Committee chair McCain vows to block contract for new Northrop bomber

Reuters News
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Posted: Feb 25, 2016 9:17 AM

By Andrea Shalal

WASHINGTON (Reuters) - U.S. Senate Armed Services Committee Chairman John McCain on Thursday vowed to block use of a cost-plus type of contract, under which the government would be responsible for cost overruns, for a new long-range bomber to be built by Northrop Grumman Corp.

McCain told reporters he would seek to block authorization of the new U.S. Air Force long-range strike bomber in its current form, arguing that cost-plus deals inevitably lead to cost overruns.

"We can disapprove it ... I will not authorize a program that has a cost-plus contract," McCain said, when asked about the contract, which the U.S. Air Force has already signed with Northrop.

McCain said the military often argued that cost-plus contracts were necessary in cases involving cutting-edge technologies since unknown problems could emerge, but such practices were unheard of in Silicon Valley.

The Air Force said that only the engineering and development phase of the program, valued at $21.4 billion, was structured as a cost-plus contract with incentive fees.

The second part of the contract, which would cover initial production of the first five sets of new bombers, usually the most expensive planes in a new class of aircraft, would be structured with a firm, fixed-price.

The Air Force has not disclosed the full projected cost of the program, although it has said that it expects to pay $511 million per plane in 2010 dollars.

"The Air Force values the oversight role that Senator McCain has and looks forward to continuing to work with him and the committee on moving forward with this critical capability for the department and the nation.

The Department looks forward to being able to provide the Senator a complete briefing of the program at his earliest convenience," the aerial warfare service said. Officials were expected to brief McCain in the next couple of weeks, a spokeswoman said.

Northrop declined comment.

The Senate Armed Services Committee and its counterpart in the House of Representatives approve legislation that sets defense policy, while funding for the military is governed by the House and Senate appropriations committees.

McCain also took issue with the high level of secrecy shrouding the bomber program, and the Air Force's refusal thus far to divulge the names of key suppliers on the program.

"If someone wants to build an engine for an airplane that requires congressional authorization, then it must be known who’s making it and under what circumstances,” he said.

(Reporting by Andrea Shalal; Editing by Bill Rigby, Bernard Orr)