With commercial airplane orders and deliveries down, there is an increased focus on Boeing’s Defense business to propel the business revenues. Boeing’s Defense and spsace business does not only include the delivery of weapon systems, satellites and munition but also maintenance and logistics which are accounted for by the Boeing Global Services unit. In November, the US jet maker did receive nearly $11 billion in contract awards, though this number is somewhat deceiving as Boeing Defense received a boost from a F-15 framework contract.
Saudi Arabia provides Boeing prospective F-15 boost
During the month of November it was Saudia Arabia that provided a big boost to Boeing’s Defense contract awards. However, most of the $9.8 billion contract was a indefinitie delivery, indefinite quantity contract which merely fixes price and sets up a framework of terms against which follow up orders can be placed. The advantage of these framework contracts is that both parties do not have to renegotiate the general terms for each contract. The drawback of this contract vehicle is that while it is a contract, it does not add to the backlog. These so called IDIQ contracts are options that can be firmed incrementally, so there is no obligation to fully consumate the framework.
The contract provides for modernisation and sustainment of the F-15 Saudi fleet to include such efforts as hardware, software, and interface design, development, integration, test, subsystem and structural component production and installation of future modifications and enhancements to the F-15 Saudi weapon system as well as product support. The F-15 plays an important role for Saudi Arabia. The RSAF has 80+ C and D variants in operations and has ordered conversion kits for 68 F-15S to bring these fighter jets to the revamped SA standard of which RSAF has 84 jets on order. An initial delivery order in the amount of $1 million was awarded simultaneously with the IDIQ award firming 0.01% of the ceiling for the contract.
For Boeing the IDIQ adds to another contract for the F-15 from Qatar, interestingly Qatar and Saudi Arabia are opposing parties in regional conflicts.