Tuesday, May 13, 2008

Consumer Alert: Beware of Sub-prime Contractors

Today I want to bring your attention an important consumer alert to inform you about a serious danger to our economy: Sub-prime Contractors.

Many of us are now realizing the toll sub-prime lending has had on the economy and the millions of families who have lost their homes because of these unscrupulous lenders. But, what most people don't realize is the equally grave danger sub-prime military contractors pose to our economy.

Never heard of a sub-prime contractor, you say.

We let me explain, a sub-prime contractor works much like a sub-prime lender. The sub-prime contractor is one who sells to the government but would not normally qualify for contracts as a prime contractor. Some are independent, but increasingly they are affiliates of foreign contractors operating under different names.

Sub-prime contractors seldom if ever identify themselves as such, and often they use established well known American companies as false fronts or as ghost prime contractors.

The only clear giveaway is their prices, which uniformly have low teaser rates and much higher life cycle costs. You want to avoid them if you can, but if you must deal with them be sure to factor in all cost correctly.

I can't stress how important it is to stay away for sub-prime contractors. To illustrate this point let me read you an e-mail I recently received:

Dear TAnchorman,

I've just signed a contract with what I now realize is a sub-prime contractor. After closing I found out there were all these costs and fees: $30 billion more in fuel costs, $19 billion more in maintenance/infrastructure costs. And the darn thing is so big that it can't even be used at 50% of the places I work.

I don't know what to do, and I really need that extra money for transformation and some air dominance.


Tragically it may be too late for anything but a congressional bailout for A.F., but it doesn't have to be that way for you.

So remember buyers, do your homework and be sure you know exactly with whom you are dealing. Also, be sure to look for words such as Aeronautic and European in the small print or in listings of subcontractors; these are usually good indications that the buyer should beware.

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