Raytheon Co. will probably have to absorb millions of dollars in cost overruns from development and initial production of a new smart bomb that will be the F-35 fighter jet’s primary weapon, the U.S. Air Force said.
Citing Defense Contract Management Agency estimates, the Air Force said Raytheon, the Pentagon’s top missile-maker, is exceeding the service’s financial liability on all three initial contracts for the Small Diameter Bomb II. The contractor is responsible for overruns above the Air Force’s liability.
The Air Force plans to buy as many as 17,000 of the bombs, and Raytheon has said the weapon represents a potential $4 billion in revenue including sales to U.S. allies that are committed to the F-35 made by Lockheed Martin Corp.
While the overruns on the primary development contract and two initial production contracts are estimated to cost Waltham, Massachusetts-based Raytheon only about $39 million, they are important as a gauge of contractor performance. The Air Force applied contract provisions intended to protect the taxpayers from undue financial risk. (end of excerpt)
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