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Cost Overrun on Air Force One Replacement Project

“Engineering inefficiencies” caused by the COVID-19 pandemic have led to the first cost overrun on the project to replace Air Force One, according to a senior-level official at Boeing.  The company will have to pay $168 million out of pocket to cover increased costs on the VC-25B Air Force One replacement program, said Chief Financial Officer Greg Smith.

While Smith said the program remains on schedule with a projected delivery in 2024 of the first of the two replacement aircraft, Boeing’s quarterly report to the Security and Exchange Commission noted future risk to the program’s cost and schedule as a result of the engineering challenges. “We believe these inefficiencies will result in staffing challenges, schedule inefficiencies and higher costs in the upcoming phases of the program,” the company stated in the report.

In 2018, the Air Force awarded Boeing a $3.9 billion fixed-price contract to modify two 747s into the VC-25B configuration.  The total cost of the program is estimate to reach $5.3 billion once ancillary costs, such as new hangars and revised technical manuals are included.  However, the fixed-price ceiling on the $3.9 billion deal ensures that Boeing will have to pay for any cost growth incurred while building the two new Air Force Ones.