There’s little doubt that effective bid planning is a critical issue for aerospace and defense (A&D) companies, particularly with the sizable budgets and extended timeframes attached to virtually all contracts with U.S. and other governmental clients.
And, there’s another reason that companies should consider putting more thought into the bid process: Once the business is won, both government and commercial customers are paying a lot closer attention to how cost overruns or delivery problems affect their bottom lines.
In its 2017 oversight report, the Inspector General for the Department of Defense (DoD) noted that new weapon systems in development frequently come on line much later than originally planned, adding that “weapons manufacturers are incentivized to submit optimistic cost and schedule estimates to be awarded major contracts.”1 This approach often backfires on defense suppliers, who struggle to keep up with unrealistic expectations for project quality and deliverables.
While many commercial aerospace companies have been riding high in recent years, due to robust customer demand driven by increased air passenger traffic and lower fuel costs, supply chain quality and fulfillment issues were a recurring headache. For instance, final development problems with geared turbofan engines built by Pratt & Whitney delayed customer Airbus’ ability to deliver its new A320 narrow body jets to airline clients. Similarly, when Zodiac Aerospace had trouble with timely fulfillment of seating and other manufactured interior items for Airbus’ new A350 widebody aircraft, that created a ripple effect resulting in a delayed rollout for that plane.2
As these examples show, a project planning and bidding process that focuses too much on low cost may help an A&D company win an account, but slowly lose credibility when production deadlines are missed, quality declines, and costs run over budget.
1) “Fiscal Year 2017 Oversight Plan,” Office of the Inspector General, Department of Defense
2) Tieman, R., “Rise in Aircraft Demand Forces Supply Chain to Modernize,” (July 11, 2016) Financial Times
June 12, 2017