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By the Numbers

Boeing has recorded roughly $8 billion in cumulative losses on the KC-46 tanker program alone, per company disclosures through the fourth quarter of 2025 — the clearest documented case of fixed-price risk transfer failing to protect the contractor while the Pentagon's own portfolio-wide GAO data shows no clear contract-type/outcome correlation across 21 major programs.

This scan quantifies documented cost-growth outcomes, profit-margin structures, and government-exposure differences across cost-reimbursement, fixed-price, and commercial defense contracts, set against the current policy inflection: an April 2026 executive order mandating fixed-price defaults and an August 2026 Pentagon memo pushing supplier cost and pricing transparency.

The quantitative record on defense contract type and cost outcomes is more ambiguous than the current policy debate suggests, and the numbers pull in two different directions depending on where you look. At the portfolio level, GAO's own analysis found no clear relationship between contract type and cost/schedule outcomes across a review of 21 major DoD acquisition programs — undercutting the simple narrative that fixed-price contracts inherently produce better cost discipline than cost-reimbursement vehicles. What GAO's broader body of work does show is that acquisition practice, not contract type, is the dominant variable: programs that completed knowledge-based practices — demonstrating technology maturity before development start, a preliminary design review before development, and releasing at least 90 percent of design drawings by critical design review — had significantly lower cost and schedule growth than programs that skipped those steps. That finding reframes the entire cost-plus-vs-fixed-price debate: contract type allocates who bears cost risk, but it does not by itself fix an immature technology baseline.

At the portfolio-wide level, GAO's June 2025 Weapon Systems Annual Assessment found that combined total cost estimates for 30 major defense acquisition programs (MDAPs) also tracked in the prior year's report grew by $49.3 billion, with the Air Force's Sentinel ICBM program alone accounting for over $36 billion, or 73 percent, of that increase. A narrower comparison of 14 programs tracked in both the 2024 and 2025 reports showed combined costs increased by about 3 percent, even as one program cut its planned unit buy and schedule delays continued to accumulate — the expected time for MDAPs to deliver even an initial capability has been rising for years. These are portfolio-level, largely engineering and schedule-driven cost growth figures; they are not broken out by contract type in GAO's public releases, which is itself a data-availability gap worth flagging for readers trying to map contract-type risk directly onto program-level outcomes.

Where contract type becomes empirically visible is in company-level financial disclosures on fixed-price development programs, and the picture there is stark. Boeing's SEC filings show the company recorded $802 million in losses on its five major fixed-price development programs in 2025, down sharply from $5,013 million in losses on the same five programs in 2024 — a year in which the KC-46A tanker alone accounted for $2,002 million, T-7A Red Hawk for $1,770 million, Commercial Crew for $523 million, VC-25B (Air Force One) for $379 million, and MQ-25 for $339 million. Momentum did not fully reverse: Boeing disclosed a further $565 million KC-46 loss in the fourth quarter of 2025 alone, pushing cumulative program losses to roughly $8 billion, and an additional $280 million reach-forward loss on VC-25B in the second quarter of 2026, on top of a further $60 million increase during 2025 — bringing that single program's documented losses into the billions. These are the canonical evidence that firm-fixed-price development contracts, when applied to immature or underbid technology baselines, transfer overrun risk to the contractor in name but can still produce years of negative program margins that show up directly in a public company's quarterly earnings — the opposite of the government being insulated from cost growth, but also the opposite of the contractor absorbing it painlessly. Boeing's own defense-unit leadership has stated the company does not intend to sign further fixed-price development contracts of this type going forward, an implicit acknowledgment embedded in the loss pattern itself.

Profit-margin structures differ systematically by segment mix rather than by prime contractor identity alone. RTX's Collins Aerospace segment, which blends high-margin commercial aftermarket work with defense content, posted a 16.3 percent operating margin in 2025 versus 14.6 percent in 2024, while RTX's Raytheon segment — almost entirely government missile-defense and munitions work priced on a mix of cost-plus and fixed-price-incentive terms — ran an 11.5 percent operating margin in 2025, up from 9.7 percent in 2024. Lockheed Martin, whose revenue skews more heavily toward direct government contracting than RTX's diversified commercial-defense mix, posted a 9.9 percent gross margin and 8.9 percent trailing EBIT margin against RTX's blended 20.2 percent gross and 12.0 percent EBIT margin — a gap that reflects business-mix and contract-type composition more than differential execution quality. Government cost-reimbursement contracting itself carries a structural profit ceiling: cost-plus-fixed-fee arrangements cap the contractor's fee regardless of final cost, which mechanically limits upside even as the government absorbs cost overruns and imposes materially heavier oversight and reporting burdens than fixed-price vehicles carry.

The policy environment is now moving decisively against cost-reimbursement contracting on the numbers the government itself has published. The White House's own fact sheet accompanying the April 30, 2026 executive order states that federal agencies obligated approximately $120 billion on cost-reimbursement contracts in fiscal year 2024, a scale the administration is using to justify mandating fixed-price contracts as the default procurement method and requiring agencies to renegotiate their 10 largest existing cost-type contracts within 90 days. Separately, the fiscal year 2026 NDAA raised the certified cost-or-pricing-data disclosure threshold from $2.5 million to $10 million for contracts entered after June 30, 2026 — a deregulatory move industry had sought — even as the Pentagon's own August 18, 2026 memo from the Deputy Secretary of War moved to functionally counteract that relief by directing "full transparency" into cost and pricing data for negotiations valued at $10 million or more regardless of certification status, reaching through prime contractors into the subcontractor tiers. That same memo directs the Under Secretary of War for Acquisition and Sustainment to establish new "fair and reasonable" contract profit-margin benchmarks by applying commercial best practices tailored to each product or service line — a mechanism that, if implemented, would be the most direct government intervention into contractor margin-setting in years, though as of the memo's issuance it remains a directive to develop an approach rather than a finalized rule with numeric caps.

The claims behind this analysis, each with its verification status — including what is contested, unverified, or could not be established. What each grade means

September 24, 2026

September 24, 2026

September 24, 2026