Northrop has, so far, totaled more than $2B in losses on the
B-21 program.[1]
Can no one estimate a program anymore? Are the people running industry and the
military really as stupid as the evidence demonstrates? It would appear so.
https://breakingdefense.com/2025/04/northrop-logs-new-477m-loss-on-b-21-bomber-due-to-higher-manufacturing-costs/
We're really seeing a marketing cost with this $2b. Presuming the planes planned are built, they'll make it up on sales.
ReplyDelete"they'll make it up"
DeleteBoeing probably thought the same thing with the KC-46 tanker.
Mark my words, more losses are coming ... much more.
"Pardon my minor interruption"
DeleteComment deleted. This is not a political blog. There are plenty of other blogs you can go to attack politicians. If you have direct, informative, useful military matters to discuss, you're welcome to comment but do so without the politics and personal attacks.
If I remember correctly NG did a head dive into this program with a bid several $B lower than both Boeing and LM. So in essence NG went into the program knowing they would take a loss and then either get the money back either by getting increased funding or during production and upgrades.
ReplyDeleteBoeing did the same in the tanker program that Airbus first won. Boeing also gamled that the DoD would change the requirements during the development and hence transform the program from a fixed price to cost. The Airforce in this case elected to not change the requirements and Boeing hence takning a loss in around $7B so far....
/W
So in summary: the procurement process is such a mess that instead of offering the best product at the best price our mega contractors are simply trying to outgame the system and hoping they don’t crap out.
ReplyDeleteNote: You somehow generated a duplicate comment which I went ahead and deleted.
Delete" contractors are simply trying to outgame the system and hoping they don’t crap out."
Yes, and no. Mainly no. The military, almost as a rule, plans for, and bids, large quantities of a product and, invariably, reduces the quantity after production has begun. How is this fair to the manufacturer and, worse, how can the manufacturer possibly offer a reasonable and solid price when they know the military is going to reduce the purchase at some point. Thus, the manufacturer must "game" the system to try to make a profit in the face of contracts that aren't really contracts and quantities that can decrease at the drop of a hat.
ALL of the purchasing problems that we face have been self-inflicted by a military that refuses to conduct business according to standard business practices.
Consider the case of the Constellation class frigate. The Navy insisted on concurrent construction and design. The manufacturer was forced to bid on an undefined ship that had so design plan. How can the builder possibly have come up with a realistic cost? They couldn't. To no one's surprise but the Navy, the project is now significantly over budget and behind schedule.
One way to write a contract with future quantities that might decrease from planned is to price the product on a sliding scale - the first ones are more expensive than later ones. You capture your learning curve, and the purchaser benefits as you gain efficiency and pay off your upfront costs - there is also an incentive to buy more as the price decreases.
DeleteAs you've said before separate R&D from production. If Northrup can't really know costs at the beginning, and how could they if what their building isn't fully defined and prototyped, then don't sign up for production costs/sales until it is.
Part of the problem lies in how Congress funds military procurement programs - typically one year of fudging at a time.
DeleteMulti-year funding would give suppliers more confidence that numbers wouldn’t significantly change and leave them carrying the can for cutback order quantities.
Blast! Auto correct! Should have read funding not fudging. But then again….
Delete"Multi-year funding"
DeleteHopefully, you understand the differences between formal Multi-Year Procurement (MYP) and Block Buy Contracting (BBC). There are legal requirements and restrictions on MYP. MYP and BBC both require Congressional approval.
That aside, there are pros and cons with these approaches. The main pro is, of course, potential cost savings although, as the Congressional Research Services report points out, the anticipated savings often fail to materialize for a variety of reasons. The main con is that MYP and BBC greatly reduce the opportunity for Congress to exercise its oversight function. In essence, MYP and BBC give the military a blank check and a free pass for multiple years.
Neither MYP nor BBC guarantee that the initial specified quantities will be completed.
A funny part is that contractors are complaining about tariffs since they import lots of foreign stuff to make "American" weaponry.
ReplyDeleteSo, anyone still believe Trump Administration's F-47's EMD cost estimation of 20 billion? F-22 was 40 billion while F-35 50 billion, no to mention, high inflation in recent years.
ReplyDeleteAs best I can tell, the F-22 EMD contract was for around $11B back in 1991. Other sources put the EMD cost at $18.9B in 1999. Nothing indicates a cost anywhere near the $40B you cite. Please supply a link or source for your claim.
DeleteLikely, NG faces serious technical issues which it cannot solve. Longer than estimated R&D time cause others idle yet NG has to pay them for doing nothing.
ReplyDeleteIf there were no problems, we should have seen B-21 made one-by-one than serious cost overrun. Pentagon and NG hide behind confidentiality to cover their incompetence.
Besides money, time is more important. B-2 are aging thus will retire soon.
DeleteAnother thought is usefulness of this kind of subsonic low maneuverability stealthy bomber. It relies solely on stealthy but anti-stealthy technologies progress quickly. Could NG have to keep changing B-21 designs thus cost more money and time? I don't know.
"B-2 are aging thus will retire soon."
DeleteSooner than the B-52's?
"usefulness of this kind of subsonic low maneuverability stealthy bomber."
More or less useful than the B-52's?
"Likely, NG faces serious technical issues which it cannot solve."
DeleteThere are zero facts to support this supposition. I don't mind speculation when it is logical and clearly indicated as being speculative (which you did indicate) but let's shy away from completely unsupported speculation which offers nothing informative or useful.
China doesn't pursue subsonic flying wing stealthy manned bomber like B2, B-21. People speculated "H-20" has never been found. Rather, it pursues supersonic stealthy ones. Recent flied Chengdu J-36 is an example. It uses 3 engines with an aerodynamic frame aiming high speed. B-21's aerodynamic frame has very high drag force thus cannot fly fast.
DeleteApparently, now, US and China have different thought on carrying weapons. One thing for sure now - fly over and bomb has become a thing of past, thanks to development of SAM. B-52 are still useful as they can carry far more weapons than B-21 but need to launch them far far away from enemies. B-21 can launch weapons closer to enemies (depend on their anti-stealthy technologies, nothing to do with their will or determination).
"More or less useful than the B-52's?"
DeleteThe flight profile isn't really the problem that the Anon above thinks it it is - the B-2 is also subsonic. The bigger concern is more the lack of survivability imparted by the B-52 being a non-stealth design vs the B-2 and B-21 being stealth bombers - as you yourself have noted, CNO, we're in that moment of time where stealth is the cost of doing business.
Now, the B-52 served us very well as a long loiter long range bomb truck during the last 25 years of the GWOT, but it's telling that nobody else has made such aircraft, because nobody else had the kind of needs we were, fighting a colonial small war halfway across the world, in permissive airspace. A B-52 can loiter over a COIN battlefield all day everyday, leisuirely dropping JDAMs on point targets. That's not really something that can be done in Major Combat Operations, the peer war that we're gearing up to.
Of course in that sort of scenario, we could transition B-52s to being cruise missile carriers. The challenge facing the B-52, however, is that we have limited quantities of the long-range AGM-86 ALCM, not even 600 missiles, and its replacement, the JASSM, is meant as a tactical cruise missile and has a range of 370 kilometers, which means our B-52s would be entering the detection range of ground based radar and AWACS if they were attempting a strike at targets on the Chinese mainland.
This is where the B-21 comes in, Anon. By having a stealth bomber, it gives us a better chance of sucessfully penetrating the enemy long range detection net, surviving long enough to reach the release point and launch our ALCMs. Yes, the Chinese are hard at work at stealth detection technology, as are we, but remember: just because something is DETECTED doesn't mean that you have a firing solution. You still need to LOCATE it and IDENTIFY it. Read up NORPAC 82's cruise; it'll be illuminating to you.
" it's telling that nobody else has made such aircraft"
DeleteAn interesting note is that the Chinese have built a very similar aircraft, the H-6 bomber (Soviet Tu-16 derivative). Over 200 have been built and it is still listed as being in production, today. Given its ability to launch cruise missiles, the H-6 is a valid threat to ships and land bases under the right circumstances.
"China doesn't pursue subsonic flying wing stealthy manned bomber like B2, B-21"
DeleteChina's main problem is Taiwan, Japan and Philippines(to some extent) which restricts its access to Pacific Ocean unlike US
so they are currently building Tactical/Regional bombers
J-36 which is next Gen of American F-111 or Russian S-34
once those two hurdles are removed they will induct long range sub-sonic bombers like B2 and B21
"China doesn't pursue subsonic flying wing stealthy manned bomber like B2, B-21. "
DeleteIncorrect. The H-20 is one example of a B-2/21 type stealth bomber in development.
Just to put things a little bit in perspective, $2B is the value of 1 B-2 or 3 B-21s as they were originally bid at $700M each. It stucks, but this seems less like a procurement trainwreck and more like a nonfatal carcrash compared to other acquisitions programs out there. Maybe I've just been too traumatized from observing the LCS fiasco most my life.
ReplyDeleteThat comparison is meaningless. The comparison that matters is what does the loss represent relative to Northrop's annual profits. In 2024, Northrop made a $8.4B profit. Thus, the $2B loss represents 24% of the profit ... lost. And, this is only one program and only one point in the program. Northrop's other programs may contribute other losses and the B-21 program is still in its infancy. More problems and more losses will crop up.
DeleteThere is still potential for NG to make an ultimate profit but this is not a good start and indicates very poor program management right from the start.
I'm sure Boeing thought each individual loss on the KC-46 tanker program wouldn't be that big a deal but they kept adding up. If NG can stop the losses they might be okay but if not ... Boeing, hold my beer.
No great loss. An incompetent company deserves to go out of business.
ReplyDeleteOh come on, now. You can't be this oblivious to the impact of losing yet another major defense industry company. Think about it and reply with an analysis of the impact. Contribute something useful and informative.
DeleteThe capitalist model teaches us that it is the market which makes companies survive. If comoanies are incompetent and perform losses, they go bankrupt and their space is taken by their competitors.
DeleteSurely you are not arguing that the company should be owned and administered by the government - or, heaven forbid, the Army. That is socialist talk.
As gently as I can say this, you might want to find a blog more suited to your intellectual level.
DeleteUnlike F-35, use cost plus model, NG signed B-21 contract on fixed cost model. It means NG's profit/loss depend on how much it spends. NG bears most responsibility, if not all, for this cost overrun. Most businesses in the world run on fixed price model. Do you buy a car from Ford on cost plus model?
ReplyDeleteHow can a business accept a price but end up in loss? Of course, its initial estimations filled with rosy forecasts which cannot materialize. They may include but not limit to - failure in R&D, suppliers' R&D problems caused delay (in private sector, they can fine suppliers for serious delays), poor management (keep missing milestones), .... , etc.
This is why in most defense projects, contractors like the cost plus model - Pentagon pay cost plus a reasonable profit margin. Therefore, only Pentagon needs to explain to Americans "why" their money goes down into drain. LM uses cost plus on F-22 and F-35 thus all %^$#@ are your problems.
Currently Defense Contractors utilize Price to Win analyses to win proposals. This approach analyzes the evaluation criteria listed in Section M to determine what factors, and by how much, the proposal has to meet to win over the competition. Usually cost is the final determining factor hence the name. Note that the Price to Win is not based on the price needed to execute the program either technically or profitably.
ReplyDeleteWhen you win and the execution team is assembled and says we can't do it for this amount, they get told you have an opportunity to excel, do it for that. Furthermore, the company does not want to lose the prestige and hopes that contract changes will save them. Finally like on the B-21 the losses aren't covered come out.
If investors really understood the current bidding process they would not buy Defense Stocks. it is not like the old days where you got a Cost Plus development contract for trying to build something that had never been done and hopefully are able to build a working Development Model and can make good profit on the fixed price production contract. Also you may get new technology that you that you can roll into your commercial products.
Unfortunately, Defense Contractor no longer have substantial commercial product lines and have to show strings of wins to keep their stock price up.
Added to this is the complete and utter ignorance on the part of the Government evaluators about how to tell if a proposed development cost is realistic and the backbone to escalate the PTW bid to a realistic value. Instead they seem to just use Greenspan's argument that companies would not take on this much risk. It is risky if you hire the Flags that run the evaluations.
"utter ignorance on the part of the Government evaluators about how to tell if a proposed development cost is realistic"
DeleteI have no idea how a govt evaluator, whatever that is, would work. However, as an example, the day the first public cost estimates ($800K) for the Constellation surfaced, I noted that the Constellation is 80% of a Burke and the Navy was trying to claim they would build it for 35%-40% of the cost of a Burke. That's all the analysis I needed to see the Constellation cost estimate was a fraud. Indeed, the Constellation is now up to around $1.2B which is EXACTLY what I predicted way, way back. The point being that sometimes (most of the time!) you don't need to be a highly trained evaluator (whatever that is). An ounce of common sense will usually suffice. BOTH industry and the govt lacked common sense.
A Government Evaluation Team (Tech Team) are a few operational types from the Fleet, and then the technical (HW, SW, any specialty Tech - like Radar) and logistician personnel from the SysCom. The Ops types evaluate how well the proposed design meets the CONOPS and the SysCom folks are supposed to evaluate the tech approach and the Basis of Estimates (BOEs) to see if they are reasonable. But if folks are not experienced, they are just looking at the words in the BOE and won't dispute the contractor's PTW based proposal.
Delete"evaluate how well the proposed design meets the CONOPS"
DeleteOne of the problems is that the Navy doesn't do CONOPS anymore. I can't recall the last true CONOPS the Navy did. Instead, they've substituted Key Performance Parameters and various other technical specs for CONOPS. This is why so many systems seem to have no valid, viable use when they reach the fleet.
You are spot on. CONOPS and Mission Profiles are absolutely critical. Mission Profiles tell how long a system is expected to be in storage (transit), operation, type of operation (for example for vehicles how much time off road, road, cross country), whether the system has to be continuously ready to operate without maintenance or check out. This drives the reliability test criteria and the testing. If you don't expect a system to get exposed to sea spray (because it is containerized) why test for it? PLUS it tells the operational folks how the developers think this system will be used. Better to get any disconnects identified early.
DeleteEven Admirals and SESs should be able to see if a RFP package has a CONOPS and Mission Profile in it. Gross incompetence is the only reason, not excuse, for these RFPs coming out without these critical documents.