Defense Industry:

Status of the C-17 Program and Related Issues Affecting the McDonnell Douglas Corporation

T-NSIAD-92-4: Published: Nov 14, 1991. Publicly Released: Nov 14, 1991.

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GAO discussed the Air Force's C-17 military transport aircraft program, focusing on financial issues involving the Department of Defense (DOD) and the contractor. GAO noted that: (1) because of major schedule delays and increases in the overall cost of the C-17 program, cost overruns are estimated to range from $450 million to $1.4 billion; (2) in January 1991, the contractor requested that DOD establish a $1-billion advance payment loan to help it overcome an anticipated cash flow shortfall; (3) DOD did not approve the assistance request, but was concerned about the viability and effect of the contractor's financial failure on government programs; (4) as a basis for determining the contractor's actual need, DOD asked the contractor to reassess the cash flow it expected from the C-17 program based on a set of assumptions DOD and the Air Force developed; (5) the first three assumptions dealt with the contract's estimated cost of completion and the other four assumptions related to the amount and timing of funding actions that would take place in relation to other contracts being negotiated; and (6) those funding actions could result in a large percentage of the contract's value being obligated and spent before the actual final contract award.

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