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Navy P-8 Deal Tops $17 Billion in July Awards

Boeing Co. won the U.S. Defense Department's biggest contract last month, a $2 billion award for more P-8 Poseidon surveillance planes.

Under the agreement, the Navy will buy 13 P-8A aircraft as part of another round of low-rate initial production, according to the July 31 announcement. The deal also includes equipment kits, as well as parts and manufacturing materials associated with the next planned purchase of planes.

The award topped a list of more than 240 contracts with a combined value of about $17 billion in July, according to a Military​.com analysis of the Pentagon’s daily contract announcements. The overall value fell by more than half from the prior month, as the military disclosed far fewer orders worth more than $1 billion. The amounts don't reflect what was actually spent, or obligated, because many deals are only partially funded at first.

“We’re on budget and on schedule and the Navy will stand up initial operational capability of this transformational aircraft by the end of the year,” Rick Heerdt, a vice president at Chicago-based Boeing and the company's P-8 program manager, said in a statement after the contract announcement.

The P-8 is based on the company’s commercial 737–800 twin-engine narrow-body passenger jet. In fact, both aircraft are made in the same facility in Seattle. The naval plane is designed to replace the P-3C Orion made by Bethesda, Md.-based Lockheed Martin Corp, in conducting long-range missions to hunt submarines, among other ships, and collect intelligence, according to the Navy.

The Navy's decision to buy the P-8s under low-rate initial production follows a recommendation from the Pentagon's inspector general's office, which had warned that more "critical testing" of the submarine-hunting plane was needed before advancing to full-rate production.

Buying the planes “based on incomplete test results could result in costly retrofits to meet lifespan and mission and system performance requirements,” according to the summary of an audit released in June on the website of the Defense Department’s Office of Inspector General.

The IG office recommended that Frank Kendall, the Pentagon's top weapons buyer, purchase the aircraft under a contract for low-rate production and delay the full-rate production decision until Capt. Scott Dillon, the Navy’s program manager for maritime surveillance aircraft, can demonstrate the plane will be able to survive its 25-year lifespan without structural fatigue, overcome mission-limited deficiencies, and track surface ships and perform other primary missions.

While the Navy ultimately followed the counsel of the Pentagon's inspector general's office, company officials dismissed the audit.

“I wouldn’t read anything into that,” Chris Raymond, vice president of business development and strategy for Boeing’s Defense, Space and Security unit, said during a June 16 briefing with reporters at the company’s Paris offices before the start of the Paris Air Show. “Between us and the Navy, we still feel like we’re very on track with the flight test program. It’s going well.”

Boeing is delivering planes and a pilot training program is underway at Naval Air Station Jacksonville, Fla., Raymond said.

Still, the amount of testing that remains to be done could be significant. The Navy is rumored to have wasted time and money duplicating efforts made by Boeing measuring the aircraft's flight performance. The service has yet to verify the full functionality of the plane's various sensors, among other technology.

The overall cost to develop and build a total of 122 of the aircraft, including five test versions and 117 production models, is estimated at $34.9 billion, according to figures the Pentagon released in May.

The Navy to date has ordered 37 of the 117 production models it plans to buy, according to the Boeing statement. So far, 10 have been delivered, according to the company.

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