Friday, June 12, 2009

Air Force Moves To Spread Wealth With A-10 Contract

BNET Government (part of CBS Interactive Inc.) wrote:

By Matthew Potter | June 12th, 2009 @ 3:56 am

Normally with a system like an aircraft or missile the original manufacturer will get the contracts to support, upgrade and modernize it. With older systems it is sometimes possible to move to a different contractor. This is of course aided by the fact that the Government buys the data rights to the system when they pay for the development of the equipment. This allows them to share the necessary information with any company.

The A-10 Warthog ground attack aircraft has been in service with the U.S. Air Force for over thirty years. It has seen heavy duty since 9/11 and has required a great deal of maintenance to keep flying. It has also received significant modifications as technology and weapons have changed since the Seventies. It is so old that its original manufacture, Fairchild Republic, is long gone merged into a bigger defense contractor.

One of the advantages to the government during a time when defense spending is flat or declining is that competition should reduce the prices on different services and hardware. Ideally with some things the government can award the right to bid on work to several contractors and then pick and choose among the best. This is often done with Indefinite Delivery/Indefinite Quantity (ID/IQ) contracts. These are when the government awards a series of contracts to buy hours of effort at a fixed price to groups of companies. Then as the work is done they buy the hours they need to perform it.

The Air Force has taken this kind of step with the latest maintenance and upgrade contract for the A-10. Boeing, Lockheed and Northrop Grumman have all qualified to bid on the work. This means in theory that when some sort of work is required the three companies will be in competition with each other to provide the best service at the lowest price. Of course that is the theory as sometimes only one company has the capability to do the work and that may also drive the price.

The contract also makes the companies happy as they can now book the potential work. This contract if all options are awarded may total almost $1.6 billion. There is no guarantee with this kind of contract that any work will be awarded for any value to any contractor. It is up to the government to figure out if they need anything done.


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