When we(US) buy a fighter jet do we get them at cost?

Umm…I’m pretty sure Lockheed is a for-profit company and thus must include a profit in their price to the gov’t. I am assuming that LM bid on this business and was the lowest qualified bidder and that a healthy profit was included in bid price.

No, we do not get them at cost. Lockheed Martin is neither a charity nor a government agency. It is a business.

I would expect no, because american arms makers have a massive political advantage.
The US buying foreign made military aircraft is always a shitstorm (just look at the drama over the refuelling airplanes which got redone over and over until finally boeing got the contract and not the originial winner EADS). Buying a foreign fighter jet is therefore next to impossible, and the companies know that, so I expect them to actually have a pretty large profit margin on their planes.

You need to define “at cost”.

There are direct costs involved with the manufacturing of plane. These include the mental, metalwork, plastic, windows, wiring, seats, software, the user manual, assembly, testing, etc. These are actual dollars spent on actual people or actual pieces of something physical that can be measured.

Then there are indirect costs – for instance, the cost of the factory. The cost of paying management. The cost of lights and heat and electric power. The cost of fringe benefits paid to workers. The cost of taxes paid. And insurance. And so on. These are not directly attributable or chargeable to the construction of the airplane, but they are still costs that the company incurs.

And then there is profit, which is perfectly legitimate for a company to earn.

So the US probably gets a better deal than, say Uruguay does when they buy from a US company. But the amount that the US pays is, itself, a combination of the three factors.

at cost- plane is built to spec at cost of materials and resources including labor on all levels involved, and delivered.

Not at cost- on top of the above, a surcharge for the plane itself. Say $20m profit/plane, above and having nothing to do with its production. Just, we had to build a plane, here’s how much we want for doing it.

Same thing if you bought a loaf of bread…they buy all the flour, labor, etc. then on top of that they charge you for the loaf of bread itself. Otherwise what would be the point of doing business???

But since we’re talking about a plane that is for the Government maybe they would only include the labor charges for the employees involved up through the CEO’s. Maybe there is no difference b/w labor costs, and the profit margin.

“And then there is profit, which is perfectly legitimate for a company to earn.”

That may be so, @elbanditoroso, but that doesn’t mean that profit is part of the cost. Indeed, it is not by definition. The question is not about whether or not profit is legitimate, however, but whether or not the jets are purchased at cost.

Government contracts with outside companies include a lot of things. Yes they get a discount however it comes with a price.
Example.
I will give you a 30% discount if you agree to purchase 100 fighters over the next 5 years. If you do not purchase this many fighters then you will owe us the back end of the discount.

@CunningLinguist – depends on who is doing the accounting. Under some rules, the amount paid out by the customer to the manufacturer is a lump sum (because that’s what it said on the invoice) and therefore that amount is considered “cost” whether it was for profit, overhead, or materials.

From the income side, it’s figured differently. Sometimes it is called “overhead’ or “margin”.

In any event, that’s why auditors remain employed. To fight over these terms.

Haven’t read the previous posts but the companies producing weapons/military aircraft/ships etc. are profit making entities so part of the cost to the purchaser will be profit. I don’t know of any publicly owned companies that produce military aircraft in the US?

So you see how this works is the us government declares wars on other countries so that it need military equipment. It buys the equipment from big companies who make a ton of profit. Those companies then dinate some of that profit to a political party (probably the one most likely to start a war at any given time). Because that party has more money than other and because of the way the political system works they are more likely to get elected and so there will be more need for jets and tanks and battleships that fall apart because they were designed by idiots who didn’t pay attention in chemistry 101.

@Lightlyseared oh man, I am trying so hard to not be offended by what you said up there but chemistry has little to do with engineering and actually it takes a whole lot of schooling to design any aircraft. I happen to be related to a few of those idiots and I’m sorry but I feel the need to get their back on this. Ships and planes do not fall apart. They are shot apart. If they’ve not been shot apart they continue to be used. There is still aircraft from WW2 that get’s flown around and plenty of ships that are still active.

I have some experience in this area. There are two main types of contracts ( actually there are many more) FFP Firm Fixed Price and Cost Plus.
FFP is obvious. – usually it is for smaller contracts. Usually Phase I projects that are considered high risk, high reward.

Cost Plus (usually for Phase II and Phase III projects) includes everything involved. Design, test, manufacturing. It is just what it sounds like. All the staff keeps track of their hours with time cards. All purchased parts, tools, equipment are accounted for. A reasonable % is added for profit.

There are numerous DCAA audits that make sure everyone is on track.

I am grossly simplifying here. You can look up the rules yourself. The system is quite complex – but transparent.

@judochop so…I’m taking it that you haven’t heard of the USS Independence (LCS-2) then? Or more to the point how quickly the ship started to fall apart due galvanic corrosion, where the aluminium hull is literally disolving into the sea. This isn’t metal that has rusted a bit, this is is metal that has completely disappeared. So quickly, in fact, that even though it was only commisioneed in 2010 the Independence is already so badly damaged that it will be in dry dock next year to try and repair it.

I work for SAIC. (same kind of thing as Lockheed Martin)
1st, a government contract is written up, by the government, for their needs. Then, companies with the ability to fulfill that undertaking put together a proposal and bid on the contract. The government then awards their contract to the best bid based on price, resources, turn-around time, facilities, reputation, etc… etc… etc…
As pretty much every other person has noted, the companies that do this kind of work are all separate entities from the government, and work for profit.

@Lightlyseared I knew I should have not said anything…Either way, a mistake does not make one stupid. I can’t think of any companies that manufacture that have a 100% success rate.

@judochop @LuckyGuy I’m impressed by your knowledge in this area, both of you.
@Lightlyseared Maybe you could stop posting and read.