Posted on 03/01/2008 7:42:30 AM PST by jdm
The Air Force snubbed longtime partner Boeing and awarded a lucrative contract to Northrop and EADS, the European maker of the Airbus, to build a fleet of refueling aircraft. The decision stunned Boeing and elected officials in the Northwest, who immediately objected to the decision to reject the all-American option. However, officials claim that Boeing’s submission simply didn’t measure up — literally:
Air Force officials offered few details about why they choose the Northrop-EADS team over Boeing since they have yet to debrief the two companies. But Air Force Gen. Arthur Lichte said the larger size was key. “More passengers, more cargo, more fuel to offload,” he said.
“It will be very hard for Boeing to overturn this decision because the Northrop plane seemed markedly superior” in the eyes of the Air Force, said Loren Thompson, a defense industry analyst with Lexington Institute, a policy think tank. And as the winners of the first award, EADS and Northrop are in a strong position to win two follow-on deals to build hundreds of more planes.
Boeing spokesman Jim Condelles said the company won’t make a decision about appealing the award until it is briefed by Air Force officials. Boeing believes it offered the best value and lowest risk, he said.
Stifel, Nicolaus & Co. analyst Troy Lahr said in a research note it was surprising the Northrop-EADS team won given the estimated $35 million per-plane savings offered by Boeing. Lahr estimated the Boeing aircraft would have cost $125 million apiece. “It appears the (Air Force) chose capabilities over cost,” Lahr said.
In short, Boeing gave a better price, but Northrop/EADS gave more capabilities. It can deliver more fuel or carry more personnel and/or cargo, depending on configuration. That may be a rational trade-off, and the Air Force is the organization best positioned to make that choice. They understand what their missions require and should know which airframe best complements them.
Appeals rarely if ever work, as the GAO assumes the client (Air Force) knows what it’s doing. It will only have a chance of succeeding if Boeing can demonstrate that the Northrop/EADS offering does not meet the specifications demanded in the RFP, or if the competing bid has unfair pricing or other violations of the process. And even then — as I know from personal experience — Boeing is unlikely to succeed, and could damage their chances for future contracts.
In the mid-1980s, the FAA put out an RFP for a system to completely replace the air-traffic control system across the nation. Two companies got selected to compete for the prime contractor position, IBM and Hughes Aircraft. The spec had three bedrock requirements: the system had to use all-new components in the ATC suite, it had to be functional at the time of submission (no mock-ups), and it had to use IBM’s computer as its core. IBM was required to give Hughes its at-cost pricing to ensure fairness.
IBM won that contract, as it bid significantly lower costs than Hughes. After the debriefing, Hughes found that (a) IBM had priced its core higher for us than for them, (b) their model reused existing components in the ATC suite, and (c) they didn’t have a working system. Hughes appealed the decision, which was considered something of a scandal in its own right at the time, but got overruled.
Three years later, IBM gave up on the contract, admitting that it could not produce the system. By that time, Hughes had sold its system to Canada, as well as other nations, while the US remained reliant on ATC computer systems dependent on tubes.
If that deal didn’t cause Congress to demand a redirected result, this one won’t, either. Congress may have the Air Force explain their decision to send some of their procurement budget to Europe rather than employ Americans, but unless someone turns up corruption or compromised safety, the decision will likely stand — and it might just be the best decision in any case, at least in terms of support for the missions the Air Force has to accomplish.
You should post less and read more carefully.
Agreed. They get 2,000 jobs, we lose 9,000.
I read quite carefully-thanks. I have seen what modern free trade has brought this country-closed garment factories, closed steel factories, close auto plants, destruction of the American electronics industry...etc. The American government should award billion dollar weapons programs to American companies. Also, I do believe it is a security issue as well.
Unfortunately, this is the truth despite all the rhetoric.
“A functioning air force is infinitely more important than drumming up business for Illinois”
Glad you agree but will you still say that should the French withhold parts and service if they disagree with one of our foreign policies?
Up until yesterday I had so looked forward to seeing the dims kick the crud out of each other come their convention.
Do a search here on my posts prior to 2-29-08.
Here's what CONSERVATIVE Duncan Hunter said of the deal :
“These are the same European governments who are unwilling to support us in the global war on terror and over the last few months refused to provide even an additional 100 soldiers apiece for Afghanistan operations,” said Rep. Duncan Hunter, R-California.
“Instead, we have to send 3,200 additional U.S. Marines to Afghanistan while they take $35 billion in American taxpayer contracts.”
Excellent post-you make very good points.
I might care more about what you think if you could distinguish between facts and delusional rantings.
No, but that’s a plumb opportunity for Boeing if it ever happens.
“When our defense contractors realize that price points and design innovation really matter then they’ll get the business back.”
The Boeing entry would’ve suited the Air Force just fine. Just a couple of years ago, they were all hot to get 767 tankers.
This is one of the few issues I’d vote with a Democrat on. For defense systems, you ONLY go outside of America if you can’t get what you need here. And the 767 could easily be stretched if USAF simply wants a little more capacity.
Look, I documented for you in detail various the jobs that will be created from the Northrop Grumman Tanker program.
Your response is baseless.
“Alamaba? Where the heck is that.
Right between Greogia and Mippississi.
Everybody knows that. ;-)”
Today they’re closer to France.
“When our defense contractors realize that price points and design innovation”
When FReeper’s read entire articles then we’ll get a conservative in office :)
The Boeing Aircraft according to this article is $35 million dollars cheaper per plane than the Airbus. The article mentions some aspects of performance but of course they won’t talk about the specifics and end the sentence...”depending on configuration”.
“I also would not be surprised if President Obama cancels the contract altogether.”
Good point. Why would we need tankers if we’re just going to wait for him to come here instead of engaging him overseas?
Nobama!
“Yes, they will. What is wrong with the GOP? They have begun to believe their own nonsense. Free trade is largely unpopular with all Americans-not just Democrats.”
Free trade is fine for civilian purchases. But not Military weapons systems. This deal is just insane on numerous levels.
Boeing uses major parts and assemblies from China. Here's one example.
Boeing, the world's second-biggest maker of commercial aircraft, said Thursday that it signed contracts with Chinese aircraft parts makers valued at an estimated $600 million as part of its plan to cut production costs.
The agreements with four companies include the first firm contract with Chinese suppliers to make parts for the 787 jetliner, the company's first new model in 15 years, Boeing said in a statement issued in Beijing. Boeing is trying to reduce costs to make its airplanes more competitively priced against Airbus, which surpassed Boeing as the top commercial plane maker by deliveries in 2003. More than 3,500 Boeing planes have major parts and assemblies made in China.
(The underscore is mine)
All the articles you provided were before the deal was struck. Show me one article -post deal- that provides any evidence that jobs will be gained outside of Alabama.
Exactly, Boeing was forced because of free trade pressure to manufacture some parts in China. Wow, I feel secure knowing that parts used for American military planes etc. are being manufactured by the Chinese-probably the most dangerous country right now in terms of national security.
That’s for the 787, a civilian airliner for an international market. For MILITARY SYSTEMS, we should only buy American produced weapons, period. We can get tech from abroad if we need it and build it here. But the Airbus will still be mostly fabricated in Europe. It’ll just be assembled here.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.