Last-Time-Buy Funding Issues for Military Contractors

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prabhakar_deosthali
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Re:
prabhakar_deosthali   12/6/2011 1:15:12 AM
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The issue here looks to be ,not whether there is a technical solution available to take care of End of life situation but whether the govt funding will be awarded at that time for such a purchase.

Here in my opinion , it would be the defence department's responsibility to allocate upfront approved budget for such LTB based upon the defence contractors recommendations  and the then( at the time of LTB) goverment's responsibility  to honour such advance commitements.

This is like buying a 20 year insurance policy with guranteed returns at maturity to take care of the exingencies at that time.

Cant' military administration plan that way?

Barbara Jorgensen
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LTB
Barbara Jorgensen   12/2/2011 1:36:23 PM
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Bolaji--at the same time, it strikes me that moving more toward commerical products--as the mil/aero marekt has been doing-- was supposed to eliminate some of the uncertainty around component sourcing. Commercial products are thought to be more easily and widely avialble so therefore less dependent on things like funding. It was a good theory while it lasted.

rwiles
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Re: Qualification testing also a factor
rwiles   12/2/2011 11:08:08 AM
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Excellent discussion. It is certainly true that manufacturers overlook the military market when issuing LTBs. The ability to forecast is one thing that most could improve, but assuming good forecasting, government contractors simply cannot spend money that they have not yet been awarded. 

There are companies who offer programs to support this problem with special purchase agreements and long term storage capabilities. In some cases this means making a proxy LTB for a customer, and other times it means making a wafer purchase during the LTB cycle and storing die until it is needed and funding is available. While the end cost of products with these programs may be marginally higher than the original selling price, they are much more affordable than re-design and qualification costs, as others have commented on.

Eldredge
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Re: LTB
Eldredge   12/2/2011 8:48:35 AM
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@Bolaji - In addition to the items you mention, the volume of components in the mil/aero arena is often a lot smaller than commercial applications. Generally, the commercial applications drive the market on that basis.

Bolaji Ojo
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Re: LTB
Bolaji Ojo   12/1/2011 5:17:41 PM
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Barbara, The last-time-buy issue is a complicated one for all manufacturers but as you noted, it is even more perplexing for companies in the military market. The problem is complicated by the size of the sector and the limited number of companies that can or that are allowed to participate there. Getting certified is only the beginning, servicing an industry segment where products last 20 or more years is an additional burden.

Barbara Jorgensen
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LTB
Barbara Jorgensen   12/1/2011 9:17:27 AM
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I've never thought of the funding vs. LTB decision. It seems obvious now--every year, the US government has to hammer out a budget and military spending is always an issue. It makes an already-difficult forecast situation even worse. Commerical users of chips can't get it right--it must be even worse in mil/aero.

Eldredge
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Qualification testing also a factor
Eldredge   12/1/2011 8:56:12 AM
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The qualification testing required for military applications is also a factor. In the case of component obsolescence, military contractors may also have the option to redesign and upgreade to a newer replacement. But the cost to do so is ofter far greater than it is for commercial applications, because the military application must be tested to far more rigorous environmental standards, and must be approved and funded by the government.



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