WASHINGTON — Boeing is revising its master schedule for developing the new U.S. Air Force aerial tanker, adding to uncertainty about a plane that already has run up an estimated $1 billion in excess costs for the contractor.
The Air Force “has been continually monitoring” Boeing’s “progress on their internal schedules, and as we get” the contractor’s proposed revised time line “we will continue to assess the milestones,” Ed Gulick, a spokesman for the service said in an emailed statement.
Boeing won the tanker work in February 2011 when it beat Paris-based EADS for the initial contract to replace the Air Force’s aging fleet of KC-135 Stratotankers, which first flew in 1956, to refuel warplanes and transports in mid-air.
The Air Force and the U.S. Government Accountability Office have praised Boeing’s progress on the $51 billion program to build 179 of the planes, which is based on the company’s 767 jetliner and designated the KC-46. However, the service estimates that Boeing will have to absorb $1 billion in costs for exceeding a $4.9 billion ceiling to develop the first four planes.
The key contract milestone is the delivery of 18 combat-ready tankers, equipped to carry more than 212,000 pounds of aviation fuel and operate at altitudes up to 43,000 feet, by August 2017.
Boeing’s schedule revision “is intended to keep us on track” to meet that deadline, Caroline Hutcheson, a spokeswoman for the company, said in a phone interview.
Chicago-based Boeing is looking at how “to get us in a better position” to accomplish that, she said. “The challenges that Boeing is addressing” are “leading the company to re-plan elements of its tanker work flow, and its internal schedules,” she said.
Boeing’s proposed revised schedule won’t be presented to Pentagon acquisition officials until early next year, after an Air Force evaluation, according to Gulick.
Before the August 2017 milestone can be met, the tanker must complete a series of interim steps, spelled out in the schedule Boeing is revising.
They include the first flight of a prototype and then of a fully equipped tanker, the first deliveries, a Pentagon decision on initial production, the start of combat testing and finally the more lucrative decision on full production.
A decision on starting low-rate production at Boeing’s Everett plant is scheduled for August 2015; a decision on full-rate production in June 2017. The Pentagon test office this year warned that the start of combat testing, scheduled for May 2016, could slip a year.
Gulick, the Air Force spokesman, said, “We will make an assessment, and then we’ll be able to answer” how many of the milestones the military may agree to revise.
A revamped schedule may invite increased congressional scrutiny as Boeing and the Air Force seek approval to increase production. Tanker purchases are planned to increase from the seven requested this year to 12 in fiscal 2016 and 18 in 2017.
The Pentagon’s Defense Contract Management Agency, which oversees plant operations, said in an internal assessment in August that the revised Boeing schedule “is expected to have significant changes to baseline dates of major milestones.”
Gulick said that “while it’s too early to predict if the revised” schedule “will result in an increase to the government estimate” of the development phase’s cost, the government’s “liability is capped at the ceiling price.”
Boeing executives previously have said they expect to recoup the $1 billion in excess development costs during the program’s $39 billion production phase. The company is to report its third-quarter earnings on Oct. 22.
Boeing officials are “currently seeking internal” approval by the company’s top leaders for a proposed revised schedule before coordinating it with the Air Force, Gulick said.
Then the Air Force will conduct a “schedule risk assessment” to examine the assumptions behind the proposed changes and their impact, he said.
Among the difficulties forcing Boeing to revise the schedule were a six-month delay in turning on the power of the prototype tanker, a reworking of about 5 percent of the initial aircraft’s wiring after it wasn’t installed to specifications and “slower than planned” completion of assembly line “functional” testing, Gulick said in his statement.
Wiring design and installation issues pushed the first flight of the initial prototype to about November from June, according to the Air Force.
Boeing is spending about $7.5 million a month of its management reserve designed for unanticipated problems, Gulick said. The Air Force estimates that based on its current expenditure rate, the contractor will exhaust the reserve in March, he said. When faced with diminished management reserves on the program, Boeing has replenished it with its own funds.
The first flight of a fully equipped KC-46 is estimated to slip to April from earlier next year, Major Gen. John Thompson, the tanker program’s executive officer, said last month.
“The next six months are absolutely critical for the execution of the program,” Thompson said at the annual Air Force Association conference, without disclosing the schedule revision.
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