Q: We know the Lockheed Martin's theater missile program has been pretty much of a disaster, but are they charging us now $1 billion more than the negotiated contracts? Have they got a billion dollar overrun on this program?
A: No, that's not entirely true. There is a big cost overrun. My understanding is that the overrun is $732 million so far, and that largely results from the delays -- reflects the delays in the program that obviously a program delayed is a program that becomes more costly.
Q: Is this cost-plus?
A: They do -- it is a cost-plus program. They do not receive any fee -- it's a cost-plus fee program, cost-plus fixed fee. They receive no fee, as I understand it, on cost increases caused by delay.
In addition, we have changed the requirements of the program to a certain extent and that has created another $265 million in cost increases. So the combination of the delay plus the enhanced DoD requirements has generated about a billion dollars in increased costs.
Q: For nothing though, right? We've got nothing out of this. Though we've got a string of disasters so far.
A: That's true. We have not been able to hit the target. We do have a number of successful components of the program. One is the radar system which works very well. As you know, because we've been through this many times here and I don't have to go through a lengthy repetition of all of this, but there have been five failures and each failure has been attributed to a different cause so it has made it difficult to trace down and fix the failures. But both the program managers and the contractor are determined to make it work.
Q: Is there any increased consideration of finding a second supplier for this?
A: Right now, my understanding is that we are working aggressively with Lockheed to try to make the program work. A second supplier is always a possibility, but one of the problems we have right now is that there has been a substantial amount of investment in the program and there is a reluctance to start from scratch with another supplier.
Q: What were the changes that -- what did you say, 275 million?
A: $265 million, and I do not know what those new requirements are, but we will find out.
Q: Will you find out and let us know?
A: Yes, we will.