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Defense Contractors under cost pressure from Trump

Defense Contractors under cost pressure from Trump

CEO of Lockheed Martin also promises cost cuts to F-35 fighter jet program.

http://wapo.st/2he3XT5

Kemberlee recently noted that President-elect Trump tweeted costs for plans to build a new Air Force One were “out of control” and that the order should be cancelled.

File Trump’s tweet under “Opening Negotiations”.

The head of Boeing is saying he promised President-elect Donald Trump that the manufacturer would complete the Air Force One project for less than the $4 billion the president-elect had claimed it would cost.

Dennis Muilenburg on Wednesday told reporters outside Trump’s coastal Florida estate that his meeting with the president-elect was “very productive.”

Trump earlier this month had ripped Boeing over the cost of the program to replace the aging presidential aircraft.

Muilenburg did not specify how much less the final cost would be, however,in his post-meeting statements.

“We’re going to get it done for less than that, and we’re committed to working together to make sure that happens,” Muilenberg said. “I was able to give the president-elect my personal commitment on behalf of the Boeing Co. This is a business that is important to us. We work on Air Force One because it’s important to our country and we’re going to make sure he gets the best capability, and that it’s done affordably.

Muilenburg wasn’t the only aviation CEO Trump discussed cost reductions with, either.

Trump also met Wednesday with Marillyn Hewson, CEO of Lockheed Martin. Trump recently criticized the cost of the company’s F-35 fighter jet program.

“We’re trying to get costs down, costs,” Trump told reporters Wednesday after the meetings, Bloomberg reported. “Primarily the F-35. That program is very, very expensive.”

In a statement, Hewson called the meeting “productive.”

“I had a productive meeting with President-elect Trump this afternoon,” she said. “I appreciated the opportunity to discuss the importance of the F-35 program and the progress we’ve made in bringing the costs down. The F-35 is a critical program to our national security, and I conveyed our continued commitment to delivering an affordable aircraft to our U.S. military and our allies.”

It appears Trump has been more productive on behalf of the American people as President-Elect during the last several weeks than Obama has been as President for the past 8 years.

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Comments

Nice to see a POTUS that is on the taxpayer’s side for a change

liberalinsight | December 23, 2016 at 8:19 pm

Fluff piece. What, T.rump (Putin’s man) is going to renegotiate every government contract? ridicules. And determining that an entire contract for a new design plane is over budget first, after a meeting with the CEO and then now will not be, is overtly asinine. Submit a budget, get down to honest work. Take responsibility.

    Liberalinsight?

    Hard to hold intelligent debate when your premise is an oxymoron out of the gate…..

    casualobserver in reply to liberalinsight. | December 23, 2016 at 10:09 pm

    You might want to thicken you skin about a Chief Executive that gets into the details and enjoys negotiating, or you’ll have some miserable years ahead.

    Of course, you may enjoy being miserable.

    Walker Evans in reply to liberalinsight. | December 24, 2016 at 12:12 am

    I believe your problem is less complex than previously thought. You say “And determining that an entire contract for a new design plane is over budget first, after a meeting with the CEO and then now will not be, is overtly asinine.” And there it is, plain as day: a failure of reading comprehension.

    That is clearly not what was said in the OP. Do a little proofreading before you post; go back, compare your remarks with the OP, and be certain your comments match, as they clearly do not in this case. If you want people to take you seriously quit appearing to go out of your way to give them reason not to do so.

The F35 is not just any contract. It is the largest contract in history and the cornerstone of the US air force. If it is a lemon it must be dumped.

I’m afraid this stuff doesn’t mean much. It’s not English, it’s a code peculiar to a certain type of business. “Productive” just means that they’re still talking; nobody’s quite told anybody else to “f— off” yet. From here on the outside, we really can’t read much more into it.

And unfortunately there’s no cheap way to do this stuff. Air Force One isn’t just an expensive way for Obama to travel to golf courses in exotic climes, it’s a Command & Control center with air defense capabilities, radiation hardening, and all sorts of stuff which will probably never be needed … but if it is, it won’t be inexpensive.

Ditto for new combat aircraft, new Navy ships, exotic weaponry … to be useful at all in a world already full of such stuff, it has to be pretty cutting-edge, and again, that ain’t cheap.

There are just some things about being a world power which cost money, and lots of it.

What Trump probably can do is express an unwillingness to go along with some of the customs which have become routine in the government acquisition biz, mostly having to do with billing for overheads, and accounting for cost overruns. And that will help, but it’s not likely to yield any really yuuugge savings.

    I suspect you’re underestimating Trump’s ability to ferret out fluff from contracts and construction projects.

    His prior experience and track record of success in the private sector is certainly unprecedented as POTUS.

    I understand and respect a certain amount of trepidation, but given where we’ve been, and the gross incompetence of people in high places (and not only (but particularly) the last 8 years) I suspect naysayers who can still remain objective will be pleasantly surprised.

    casualobserver in reply to tom swift. | December 23, 2016 at 10:15 pm

    If you honestly don’t think there is likely a lot of waste and overcharging, you haven’t been watching very closely since the Cold War. If not before. I’m all for squeezing contractors. I’ve worked as a supplier into non-defense programs. It’s a game with written rules and unwritten rules that every contractor knows how to exploit.

    Zachary in reply to tom swift. | December 23, 2016 at 11:08 pm

    I agree, Tom, that the costs of AF1 are a different animal and the savings from this deal or the F-35 probably won’t amount to much. But I’m going to have to come to Trump’s defense here, in a bit of role reversal, and say that I do think this is an encouraging new tact by the bully pulpit to set an atmosphere for government contracts- that he’s watching and you’d better tighten up.

    This is Trump’s bread and butter. He’s setting the tone for govt contract negotiations.

    Now if we could just drop the tariffs and 1 trillion stimulus, err, infrastructure rhetoric…….

There is definitely excessive amounts of waste in all government programs, military included. I’ve witnessed it first hand. If Trump does more than talk, he can save this nation millions of dollars every year. I’m skeptical he can pull it off, as big business is well entrenched at the government trough. Trump’s business experience should make a difference, however. In the final analysis, it’s up to congress to cut costs. Perhaps with a tougher CEO riding them, they’ll be up to the task.

There will never be any savings on government contracts until the Crogress repeals the Davis – Bacon Act. The one that makes it legal to tack on an extra 10% to cost of everything.

All I know is that any hammer or toilet seat that costs $350 must be the best damn hammer or tiolet seat in the world.

    Walker Evans in reply to Henry Hawkins. | December 24, 2016 at 12:54 am

    There are many reasons why some military acquisitions have what appear to be grossly overpriced; in some cases that is true but in others it is not and the problem is that most civilians can’t tell which is which. Case in point: Nose wheel bolts for the A-10 Intruder, known fondly as the Warthog.

    These bolts now cost nearly $1000 apiece, which seems ridiculous. However, the A-10 was supposed to be obsolete and out of service years ago but their usefulness has caused them to remain active. But $1000 for a little bolt? Ridiculous, right? Well, maybe not. This bolt is an unusual size, made from an unusual alloy, with unusual threading. They are “over engineered” because of the beating they must withstand during the controlled crashes that we call carrier landings. When we bought these birds we also bought enough spare parts, including these bolts, to last their entire service life plus a safety margin of about 15%; this was expected to be sufficient. But, when the service life of the aircraft was extended, and then extended again, that supply of spares was exhausted; we now need another 400 of these highly unusual bolts. Some company has to tool up to produce them, obtain the proper alloys, manufacture and stress test them, and ship them out. Oh, and as quickly as possible consistent with meeting all specs, of course. This is small-lot manufacturing, and it is expensive. We could reduce the cost per item to maybe a quarter of what the 400 bolts cost if we were to order 3000-4000 of them, but then we would end up with as many as 3600 of these special-purpose bolts that we can’t use; yet another “contracting boondoggle”.

    And I’m not going to play the game of trying to second guess the rationale of the original specs. I’m not an engineer, just a retired military guy that is grateful that Warthog jockeys can supply close air support to our troops without having to worry about their landing gear collapsing and killing them when they slam into that carrier deck.

    Bottom Line: Yes, we pay too much sometimes and some of those overcharges should result in criminal prosecution. But the ones we should be holding responsible are the auditors; they are the ones we are paying to catch or hopefully prevent this price gouging.

      Walker, while your observations are correct, your nomenclature is a little off. 🙂

      The A-10 “Warthog” is officially known as the Thunderbolt II, not the Intruder. It is an Air Force aircraft and is not capable of carrier operations.

      The A-6 Intruder was a Navy aircraft and capable of carrier operations, but is now no longer in service with the U.S.

      Beyond these minor points, your comments are spot on!

      Henry Hawkins in reply to Walker Evans. | December 24, 2016 at 9:24 am

      I suspect if I asked you what time it was, I’d get a three hour lecture on the history of clocks.

      Did you really think I didn’t know how we get $350 hammers?

      LibraryGryffon in reply to Walker Evans. | December 24, 2016 at 1:21 pm

      When we lived in Navy Housing, we were required to leave the place looking like no one had ever lived in it, or we were charged to replace/repair each item.

      The back door had long mini blinds and a lever style handle, designed to catch on the blinds every. single. time. you opened the door, so eventually they got damamged. We were informed that it would cost us something like $200 to replace the blinds on the door and the glass panel next to it (because they have to match of course). So we went to Home Depot, bought two, had them cut to the right width, and put them up ourselves. Cost of the blinds with sizing was around $30.

      Given that the contracter in charge of housing was buying the things wholesale, I’m sure his costs were much less. And since it took about 15 minutes, tops to take down and install the new ones, that’s a damn expensive maintenance man since labor was coming in well over $600/hour.

It almost sounds like water running out of a swamp.

In reference to Walker Evans post. There is some truth to what you write in regard to military contract costs. You however lost me altogether as to the scenario you pose about nose wheel bolts.
The A10 Warthog is strictly a land based Air Force plane. It never has and never will be flown off or land back on an aircraft carrier.

buckeyeminuteman | December 24, 2016 at 10:46 pm

Three years ago the AF involuntarily cut thousands of Airmen and offered incentive pay for people to separate or retire early. General Welsh claimed they needed funds for the F-35 and didn’t need 335,000 on active duty. They could make do with 15,000 less. Now just this week the new CSAF, General Goldfein, says the AF desperately needs more manpower. Getting rid of all those people was just a ruse to fully fund the F-35 program. Oh, and last week it was announced that recently retired General Welsh had taken a position on the board of Lockheed Martin…absolutely criminal behavior if I’ve ever seen it.

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