L3Harris Technologies, Inc. LHX uses a structured process to monitor the cost and performance of its long-term contracts. The company establishes an estimated total cost at completion based on contract complexity and perceived risks, and regularly reviews progress and performance. This process provides an opportunity to adjust cost estimates as technical, schedule and cost risks are retired. Contract execution is particularly important because L3Harris' production contracts are mainly fixed-price, while development contracts are generally cost-type. Under fixed-price arrangements, the company can benefit from cost savings, but it also carries the burden of cost overruns.
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