B-2 Bomber:

Status of Subcontract Options

NSIAD-91-295: Published: Sep 24, 1991. Publicly Released: Oct 21, 1991.

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Pursuant to a congressional request, GAO examined the extent to which: (1) a contractor used advance procurement funds provided by the Air Force to acquire components for B-2 aircraft that the Air Force planned to procure in future years; and (2) estimated prices for components being acquired under contract options had increased.

GAO found that: (1) the Air Force has obligated $341 million of $401 million in advance procurement funds by Congress for exercise of the subcontract options and has requested an additional $220 million in advance procurement funds for fiscal year (FY) 1992 to provide funds to the contractor to continue to exercise such options; (2) the current Air Force procurement plan, exercise of available fixed-price options could result in the Air Force purchasing components for installation in 28 more aircraft than it plans to procure through FY 1992; (3) the contractor estimates that the new subcontract prices for components whose options are expired will be 150 percent higher than the prices that were available through the options; and (4) subcontracts with annual options have increased in price by 61 percent since FY 1989, primarily due to design changes.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Essentially, the intent of the recommendation has been met by the Air Force. Air Force officials indicated that further subcontract options would not be exercised. Funds made available for that purpose have been reallocated to other needs.

    Recommendation: The Secretary of the Air Force should make a comprehensive analysis of the alternatives to exercising the options for each of the 36 components listed in appendix 1. The Secretary should also consider the: (1) risks of acquiring components with unstable designs; (2) revised schedules for delivery of aircraft; (3) impact of inflation and the cost of financing the procurements ahead of the dates needed; (4) cost of storing the components; (5) potential obsolescence of the components; and (6) potential expiration of subcontractor warranties and or guaranties.

    Agency Affected: Department of Defense: Department of the Air Force

  2. Status: Closed - Not Implemented

    Comments: Because of the President's decision in connection with the FY 1993 budget submission to reduce the number of B-2s from 75 to 20 operational aircraft, the recommendation to provide a summary of the analysis of subcontract options with the FY 1993 request is no longer valid.

    Recommendation: The Secretary of the Air Force should complete the analysis for each component before FY 1992 funds are obligated for that component on a contract with Northrop and provide a summary of the analyses with the Air Force's FY 1993 budget request.

    Agency Affected: Department of Defense: Department of the Air Force

 

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