The U.S. Air Force and Northrop Grumman [NOC] are negotiating prices for 19 B-21 Raider stealth bombers to follow the 21 scheduled for five lots of low-rate initial production (LRIP), and the average prices for those 19 will be higher than for the earlier 21, the company said.
An inflation and other price uptick for the B-21 would help Northrop Grumman avoid future losses on what has been a fixed-price effort on which the company took a nearly $1.6 billion pretax–$1.2 billion after tax–charge in January for the 21 announced LRIP planes (Defense Daily, Jan. 25).
The company said at the time that inflation, supply chain problems, and labor constraints on the B-21 program will cause Northrop Grumman to lose money on the five lot work through 2030.
“B-21 remains on track to meet its key performance parameter for Average Procurement Unit Cost (APUC) of $550 million in Base Year 2010 dollars,” Northrop Grumman said on June 18. “The government has fixed price production options for the first 21 aircraft. Final terms, quantity, and pricing beyond the first 21 aircraft are subject to negotiation. The government and Northrop Grumman have established not to exceed pricing for an additional 19 aircraft.”
“The average not to exceed value for the subsequent lots is above the average unit price of the five LRIP lots,” the company said. The $550 million in 2010 APUC is $792 million in today’s dollars.
Northrop Grumman and the Air Force have cited classification in declining to answer detailed questions on the B-21, including whether the additional 19 planes are in full production or whether they are in LRIP and involve concurrent development, in what year or years the Air Force negotiated the LRIP price for the 21 LRIP aircraft, and why the added 19 are more costly than the 21 in the five LRIP lots known so far.
Air Force Global Strike Command has said that it may need 145 or more B-21s, but the Air Force has said that it will not need to make a decision to buy more than 100 until the mid-2030s.
The Air Force picked Northrop Grumman for the Long Range Strike-Bomber, which became the B-21, on Oct. 27, 2015 (Defense Daily, Oct. 27, 2015). The Air Force then estimated the total contract value to be $80 billion. Northrop Grumman beat out Boeing [BA] and Lockheed Martin [LMT] teams, which protested the award.
“It’s unclear when the “not-to-exceed price” for the additional 19 B-21’s was negotiated,” Cai Von Rumohr, a senior defense analyst at TD Cowen, wrote in a June 20 report. “This matters because the contract for the five options was negotiated in 2015-16 when inflation was low…Northrop Grumman suggests contract for the additional 19 was negotiated in the ‘normal course of a program of this size and complexity.’ We take that to mean later than 2015-16 and in a period when Northrop Grumman had won the program and inflation might have been picking up. Thus, the terms likely are more favorable than on the first 21.”
While the added 19 “are covered by more than one ‘lot,'” Von Rumohr wrote, “the number of lots and size of the lots is restricted (our guess would be ~ 3 options).”
“Furthermore, funding for the additional 19 is beyond the FY23-27 period covered by the FYDP and in which the five LRIP options are funded,” he wrote. “Thus, if the 19 are covered by three lots, they likely would be funded in FY28-30.”