US will drive tough bargain on tanker deal: Gates

AFP via Google ^ | 3/11/2010 | AFP via Google

[ErnstStavroBlofeld]

US Defence Secretary Robert Gates said on Thursday the Pentagon will drive a hard bargain with Boeing on a contract for a new aerial refuelling tanker after Airbus parent EADS dropped out of the competition.

"I wish that we had had a competition. I wish both companies had stayed in it," Gates said.

But he said that "we will certainly be sharpening our pencil when it comes to negotiating a contract with Boeing", the sole bidder for the troubled tanker aircraft project.

He said he saw no reason why the decision by EADS and partner Northrop Grumman to bow out would cause any further delays to "the long delayed" programme.

Gates made his remarks to members of the 380th Air Expeditionary Wing -- which carries out surveillance and air refuelling missions for the wars in Afghanistan and Iraq -- at a US military base in Southwest Asia, en route for talks in Abu Dhabi.

The Pentagon chief defended the terms of the competition, saying the request for proposals had been "fair and balanced."

US aerospace giant Boeing is poised to win the 35 billion dollar (26 billion euro) contract to build the new refuelling tanker plane for the US Air Force after Northrop and European partner EADS dropped their joint offer.

[Hoodat]

This is the same Boeing that is based in Chicago, right?

[ErnstStavroBlofeld]

I wonder how “tough” barganing it will be but I am still happy that the tanker will be built by an American company.

[cherry]

I'm glad its an American company but Northrup was also an American company and Boeing doesn't build all of its stuff here...

look....there is no competition and there is going to be no "hard" bargaining...its over....the big company got the contract and they can do anything they please....change specs..delay....charge more...

this is what happens when games are played in the bidding process....

they might as well just told Boeing to come up with what suits them and govt just pay...

[agere_contra]

This is the tender that Airbus won, and Boeing got its paid congressmen to get them a do-over.

And now they are the only ones left, and Gates is promising a ‘tough deal’.

Yeah right. I expect these tankers will end up costing the same as Frigates.

[Yo-Yo]

Northrop Grumman-EADS have already announced that they were prepared to bid a unit cost of $184 million per aircraft including development costs, which is in line with their previous bid.

Boeing had better uncercut that price.

[17th Miss Regt]

The final costs will be in the neighborhood of $350 million per plane. After all, there is no competition. Why temporize when your congresscritters will do the heavy lifting?

[MHalblaub]

“The final costs will be in the neighborhood of $350 million per plane. After all, there is no competition. Why temporize when your congresscritters will do the heavy lifting?”

Reminds me on the Bell ARH-70 program for Armed Reconnaissance Helicopter. Bell won the contest but price increased up to the unit costs of an AH-64 Apache or Tiger. Then DoD finally canceled ARH program. Now Eurocoptor offers the Armed Scout 645 developed from the UH-72 Lakota (unit price of EC-145 is $ 5.5 million) which itself is developed from a B0-105:
http://en.wikipedia.org/wiki/MBB_Bo_105.

What initial offer do you expect by Boeing?
$215 million per unit (patriotism tax and fuel save tax included)?

[17th Miss Regt]

We call on the Department to keep in mind the economic conclusions of the prior round of bidding as it takes actions to protect the taxpayer when defining the sole-source procurement contract. In the previous round, the Air Force, through a rigorous assessment of our proposal, determined that it would pay a unit flyaway cost of approximately $184 million per tanker for the first 68 tankers, including the non-recurring development costs. With the Department's decision to procure a much smaller, less capable design, the taxpayer should certainly expect the bill to be much less."

The above quote is from the Northrop Grumman press release when they announced their no-bid decision. The last sentence seems pretty reasonable. If Boeing comes in at about $200 million per copy for the first 68 planes I would be not be too surprised. Absent any competition, your $215 million figure might be in the ball park as well. Indeed, I expect cost escalations to occur as Boeing goes through its learning curve.

[Mr Rogers]

The ‘tough bargaining’ will consist of Gates asking Boeing to please remove the splinters from the broom handle before they stick it up the American taxpayer’s rectum.