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.
Yes it is insane.
All Tanker bids were submitted in April of 2007.
The articles dated August through December of 2007 all refer to the Northrop Grumman bid of April, 2007. The bid that was awarded is the April, 2007 Northrop Grumman bid.
Your claim that something has changed since the various analysis that I posted of the Northrop Grumman bid, is false. Please don't spread false information.
Again with the name calling-no problem. Every word I have posted is true. Jobs have been promised to Alabama-nowhere else. American companies have been run out of business because of foreign dumping. National security is compromised by manufacturing military equipment overseas.
We have replaced an economy that relied on manufacturing goods with a consumer driven economy which is why we are told to spend money...including the so called stimulus money. Unfortunately, the chickens have come home to roost. Americans are over extended and can not keep the economy strong anymore. In fact, I think you are somewhat delusional if you can not see the impact immoral, unfair free trade deals have on the GOP and more importantly the country. McCain will lose Ohio on this issue...How many times have Republicans won without Ohio? The answer is twice.
Have you listened to the financial news yesterday or today? The planes will be assembled and modified in Alabama-that’s it. Whatever the bids called for-it’s not happening.
N.G. will "just" be assembling and modfying?
No. Northrop Grumman will be engineering the electronic systems and the software componants and they will be building all fueling componants. American companies will be supplying a majority of the parts. Northrop Grumman will then assemble everything.
Contrast that to EADS. They will be metal-bending the frame.
I documented in full detail the reality. You have done no such thing except to give me some paraphrase from the Drive-Bys.
Whether you choose to ignore what I've documented is up to you.
It works towards the balance of trade. Northrop Grumman is Prime here and will reap most of the profit.
Well, we shall see. I consider your ‘proof’ outdated. Tell you what, let’s watch the situation and see how many jobs America ends up with out of this dubious deal-not the ones dangled during the bidding faze but the ones actually created. Also, let’s keep an eye on the net job gain or loss in general.
Airbus will reap the profit.
A country that manufactures nothing will not remain an economic power. We have a government that favors foreign competitors and does nothing when these companies violate trade agreements, a tax code that favors companies that move jobs overseas. There is no upside to free trade as it is currently practiced in America.
I thought the Air Force had to go with the lowest bidder, but something strange happened in this case.
Someone’s pockets getting lined perhaps?
Could be. It has happened before.
Right you are.
US manufacturing has increased 53% since NAFTA was first adopted. It follows the year-to-year state of the economy but has been growing steadily for over half a century along with our economy as a whole. You can point to the decline of this or that industry (assuming you have any numbers to back up your assertion) but it doesn’t affect long term trends overall. As of 2006, we’re manufacturing two and half times as much as China is, even though China is a huge country with an equally huge, increasingly well educated work force that understandably wants to provide for itself as well as the US or other markets out there. So if you’re implying that the US is doomed because manufacturing is in decline, you’re wrong on both counts.
I don’t know. I think the reports that show manufacturing up are a bit suspicious. If manufacturing is up then how come almost all products in the store are made in China? Also, why do we have such a huge trade deficit?
I’ve been around long enough to see the impact of free trade as currently practiced-to call it a disaster for this country is an understatement.
You know, when people lose job as a result of trade policies, or have their wages cut and health care eliminated, there is a cost to the taxpayers. The more people affected, the more likely it is that Democrats will get elected and socialism will prevail. I think this will cost more in the end.
They also want it to fly. The 767 already has runway lenght issues to meet the present capacity. Stretch it to match the A330 fuel/cargo capacity and there wouldn't be a airbase anywhere with enough runway to get it off the ground.
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