Summary

Pursuant to a congressional request, GAO reviewed the contract structure and selected provisions affecting contractor and government risks under the B-2 Bomber low-rate initial production contract.

GAO found that: (1) the Air Force's prime contractor was responsible for ensuring that B-2 met specifications and for managing major subcontracts; (2) federal legislation required that contracts include warranty provisions for design, manufacturing, material, and workmanship; (3) the B-2 test program could affect the government's ability to enforce the contract's performance warranty, since testing was scheduled for completion 10 to 18 months after the initial 5 production aircraft warranties expired; (4) the low-rate initial production contract established a cost-sharing arrangement under which, unless the contractor has a substantial cost overrun, the Air Force will pay 80 percent of allowable warranty costs; (5) the contractor's liability under the warranty provision was limited to $100 million for the 5 aircraft; (6) the Air Force reported that it obtained the B-2 warranty at no additional cost to the government; (7) the Air Force asked the contractor to propose a warranty assuming greater responsibility for corrective action costs for the next 5 aircraft; (8) the low-rate initial production contract included a provision to renegotiate the contract if a prescribed number of aircraft are not purchased and also included termination provisions to protect the contractor's investment and the government's liability; and (9) the Air Force's reduced requirement for B-2 aircraft from 132 to 75 could require further negotiations and increase contract costs.