Corporate maneuvering may be throwing a wrinkle into plans for the next big U.S. Air Force combat aircraft program, the Long Range Strike-Bomber (LRS-B), as Boeing and Lockheed Martin formed a powerful team to win the $100 billion-plus program. Left as a wallflower, Northrop Grumman has pointedly not confirmed its intention to compete, indicating unhappiness with the Pentagon's approach. But with most aspects of the program classified, companies are generally silent about their plans.

Under the agreement announced Oct. 25, Boeing will be the prime contractor, with Lockheed Martin as its primary teammate. This is their second trip to the altar on the USAF's next bomber, having joined forces in 2007 on what was then the Next-Generation Bomber (NGB) (the deal was announced in early 2008). Aimed at delivering a new bomber in 2018, NGB was canceled as a full-acquisition program in 2009, due to a combination of cost, risk and the 2008 fiscal crisis, and the two companies continued work separately.

The LRS-B program is aimed at delivering 80-100 very stealthy long-range bombers to the Air Force, with an initial operational capability in 2024-26, and with a unit procurement cost ceiling of $550 million, not including engineering and manufacturing development (EMD) and upgrades. The Air Force was given the go-ahead for LRS-B in early 2011, with easier operational requirements than NGB, particularly related to endurance and a cost ceiling endorsed by senior Pentagon leadership.

Unlike NGB, the LRS-B is expected to work as part of a family of LRS systems, including a long-endurance stealthy unmanned air system (UAS) (already under development by Northrop Grumman, under a classified program) and a future cruise missile (LRS-M). It is likely to be smaller than NGB and earlier USAF bombers.

NGB has apparently survived as the umbrella title for a number of risk-reduction efforts, including, according to an industry source (AW&ST Dec. 3, 2012, p. 29), a large-scale flight demonstrator produced by the Lockheed Martin Skunk Works. “The risk being hedged against is the risk of not being able to deliver an aircraft in 2025,” one government official adds. “Unless you are close to flying something now, you are not going to do that.”

In an attempt to avoid the massive cost overruns endemic to its advanced programs, the Pentagon is imposing new constraints on the LRS-B program. Lt. Gen. Mark Shackelford, who retired in late 2011 as the Air Force's military deputy in the office of the assistant USAF secretary for acquisition, said in September at the Air Force Association's convention that the Pentagon is proposing many elements of EMD will be fixed-price, with cost-reimbursable line items limited to areas where the government sees risk. Incentive payments will be tied to tangible deliverables rather than paper milestones. Senior Pentagon leadership will supervise a “should-cost” process, controlling the release of money to the program office and retaining a contingency reserve.

The Pentagon expects contractors to invest in the program, Shackelford suggested. He told delegates that “keeping the program sold will be critical for some time” and that industry “has to be prepared to bridge until the government funding starts to flow.” The next round of study and risk-reduction contracts had been scheduled for first-quarter 2014, but given that more sequester-driven budget cuts are likely, “I wouldn't count on a first-quarter award,” he warned.

Even after the next contract round, LRS-B will not be like the USAF's final tanker competition, where evaluators could not give credit for any performance beyond the objective. “Within the proposed price [$550 million], we hope that there is some level of headroom that could be applied to performance beyond the threshold,” Shackelford said. “The five areas where we have invested in risk reduction are hints as to what the government wants.”

But the Pentagon is not going to pay for such improvements before EMD starts. “Government will reward contractors that come up with low-risk proposals that have some capability beyond the threshold,” Shackelford explained, “if the contractors can reduce risk” without more customer money. “He who invests increases his likelihood of winning.”

Following Boeing and Lockheed Martin's announcement, Northrop Grumman declined to say whether it would compete in LRS-B, or to disclose whether such a decision was under discussion. “Northrop Grumman views the Long Range Strike-Bomber program as vital to both national security and the power projection capability of the U.S. Air Force,” the company stated. “We do not comment on other companies' business arrangements and have no further comment on the program at this time.”

The noncommittal statement is surprising because the defense manufacturer has been promoting its qualifications to build USAF's next bomber, based on its B-2 experience, for more than a decade. That campaign continued through September's Air Force Association show via advertising and the release of a specially commissioned book about the B-2's history.

But Northrop Grumman elected to no-bid the final stage of the Air Force's tanker program after investing many years and a great deal of money in its Airbus A330-based proposal. With LRS-B, industry observers suggest, the company may not like its competitive position now that the two other U.S. military aircraft primes have teamed against it. With a strong business portfolio, particularly in unmanned systems (including the secret stealth UAS) and surveillance, the defense manufacturer could thrive without LRS-B, one industry executive suggests.

Northrop Grumman may believe that the Pentagon, in giving its blessing to the Boeing-Lockheed Martin pact, has anointed a favorite and relegated Northrop Grumman to the status of an insurance policy. The new team appears to have the largest and most important risk-reduction contract in the shape of the NGB demonstrator. When it comes to investing company funds in risk reduction, Boeing and Lockheed Martin combined are five times larger (in annual sales) than Northrop Grumman. Nor has the latter integrated a new manned aircraft system for many years.

This does not mean that Northrop Grumman does not intend to compete—it may be seeking better terms. A credible threat to sit the program out is a threat to the Pentagon, because a sole-source, $100 billion secret program is not a recipe for a warm welcome in Congress. With Boeing as prime contractor, it will be a target for Sen. John McCain (R-Ariz.), a persistent and influential critic of that company.

Northrop Grumman—which cares about its history, as shown by the B-2 book—has been willing to strong-arm the Pentagon in the past. The company was reluctant to join the Advanced Technology Bomber program, which led to the B-2, until it was assured that it was more than a backup to Lockheed. When the Navy demanded a fixed-price development bid for the Advanced Tactical Aircraft stealth bomber in the mid-1980s, Northrop refused to comply. The Navy was forced to award the A-12 contract to the stalking-horse team of General Dynamics and McDonnell Douglas: the program was dead within seven years.

Meanwhile, Boeing's leadership role in the new partnership confirms that the company's long and largely unadvertised work in stealth technology has reached the point where it is a strategic advantage. The company's Bird of Prey vehicle was intended to demonstrate the potential for operational daytime stealth. In 2003, this magazine reported a USAF official as saying that Boeing had made “more aggressive investments than Lockheed Martin” in stealth, and was developing another new stealth demonstrator (AW&ST July 6, 2003, p. 20).

Even so, “the odd part about the Lockheed Martin/Boeing team is if it can really work,” comments Capital Alpha Partners analyst Byron Callan. “Lockheed Martin's prize pony is the F-35. LRS-B will compete with funding for F-35, and Boeing has no interest in bolstering F-35.”

Out of five full-scale bomber programs launched by the USAF in the past 65 years, two were canceled outright, and two delivered a fraction of the number of aircraft planned.