The US Air Force will release $882 million in payments to Boeing that were held back due to flaws in the KC-46 air refueling tanker, said a Pentagon official.
The release of the payment to Boeing is part of a broader recommendation sent to Air Force contracting officials, according to a memo seen by Reuters, aimed at maintaining the financial health of suppliers to the Department of Defense.
The KC-46A Pegasus in-flight refuelling tanker has been plagued with problems and is years behind schedule. The Air Force had the right to hold back about $28 million of the cost of each of the first 52 KC-46 Pegasus jets on order to ensure Boeing delivers fully functional tankers. With 33 jets delivered thus far, the Air Force could have withheld up to $924 million.
However, in order to ensure a fix to an especially difficult problem with the tanker’s Remote Vision System (RVS) – a camera used to guide the tanker’s refuelling boom – the service believes it would be productive to release the withheld funds. The additional cash should help improve Boeing’s financial position and thus speed up the resolution of the problem.
“Cash flow is everything right now. Liquidity is everything. We have created policies in the Department of the Air Force to get as much cash out of our hands and into industry as possible where prudent. The KC-46 is no exception,” says Will Roper, assistant secretary of the USAF for acquisition, technology and logistics on 2 April. “As we’ve changed cash flow policies, we took a hard look at our withholds for KC-46. Given the need to get an RVS 2.0 design nailed down, we asked ourselves, given Covid-19, is this withhold doing the job for us that we need it to do? We thought it was much better to go ahead and try to tie this up.”
The result is two memoranda of understanding with Boeing. One agreement is to the specifications and process to certify the RVS. The other agreement is for releasing the withheld funds.
The new camera design is jointly developed by the USAF and Boeing . The service plans to initially field the new RVS in 2023.
The Air Force plans to buy 179 of the aircraft, which refuel other aircraft mid-air, but the program has been plagued with problems, including foreign object debris found onboard the planes and issues with a camera system used during the refueling process.
Boeing Defense, Space & Security chief executive Leanne Caret said the “takes advantage of new remote vision systems technologies that are orders of magnitude better than what was available when the program started.”
Boeing has temporarily shut several production lines in Washington state due to the spread of the coronavirus.
On Monday, the Air Force announced an additional major technical issue with the KC-46 Pegasus related to fuel leaks that could endanger the aircrew and aircraft.
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