disastrous for defense firms — like Boeing’s $7 billion in overruns on a $4.9 billion contract for the KC-46, an Air Force tanker. Taiclet argued that, as the defense industry’s only customer in most cases, the Pentagon has enough sway to make its suppliers accept its terms.

Oh no, not the poor little multibillion dollar megacorporation! Maybe they should just... fail and go out of business, isn't that what the free market's all about? They should have just been a better company and not allowed costs to overrun, or analyzed the market better and gotten a more accurate estimate of the costs.

In an earlier interview with Defense News, though, acting deputy for industrial base policy Halimah Najieb-Locke said the department is reconsidering how often it uses fixed-price contracts, especially when it comes to companies that also work in the commercial market. ... Despite the intent to save taxpayer money, she said, these contracts don’t account for changes in the market. Sometimes it makes sense for the Pentagon to pay more when that investment keeps a supplier in the market or to secure a supply chain, she said.

Here's a secret little trick - if the government simply owns the arms manufacturing capabilities itself, it doesn't have to worry about the companies that supply it going out of business or switching to serving a different market during a downturn in demand, and then not being able to buy all the shit it needs once a war starts approaching. By using the forbidden black magic spell called "economic planning", it can simply keep that industry around, even if it isn't strictly profitable, because it's obviously incredibly strategically important and shouldn't be left to the whims of the free market!

“So now we’re reverting to best value” contracting standards, which take into account more than just price, she said. ... Lockheed wasn’t the only company this week signaling a change in how it approaches fixed-price contracts — and warning of exiting competitions if the conditions aren’t right. Northrop Grumman too said it has changed its approach to bidding on fixed-price deals where a mature design is not in place since 2015, when it won the contract to build the B-21 Raider stealth bomber. The service used a cost-plus structure for the Raider’s initial development phase, and a fixed-price structure for the low-rate initial production phase that began in the final quarter of 2023. ... Northrop Grumman on Thursday announced a nearly $1.6 billion pre-tax charge on the B-21, which included $143 million in cost growth for the Raider’s first LRIP lot.

Besides passing on some fixed-price programs outright, Warden said, Northrop has also come back to the government with its own counter-offers. Sometimes, as in the case of Northrop’s counter-offer to the Space Development Agency on a second tranche of satellites to provide missile warning and tracking capabilities, the government passes, Warden said. “These are things that are going to happen, and we are going to remain disciplined,” Warden said. “We have plenty of opportunity in this company to grow. We have a strong pipeline of opportunities for pursuing, and a strong pipeline of opportunities that we believe have the right risk-reward balance.”

okay, so the government is "flexing its muscle as the sole buyer of military hardware", and yet companies have "plenty of opportunity to grow" and a "strong pipeline of opportunities for pursuing", so I guess the flexing isn't doing much