Pentagon acquisition chief Ashton Carter traveled to California last week to meet with Northrop Grumman Corp (NOC.N) Chief Executive Wes Bush and other industry executives about a new long-range bomber, according to three sources familiar with the meetings.
The Defense Department is working on a new long-range "penetrating" bomber, which will be designed to fly with or without a pilot on board, carry nuclear weapons, and cost about $550 million per plane on average, according to a new 30-year Pentagon plan for aviation procurement.
The plan calls for the Air Force to field 80 to 100 of the new bombers to replace the current fleet of bombers, which include 66 B-1 bombers, 20 B-2 bombers and 85 B-52 bombers.
That means the overall program will cost $40 billion to $50 billion over the next decades -- a huge opportunity for big weapons makers like Northrop, Lockheed Martin Corp (LMT.N) and Boeing Co (BA.N), which are bracing for declining defense spending in other areas.
The Pentagon's plan calls for upgrades to the B-2 bomber built by Northrop in the 1990s, to enhance its effectiveness and survivability, and divestment of 6 Boeing Co B-1 bombers built in the 1980s to pay for upgrades to the remaining fleet.
Senior defense officials have said that the fiscal 2012 budget includes $3.7 billion for the new bomber over the next five years, but industry executives are waiting for details on how the department plans to structure an acquisition plan.
One big challenge is that work on the bomber is likely to be classified, but funding for the program will be in the public domain, said one executive who was not authorized to speak on the record.
Defense companies are also worried that the Pentagon may try to develop the new bomber on a fixed-price development contract, rather than the cost-plus contracts used in the past, according to a second industry executive.
BUILDING AFFORDABILITY IN FROM THE START
Carter, meanwhile, is focused on ensuring that development of a new bomber doesn't run into the cost overruns and schedule delays that have plagued most big weapons programs.
He told lawmakers last month the Pentagon wanted to build "affordability" into big weapons programs from the start.
"The military services have worked and reworked the requirements for these programs to ensure that we do not find ourselves, after spending billions on development, with a system we can't afford to produce," he said in written testimony for the House defense appropriations subcommittee.
The Air Force said it was focused on keeping the new bomber affordable by constraining military requirements and adopting a streamlined management and acquisition approach.
Setting a target for the new plane's average procurement cost would allow officials to make the capability trade-offs needed to keep program costs low, the service said.
Carter also met with executives from Lockheed Martin Corp during his visit to Palmdale, California, where the company has its Skunk Works facility where it works on classified programs like the F-117A stealth fighter.
Boeing's advanced research facility in Palmdale, known as Phantom Works, is where the company designed its new Phanton Ray unmanned plane, which executed a first flight last month.
Officials at the three biggest U.S. defense contractors declined to comment on any specific meetings between their executives and government officials. No comment was immediately available from Carter's office.
Defense consultant Jim McAleese said the Air Force had likely already paid the three companies -- Lockheed, Northrop and Boeing -- at least $1 billion to develop technologies that would be used on a new bomber.
Last week's meetings were likely part of a "fact-finding" mission that would help Carter shape an acquisition strategy for the new weapons program, he said.
The Air Force's budget included $12 billion for classified research in fiscal 2012 alone, plus $18 billion for classified procurement, McAleese said.
Air Force budget documents foresee spending on the bomber of $197 million in fiscal 2012, which begins October 1, with outlays growing each year to around $1.7 billion in 2016.
Additional money would be spent on other weapons associated with long-range strike capabilities over the time, including $800 million for a new nuclear-capable cruise missile.