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Posted on 03/10/2008 4:07:45 PM PDT by Paleo Conservative
WASHINGTON (Reuters) - Boeing Co (BA.N: Quote, Profile, Research) said on Monday it would formally challenge a decision by the U.S. Air Force to award a $35 billion aerial tanker program to a team led by Northrop Grumman Corp (NOC.N: Quote, Profile, Research) and Europe's EADS (EAD.PA: Quote, Profile, Research).
"This is an extraordinary step rarely taken by our company, and one we take very seriously," said Jim McNerney, Boeing chairman, president and chief executive officer, in a statement.
Boeing said it would ask the Government Accountability Office, the investigative arm of Congress, to review the February 29 decision that has triggered outrage from some U.S. lawmakers.
Boeing said on Friday it had "significant concerns" about the contract decision after an Air Force briefing on why it lost the contract award.
Under the program, the Northrop/EADS team is to supply 179 tankers over 15 years. The Air Force plans to eventually replace more than 500 of its aging fleet of KC-135 Boeing tankers.
Boeing had offered a tanker based on its 767 commercial jetliner but the Air Force picked the Northrop proposal for a modified Airbus A330 airliner.
Northrop forecasts more tanker jobs
Mon Mar 10, 2008 4:10pm EDT
NEW YORK (Reuters) - Northrop Grumman Corp (NOC.N: Quote, Profile, Research) has nearly doubled its estimate of the number of jobs it will create on the $35 billion U.S. Air Force refueling tanker program it won over rival Boeing Co (BA.N: Quote, Profile, Research).
Northrop, using a different forecasting method, said on Monday its handling of the tanker work would create about 48,000 direct and indirect jobs in the United States. That is almost double the 25,000 jobs it initially projected would be created.
The award of the first phase of the tanker contract to Northrop and its European partner EADS (EAD.PA: Quote, Profile, Research) last month has become a political issue as Boeing's supporters in Congress complain that the decision will mean the loss of U.S. jobs.
Northrop's revised estimate, using the most recent data from suppliers and applying the U.S. Labor Department's formula for projecting aerospace jobs, exceeds the 44,000 jobs which backers of Boeing claim would be supported if Boeing carried out the contract.
The Air Force plans to buy 179 tanker aircraft over the next 15 years to begin replacing its fleet of Boeing KC-135 tankers, which are 47 years old, on average. Boeing was debriefed on the contract award by the Air Force on Friday and is expected to announce whether it will officially protest the decision by Wednesday.
Northrop completed its debriefing with the Air Force on Monday, and said the Air Force called its winning bid "more advantageous to the government" in the key areas of capability, past performance, cost and refueling performance.
Under its plan, EADS will assemble Airbus A330 freighters at a new plant in Mobile, Alabama, while Northrop turns them into military tankers at an adjacent facility.
On Monday, Los Angeles-based Northrop said the assembly and militarization of the tankers would create 1,500 jobs in the United States. EADS has said assembly work in Mobile would create 1,300 jobs.
Last week Northrop said about 2,000 jobs would be transferred to the Mobile assembly facilities from Europe, but a spokesman said on Monday that was "inaccurate."
Mindful of worker protests on both continents, EADS and Northrop now say that no jobs will be transferred between the United States and Europe.
The first of the tankers will be assembled at a plant in Melbourne, Florida, but that work will be transferred once the Mobile facilities are up and running, probably around 2010, a Northrop spokesman said. The first tanker is due to be delivered to the U.S. Air Force in 2013.
According to Northrop, its handling of the work will create 14,000 direct jobs and 34,000 indirect jobs in the United States. Major suppliers to the Northrop/EADS team include General Electric Co (GE.N: Quote, Profile, Research), Honeywell International Inc (HON.N: Quote, Profile, Research), AAR Cargo Systems, Sargent Fletcher and Knight Aerospace.
(Reporting by Bill Rigby; Editing by Brian Moss and Tim Dobbyn)
As they should. This seemed rigged to me
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Here is what Yo-Yo posted earlier:
Following the Air Force’s KC-X decision announcement, press articles have appeared quoting aerospace experts who purport to have insights into why the KC-767 was not chosen. These articles allege that “Northrop Grumman’s victory was not a close outcome” and that “Boeing didn’t manage to beat Northrop in a single measure of merit.”
Nothing could be further from the truth.
Factor 1 — Mission Capability
• Boeing scored “Blue (Exceptional) and Low Risk” in this area – the highest possible rating in the most critical “factor” in this competition
• The Air Force assessed Boeing as meeting or exceeding all Key Performance Parameters (thresholds and objectives)
• Indeed, the Air Force evaluated Boeing as having significantly more strengths (discriminators) than the competitor
Therefore, it follows that Boeing 1) received the highest rating possible, 2) met or exceeded all KPP thresholds and objectives, and 3) was graded as having significantly more strengths than the competition
Factor 2 — Proposal Risk
• Boeing’s proposal risk was rated “Low”
• Surprisingly, the competitor was also rated as low despite the high risk associated with its evolving multi-country, multi-facility, multi-build approach as contrasted with Boeing’s integrated approach to design, build, and certification in existing facilities with experienced personnel
Therefore, it follows that Boeing 1) was low risk, 2) had an integrated and lean build approach, and 3) the competition should have been assessed greater risk for its complex and unproven multi-country build approach.
Factor 3 — Past Performance
• Boeing’s past performance was rated “Satisfactory” • Northrop Grumman/Airbus was also rated satisfactory, despite having no relevant tanker experience and having never delivered a tanker with a refueling boom
• Press reports indicate that some of the most relevant programs for Airbus (the KC-30 for Australia and the A-400M) are both significantly over cost and behind schedule
Therefore, it follows that Boeing 1) had satisfactory past performance, and 2) relevant Airbus programs like the Australian KC-30 tanker and the A-400M are struggling.
Factor 4 — Cost/Price
• As determined by the RFP, “Most Probable Life Cycle Cost” (MPLCC) was the only measure of cost to be assessed
• The Air Force described the cost visibility information Boeing provided as “unprecedented” and rated Boeing’s MPLCC cost “Reasonable,” “Balanced,” and meeting “Realism” criteria – all the highest ratings a competitor can receive
• As recognized by the Air Force itself in 2002, the significantly bigger A-330 would demand a greater infrastructure investment with dramatically lower operational effectiveness
Therefore, it follows that 1) Boeing’s MPLCC was judged by the Air Force to be realistic, 2) Boeing’s submitted MPLCC were significantly lower than the Air Force adjusted MPLCC costs and, 3) the Air Force adjustments to Boeing MPLCC costs effectively deprived Boeing of the benefits associated with its integrated in-line production approach.
Factor 5 — Integrated Assessment
• The model used by the Air Force to judge tanker “fleet effectiveness” was developed and is maintained by Northrop Grumman
• The mission scenarios and operational constraints to be used with the model issued in the draft RFP to judge tanker “fleet effectiveness,” were based upon the 2005 Air Mobility Command “Mobility Capabilities Study” (MCS).
• Before and after the RFP release, changes to the model’s parameters occurred so as to allow a “greater variety of aircraft to be considered” – in essence to allow larger aircraft to compete. However the Air Force promised that it would tie the numerical output of the model back to real-world constraints by weighing “insights and observations.”
• The inherent complexities of the model have made its results inconsistent and un-repeatable and its overall operational relevance questionable;
Therefore, 1) Northrop Grumman’s experience with the model was an inherent advantage, 2) changes were made to ensure Airbus’ larger aircraft worked in the model, but there is little evidence that the Air Force used “insights and observations” to tie the model back to real world operational constraints and 3) the model’s accuracy and relevance are debatable.
Conclusion
Boeing submitted a strong and extremely competitive proposal. In assessing the critical factor of Mission Capability, Boeing was given the highest ratings and evaluated by the Air Force as having significantly more strengths (discriminators) than Northrop Grumman/Airbus. The Air Force modified the Northrop Grumman analytical model before and after issuance of the RFP to enable competition and to allow a larger tanker to compete. In the end, the “leveling” of the competition and subjective assessments of the two proposals seems to have led the Air Force to select a larger, more expensive and operationally limited KC-30 tanker despite the fact that both Air Force requirements and the KC-X RFP call for a medium-sized tanker to replace the KC-135.
Just to be clear, that is a statement issued by Boeing to the press, and is posted on the Graham Warwick Flightglobal blogsite, not my own analysis.
Where did Yo Yo get that info? It goes counter to everything else I’ve heard/read.
Thanks.
So it comes from Boeing.
Appears to me Boeing’s going to try to win this politically. They’ll have the entire Dem delegation on their side.
I think the military should go with the plane they think best serves the mission.
I know. But it certainly gives weight to their protestations. The game was rigged, methinks.
Of course it does. The AF had to somehow justify it. Yo-yo has the link.
Its exactly what I’ve read. The bid tab was for a medium tanker. A large tanker, divided by the cost, equaled Northrop/Airbus.
This kind of action does nothing but insult the procurement team that recommended Northrop Grumman Corp. group. As far as I know large and incredibly important procurements are taken seriously by many objective and dedicated experts who evaluate every aspect of the proposals in a fair manner. Boeing, the contractor not selected for this procurement, should gracefully accept the government decision.
It serves no purpose to delay the government action. Of course, Boeing knows this.
It's ironic. This transoceanic defense contracting idea was a big favorite of Bill Clinton.
All & good, but Boeing forgot the main rule when dealing with contracts. Don’t piss off the partners or stiff the gratuity. I’m convinced McCain has made his two cents known about HIS grudge against Boeing which had major influence in the decision regardless. Nothing is going to change, however.
Sorry, I’m not following you. Are you saying NG/EADS submitted a tanker not complying with the bid specs?
Let me see, the DemocRATS accuse President Bush and Republicans of alienating Europeans due to our foreign policy. If DemocRATS try to ram through a reversal of the tanker RFP on political grounds, it will definitely cause Eurpoeans to be alienated from the US.
I knew it wouldn’t take long for the Boeing employees to show up.
It’s just too bad that there’s no political will to make it illegal for any retired officers or bureaucrats to work for contractors.... ever. That alone would save 10s of billions in graft.
Screw McCain. He has a history of very bad decisions when it comes to military procurements
McCain need to be on the phone with Sarko and others. Euro leaders need to loudly point out the Dems’ hypocracy.
PS: If you’ve wondered, I’m in Mobile, AL (the contract site). So I’ve got a dog in this fight.
Here is a summary of the RFP, and the bullet points are repeated below. As you may note, nowhere was the requirement to fit into the tarmac footprint of the KC-135, or into the hanger space of the KC-135, or to be the lowest cost aircraft that met or exceeded the KC-135 in range and deliverable fuel at a given distance.
However, Boeing never could have bid the 777, because it is a third larger than the KC-30, and another third more expensive. The 777 was too much aircraft for this round of bidding, and the 767 was just enough aircraft. The KC-30 was more aircraft at not much more money.
Also note that all summer long this has been a "$40 billion" tanker deal, but now that it has tentatively been awarded to the KC-30, it is a "$35 billion" tanker deal. Northrop Grumman/EADS came in under the unofficial spending cap of $40 billion.
The RFP stipulates nine primary key performance parameters:1) Air refueling capability
2) Fuel offload and range at least as great as the KC-135
3) Compliant Communication, Navigation, Surveillance/Air Traffic Management (CNS/ATM) equipment
4) Airlift capability
5) Ability to take on fuel while airborne
6) Sufficient force protection measures
7) Ability to network into the information available in the battle space
8) Survivability measures (defensive systems, Electro-Magnetic Pulse (EMP) hardening, chemical/biological protection, etc)
9) Provisioning for a multi-point refueling system to support Navy and Allied aircraft
In my town, the contract to make fighter jet parts went from Michigan to Mexico.
Since both Boeing and Northrup are multi-nationals, and rely on parts from around the globe, why are we somehow quibbling over this point? When did Northrup stop being an American company?
The point is made that the USAF will buy 170 tankers from Northrup for less money than they were gonna lease 100 from Boeing. As a taxpayer, and a guy who kinda depends on national defense (don’t we all?) I’m glad they went with the Northrup bid.
Next time I bet Boeing has its pencil just a leeeeetle shaper....
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