Umm. The F136 Fixed Price ‘Concept’

Umm. The F136 Fixed Price ‘Concept’

UPDATED: GE/RR Will Offer Detailed Fixed Price Proposal Friday or Monday

The war for the Joint Strike Fighter’s engine money has developed a new front: when is a fixed price offer actually a fixed price offer.

We spoke with a source over the weekend who read us some emails which were apparently from Pentagon officials claiming that General Electric and Rolls Royce, makers of the F136, had not actually made the government a fixed price offer. And I realized that when I had interviewed Jean Lydon-Rodgers, president of the GE Rolls-Royce fighter engine team, she had been very careful to avoid calling it a fixed price offer. She spoke of cost containment and offered a detailed explanation in contracting language that left my head full of fog.

So I sent the Pentagon folks a series of questions, trying to get a firm fixed handle on the question. It turns out GE offered “what they called an F136 Fixed Price Concept,” one that the Pentagon folks said they believed “was presented in good faith.” The concept “included Not to Exceed values for Low Rate Initial Production Lot 5 (which equates to the 2011 timeframe),” according to Pentagon spokeswoman Cheryl Irwin.

So what has to happen for any of this to mean anything, beyond being clever maneuvers by powerful companies eager to convince lawmakers to give them money. GE/RR would have to offer — tah dah! — a proposal. Why, you ask? Irwin said “a proposal would provide much more detail in order to properly analyze its value and ability to deliver to the specific requirements.”

Also, Irwin said the discussions ongoing between GE/RR and the government is not the beginning of a process to achieve lower costs.

So, for everyone to get really serious about the idea of a fixed price, a great deal more must be done.

And it turns out that GE/RR has been doing just that. A company spokesman said “that we are in the final stages of finishing our formal unsolicited Fixed Price offer. It will be submitted to the JPO on Monday.”

So, tah dah to the companies.

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Rolls Royce??? Our US tax money??? Isn’t there a buy American act?

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The Rolls-Royce unit that GE is working with is located in Indianapolis, IN, not the UK. It’s the former Allison engine.

You might note that RR and GE are either significantly present in the US in the first case (Allison engines) or that GE is a US company; and more to the point F35 is a global airplane with more than 20% non-US content; if this is a US pitch by itself; it will not be a global sale.

Does anyone really think this ‘fixed price’ contract will mean anything? Military contracts are ALWAYS fixed price under normal circumstances. The issue is that the military changes requirements constantly, so they allow price fluctuations in the contract. They also allow for changes in raw material costs and other factors. This is a public-relations ploy by GE pure and simple, and will have so many loop-holes that it will be a joke.

I am guessing you are not in military contracting. For new development, such as the F136, virtually no contracts are fixed price for good reason. The F135 is not fixed price. Since I would assume there is virtually no GFM in the engine, assuming the contract is signed, that is what they will be payed in the end. Now they can probably make up any losses (if they have any) in later contracts and in parts, but a fixed cost contract would be a fixed price contract.

“The Rolls-Royce unit that GE is working with is located in Indianapolis, IN, not the UK. It’s the former Allison engine.” WRONG!

RR-UK is the company that GE is working with. RR-UK is making the main engine fan for the F136. GE works with RR-Indy (Liberty Works) on some of the VAATE activities.


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