Politico David Vinik detailed the process and federal powers in ending contracts.
Unlike traditional contracts, most federal contracts include a “get-out-of-jail” free clause that allows the government to break a contract for a wide variety of reasons. That power is not unlimited, but for companies to prove the government illegally violated the contract, they must prove that the contracting officer acted in “bad faith,” a standard that is exceptionally hard to meet. In one case, a judge held that the company needed “well-nigh irrefragable” — meaning indisputable — “proof” to meet that standard.
What Trump is doing, by targeting specific companies or specific federal contracts, is new and unprecedented, experts said. “Never seen anything like this,” said Sean O’Keefe, a former secretary of the Navy and comptroller of the Defense Department.
In 1991, the US Navy terminated the $4.8 billion A-12 stealth plane contract “for default,” a legal standard meaning that the contractor failed to fulfill its contractual duties. Terminating a contract for default is rare and carries significant financial repercussions for the contractor, which does not get compensated for any uncompleted work.
The government can also terminate contracts “for convenience.” Under such scenarios, the government ends a contract because it deems it no longer in the best interest of the country.
Unlike termination for default, termination for convenience allows the contractor to recoup the costs of all its work done up to the point of termination. The government may also pay settlement fees and even sometimes pays the contractor a profit. Still, the termination can be complicated and the contractor loses future revenue.
Experts suggested that it would be unlikely that Boeing or other companies would sue the federal government for acting in bad faith, even if they had a good chance of winning the case. Such a move might jeopardize their other federal contracts, especially if the courts ruled against them.
Despite detailing the leverage that Trump is wielding. Vinik at Politico says the ultimate result of Trump threatening to terminate federal contracts, whether to prevent companies from moving overseas or to cut down on perceived waste, could be higher costs for the government. Companies, faced with the increased risk of termination or negative publicity from an angry tweet from the president, would likely raise their prices in response, experts said. “With long-term complicated programs, the things that drive up prices are instability and uncertainty,” Schooner said. “That’s what he just added to the process.”
I disagree and think that having Trump as Negotiator in Chief to bring pressure on major spending programs will save federal money. Boeing's CEO is already saying they will find ways to lower the cost of the new Air Force One while providing good capabilities. This is because Trump has also put Boeing's F18 plane up against the F35, which is a bigger prize for Boeing.
The F35 is older plane design but it is capable. It has inferior stealth capabilities but still has stealth. However, stealth only comes into play if the US is fighting China and/or Russia. Any other opponent would have its air defenses easily ripped apart in a few days by the B2 bombers and the F22s. Even Russia and China have fewer advanced planes and would not be able to withstand the current air power of the USA. Boeing is also pushing an improved Super Hornet F18 that would have even more stealth. It would be perfectly adequate against Russia and China's gen 4.5 fighter planes. The F18 could be even better than the F35 for many missions. The F35 has and still has software and other design problems.
An advanced version of the F18 costs about $60 million each. Making even further improvements like conforming fuel tanks for more range while still staying stealthy might bump up the price a bit more. However, it is reasonable to think those improvements can be made while keeping the cost at $70 million each.
With the production data, we can calculate a F-35A has a price tag of $157 million, not $102 million. It’s $265 million for a F-35B and $355 million for a F-35C, not $132 million for either variant.
So an improved advanced super hornet F18 should cost less than half the price of F-35A and four times less than an F-35B and five times less than an F-35C.
An F/A-18F performed a flight equipped with the IRST (passive Infrared Search and Track) system in February 2014, and Milestone C approval authorizing low-rate initial production (LRIP) was granted in December 2014. Boeing and Northrop Grumman self-funded a prototype of the Advanced Super Hornet. The prototype features a 50% reduction in frontal radar cross-section (RCS), conformal fuel tanks (CFT), and an enclosed weapons pod.
Survivability is an important feature of the Super Hornet design. The U.S. Navy took a "balanced approach" to survivability in its design. This means that it does not rely on very low-observable technology, i.e. stealth. Instead, its design incorporates a combination of signature reduction, advanced electronic-warfare capabilities, reduced ballistic vulnerability, the use of standoff weapons, and innovative tactics that collectively enhance the safety of the fighter and crew in an affordable manner
Other proposed upgrades would add more powerful and fuel-efficient engines and vastly improved electronic warfare capabilities. Once developed to its full potential, the Block III Super Hornet could perform most of the missions envisioned for the F-35C except penetrating strike—it would have to rely on stand-off weapons for that mission.
The money saved from truncating the F-35C buy could be reinvested into the F/A-XX and a new long-range unmanned strike platform. The money saving could also be used to reduce the overall military budget.
The Super Hornet employs reportedly the most extensive radar cross section reduction measures of any contemporary fighter, other than the F-22 and F-35 as of 2004. While the F/A-18E/F is not a stealth fighter like the F-22, it will have a frontal radar cross-section an order of magnitude smaller than prior generation fighters. Additional changes for reducing RCS (radar cross section) can be installed on an as-needed basis. On 22 November 2016, the Liberal government of Canada announced its intention to immediately acquire 18 Super Hornets on an interim basis.
The F35 is more costly to operate and maintain. The F/A-18 Super Hornet has a per hour operational cost ranging from USD 11000 to USD 24000, depending on degree of operational capability. The conventional F-35 A, assuming operational service over 30 years with 200 hours per year for each aircraft, to amount to USD 21000 per hour of flight. The paper also sources US Navy projections of the cost of operation of the F-35 B and C variants until the year 2029, which come to USD 31000 per flight hour.
A superhornet can be about half the operational cost of the F35. If $10,000 per hour is saved, then with 200 hours per year, each plane would have $2 million per year on operation. A super hornet with more fuel efficient engines might get closer to the $5-8000 per hour cost of some advanced European fighters. The Gripen has a Boeing engine and an operational cost of $4700 per hour. $20000 to 25000 per hour operational cost savings is possible. This would be $4 to 5 million savings per year per plane.
The stealth coating on an F35 is very costly to maintain.
Between savings on purchasing, operating and maintaining the cost savings can be around $15 billion per year by cutting off the F35 and switching to Super hornets. Over 30 years that savings could be $450 billion and could be even more.
The procurement of over 2000 F35s is projected to be $379 billion but the procurement and operation to about 2060 has been projected to total $1.5 trillion.
China will be more of a capable military opponent around 2050. However, it would of course be idiotic to ever have a war between the USA and China. An advanced US military at that time would want the F/A-XX and the new long-range unmanned strike platform. This would happen sooner by not wasting money on F35s now through 2040.
US Federal government spending is tracked at USAspending.gov
The Pentagon and Lockheed will sit down in the middle of January to hammer out a deal for the next 100 F-35s. The negotiations will not finish by Jan. 20 when Trump takes the oath of office. Clearly Trump will be leading the negotiation.
Last month, Pentagon negotiations gave Lockheed a $6.1 billion take-it-or-leave-it deal for 57 F-35s. Lockheed make no secret that it was unhappy with the deal and has until February to accept or reject it.
Nextbigfuture prefers that the F-35s get cancelled and the Advanced Hornet option is pursued.
The general in charge of the F35 project, Lt. Gen. Chris Bogdan, has floated other ways to reduce the cost of each jet, including injecting more competition within the plane’s sprawling supply chain, which touches 45 states, and buying planes in bulk.
“If you have a single source supplier of a particular component on this airplane right now and you’re not sure if that person can build you 3,000 airplanes worth of that, you probably might want to open up a second source,” he said. “Once you open up a second source, now you have natural competition. We should explore some of that.”
The F-35 will not be fully battle ready to fight a diverse range of missions until the end of the decade (or even later). As for the F/A-18, its design is stable and Boeing can build them quickly. And Boeing has marketed an “advanced Super Hornet” with high-tech equipment somewhat comparable to the F-35.
Functioning and lower cost F18s would make a stronger US military from now to 2022 at least. I am not convinced the F35s would be better even after the effort to get them capable of basic missions.
Investing some of the savings into accelerated development of the F/A-XX and new long-range unmanned strike platforms could see new military capability by 2025-2030 instead of 2035-2045.
Some more on the F35 problems
There is significant debate over whether the Pentagon actually needs the capabilities the F-35 is supposed to offer. Nextbigfuture's position that the F35 is not needed.
In 2016, Bogdan admitted that the strike fighter jet project was anything but “joint.” Despite the Pentagon’s plan to save money with shared features, the F-35A, B and C variants only have 20 to 25 percent of their components in common. It’s “almost like three separate production lines,” the general conceded, according to Air Force Magazine.
The F-35 has had — and continues to have — a lot of problems.
* The jets can’t dogfight against dated opponents
* the engine arrangement severely limits how many weapons the plane can carry
* the fancy and expensive helmets blind pilots at night and might even kill them in an accident.
* The ejection seat might not work properly
* various design features pose potential fire hazards
* the aircraft’s much-touted computer brain might lock pilots out
* the radar used to frequently crash and needed rebooting in midair
* the Pentagon’s top weapons-tester Michael Gilmore has released scathing reports and memos (the software is still years from working)
* In October 2016, an F-35 burst into flames
Jim Cramer discussed Trump negotiating.
President-elect Donald Trump is a "negotiator-in-chief," and U.S. companies will have to adapt to the new landscape, CNBC's Jim Cramer said
"I think we have to get used to the idea that [Trump] said he would be a deal maker — he would negotiate," Cramer said on "Squawk on the Street." "Everything seems like the first bid on the table."
Cramer said that Trump puts out a strong position on how companies should function. In response, Cramer said, Trump expects the other side to negotiate.
"These CEOs don't know how to negotiate," he said. "They've never negotiated with a president. It's a different world ... When Obama was slamming the banks, the fat cats, it wasn't like they were down there saying, hey, President Obama, listen, we're not fat cats ... These things actually seem like negotiations. I mean, for real."
SOURCES- CNBC, Wikipedia, USASpending, Politico, National Interest, Defense One, War is Boring