This is a government systems contract, not construction.
Odds are that most of the overrun is due to government interpreting it's original specifications as calling for more than was bid and accepted. It's an incentive fee so the feds can play games with "cooperation", "innovation", "quality" and just about any other subjective measure they can dream up. You lose profits if they deem it to be so.
So; want some extra stuff?
Willing to pay added costs if they are properly accounted for?
Going to judge me on my behavior?
Youbetcha sailor, it's coming right up!
(PS) Note: it is true that the first of a series costs more than later editions but cost estimates are usually made on a slope with the target cost in the middle between high and low.
That's just about always an issue in any cost based contract but it's virtually invisible in a fixed price contract unless and until the total procured quantity is reduced and overall costs are skewed toward the higher number. That is why so many large procurements are more economical if left to completion than having the Quantity cut to "save costs". (Reduction is a contract change and any change opens the door to renegotiation.)