And you have to do it often every year even with a multi-year fixed price, and there can be adjustments. So we want to move as briskly as we can as an industry with our commercial partners to their kind of pricing, which is value-based subscription. That’s going to take time. It’s going to take changes in government. It’s going to probably take literally act of Congress to do it. But that will be the thing that will make our industry healthier on one hand, the traditional defense and aerospace industry, but it will also invite in the commercial tech companies who are basically, if you look at the broad scope investing 10x what we are in R&D. And we want to bring a lot of that 10x R&D and all that talent over into the defense department as part of their supply chain, but it’s really tough under the bar for those companies to put time and attention and effort into DoD.
So that’s the long-term — a long-term solution, but the near-term solution will also continue.
Operator: Thank you. Your next question is from Doug Harned from Bernstein. Please go ahead.
Douglas Harned: Good morning. Thank you.
Jim Taiclet: Good morning.
Douglas Harned: As you look at Tech Refresh 3, this delay and then going longer, as you really want to build out the full kind of Block 4 capabilities, which continue to seem to expand. First, as Tech Refresh 3 takes longer. And then as you look toward the kind of multi-year trajectory on Block 4 implementation, how do you see delays here affecting your production rate, knowing that you’ve been trying to produce sort of at the full 156 type rate. But can that continue as you look at these challenges if they get more difficult?
Jim Taiclet: Look Doug, it’s Jim. I think we can continue at this rate. Demand from the U.S. services and our international customers, Air Forces, Navy’s, et cetera, around the world is they need the aircraft, right? They’ve got to recapitalize the planes that they’re still flying that I was trying to get when I went to pilot training in 1983, right? So this is essential that this production line keep up, it’s the — basically, it’s the recapitalization of the Allied fighter aircraft for us is the F-35. And so I think the key to that is full transparency and realizing the reality of the situation. When you’re trying to drive this much technology into an air vehicle, you’ve got to be honest about the schedule. What can industry do, what can the test and evaluation community handle in the various military to accept that technology and what’s the supply chain capacity.
And we’re being brutally honest with our services and our joint program offices to what we think industry can do with us and our airplane. And industry is who makes the radar. Industry is who makes the EOT, the electrical optical system. The industry is who makes the electronic warfare suite. It’s not us. So we have to be brutally honest as an industry and with our suppliers’ inputs to that with the government and say what is feasible to keep the production rate up. I think that’s starting to get traction. I hope it gets more traction, because we cannot afford to be overoptimistic in the ability to deliver these technologies as rapidly as one might like. There are real technical and physical challenges to doing this. And well our commitment to the government, meeting the service chiefs and our allies is I will tell you honestly, what we think industry can do with the jet.
And if you want to push it beyond that, I’ll tell you what the risks are and what the cost might be to do it. But let’s agree on a feasible executable plan for exactly Doug, what you talked about.
Operator: Thank you. Your next question is from Sheila Kahyaoglu from Jefferies. Please go ahead.
Sheila Kahyaoglu: Good morning, guys.
Jim Taiclet: Good morning.
Sheila Kahyaoglu: Jim, I don’t want to talk about what happened in 1983, but in terms of the puts and takes for MSC, if you could just talk about the 7% top line growth you guys have what are the biggest program drivers there between missile defense and tactical, and just on the margins, you’ve already highlighted the 50 bps from the classified programs. Are there any offsets? And I really appreciate your commentary about the government and how you plan to sell to them. So I was just thinking, where do you think that will manifest itself in its portfolio in your portfolio, the fact is, is it MFC? And specifically, can you give any specifics?
Jay Malave: Yes. Sure. I’ll start with the growth drivers. And for MFC, you would expect, tactical and strike missiles. So the guided weapons, the HIMARS, JASSM, LRASM, all those will continue towards their march through these ramps by 2025 and in certain cases, 2026 and 2027. So that is the largest driver of the growth. And that’s followed by Integrated Air and Missile Defense really on the back of PAC-3. So we’ll start seeing a more significant spike in PAC-3 activity and deliveries over the next few years here as we get to 550 by 2025, and then ultimately 650 by 2027. So those are the two — really the two businesses, the lines of business within MFC that are going to be driving it, which is really should be no surprise.
Jim Taiclet: And then when it gets to moving towards a value pricing model, Sheila. The first place that’s already starting to happen is in command and control, command situational awareness, information advantages our customers would call it. So those are largely digital services, right? You’ve got sensors on satellites, aircraft, ships, radars out scanning the sky, infrared sensors in space looking for looms of heat when a missile is launched, things like that. That’s data, right? So how do we gathered all the data from our sensors, whatever domain they happen to be in land airspace, et cetera. How do we make intelligent data fusion, and then present commanders and decision makers with options using AI and other digital services.
