Boeing’s successful bid for US Air Force program results in $7 billion loss

In a recent announcement, Boeing has stated it has quit deriving a fixed-price development contract for the new Field Air Force One, also expressing that it has no purpose of engaging in this type of contract again. Meanwhile, the Air Force has revealed the suspension of a new tactical plane that wasn’t able to meet fixed-price expectations. While discussing Boeing’s experience, some industry analysts said fixed-price contracts could be a logical choice for basic projects but may not be suitable for more complicated development programs. If a company finds itself not turning a profit due to spiraling costs, it could lead to cutting corners and moves detrimental to the program over the long run. Meanwhile, other experts in the field stated there will always be a place in the Pentagon for fixed-price contracts. There is a call for companies to better assess their capabilities. Air Force Secretary Frank Kendall believes that they did not look closely enough at some design elements in previous contracts. Analysts believe this experience serves as a cautionary tale for businesses about the risks of fixed-price development contracts, even as it became a competitive necessity to secure defense contracts. Some experts advised that firms should approach all new contract opportunities with added discipline to ensure they can meet their commitments and support the long-term health of their business. BOeing’s experience has also led to nonrenewals on contract opportunities. Furthermore, analysts believe the government, as well as the businesses, will carefully assess future deals to determine which contract structure. Fixed-price development or something else might be more advantageous.