Government Snipes About Lockheeds Payment if F-22 Line Shut Down
The US Government is considering shutting down F-22 production. The Department of Defense went ahead in early November as the AP reported and ordered long lead material for four aircraft without committing to further production. Congress is debating whether to fully fund the USAF request for more aircraft in 2009. As Bloomberg first reported if the contract is terminated and only 4, or less, aircraft produced in 2010 the DoD will have to pay Lockheed a fee of over $140 M as the production line shuts down. Lockheed as Rueters says defends that clause.
By just going ahead with the long lead materials DoD is giving the incoming Obama administration the ability to decide whether to build beyond the current quantity of 183 aircraft. Lockheed has the fee built in to their contract to cover costs associated with inefficiencies as the line closes. Most current US contracts do not have such costs, although they are not unheard of or unjustifiable. These are different from termination costs that are usually paid out if the Government ends a contract early due to its needs. Termination for cause may not require the pay out of any extra funds.
Updated to credit Bloomberg.
Matthew Potter works supporting US Army aviation programs. He holds degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, Defense Procurement News.
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