Boeing Shifts to Cost-Plus Contracts for New Fighter Jets
The manufacturer is abandoning fixed-price agreements to protect defense sector margins on high-stakes military aircraft programs.
Updated on Oct. 27, 2026 in Corporate Finance
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Should defense contractors prioritize flexible contracts over fixed-price agreements to ensure long-term stability?
Boeing secured contracts for the Navy's F/A-XX fighter and 22 F-15EX jets on September 29, 2026, marking a shift toward cost-plus contracting. The defense sector is pivoting away from fixed-price agreements that previously caused significant financial volatility.
Why it matters
By adopting cost-plus models, Boeing aims to mitigate the margin-eroding losses that impacted programs like the KC-46 Pegasus. This contract strategy shift follows a period of sector reorganization and leadership changes meant to stabilize defense earnings.
Boeing reported defense sector earnings of $710 million on $23 billion in revenue for the first nine months of 2026, compared to $379 million in earnings on $19.8 billion in revenue during the same period in 2025. New contract wins include the $20 billion F/A-XX and $2.38 billion F-15EX awards.
The players
Boeing
A major aerospace and defense contractor that produces military fighter aircraft and refueling tankers.
Kelly Ortberg
The current CEO of Boeing responsible for the company's operational recovery and strategic direction.
Ted Colbert
The former executive who led Boeing's defense sector during its 2022 reorganization until his 2024 departure.
The details
The firm is moving away from fixed-price contracts to avoid the financial exposure that plagued its KC-46 Pegasus program. Under the new cost-plus structure, the manufacturer is protected against unforeseen cost overruns, allowing for more stable margin management in complex military aviation projects. This approach accompanies operational improvements in programs like the T-7 Red Hawk and MQ-25 Stingray, both of which reached Milestone C in 2026.
Timeline
2022: Boeing reorganized its defense sector.
September 2024: The company fired executive Ted Colbert.
March 2025: The Air Force selected Boeing for the F-47 program.
September 29, 2026: Boeing secured the F/A-XX and F-15EX contracts.
October 27, 2026: CEO Kelly Ortberg addressed the company outlook.
Market Landscape
Boeing's shift toward cost-plus contracting marks a formal departure from the fixed-price models that defined its financial performance on the KC-46 Pegasus program. This change aligns with the company's broader effort to stabilize defense revenue following a 2022 sector reorganization.
Operators should monitor whether the move toward cost-plus contracting successfully stabilizes long-term margins as the firm manages significant backlogs. The transition in contract structure provides a useful benchmark for evaluating risk in capital-intensive defense and government service partnerships.
The takeaway
Boeing is prioritizing program stability over the risks associated with fixed-price agreements. Operators should watch for the company's ability to maintain mid-single-digit revenue growth while managing the operational complexity of these new, long-term military aircraft programs.
Further reading
For broader insight into shifting defense industry models, explore the Corporate Finance section.
Source note: This article includes information reported by Air & Space Forces Magazine.
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Should defense contractors prioritize flexible contracts over fixed-price agreements to ensure long-term stability?
