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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....
ha..they will come up 33% short the second time also
I want to see Boeing’s specifics before I make up my mind on this. EADS/Northrup have their talking points out there already. I’m curious to see what the appeal states.
Boeing will lose. Apparently, a gov’t employee went to jail trying to Boeing the contract.
Not for this competition. That was over a defunct leasing plan.
Actually, I’d watch “what the appeal states” and compare that to what the politicians say. I’d bet this is a political appeal and that there will be a wide gulf between what the appeal says and what the politicians say.
So you suggest SOME people should have different employment rights than others ? Interesting. Are you sure you’re on the right board ? Generally, procurement rules prevent you from working on procurement on any program you previously held any bit of sway on.
And what’s WRONG with a 25-year pilot working for a company than builds airplanes ? He might have a few insights that the Harvard MBAs would miss. . .
It still shows to what lengths they’ll go to.
See post 4 for a hint.
My sentiments, too. But it is what it is and all the whining and complaining by Murray/Cantvotewell/Bremerton Big Dig II Dicks ain't gonna help reverse sh...
Bastards, I still haven't gotten over the Boeing HQ moving to Nobamaville. Serves them right too, Chicago is now the highest taxed city in the nation.
If footprint per aircraft and ability to use existing infrastructure is taken off the table and performance on 7000' runways is a criterion, the only aircraft Boeing could have proposed as a platform would be the 787. The 757-200F could possibly have been a good choice for having good short field performance and being able to fit in the exiting infrastructure.
It ain’t just dems up in arms.
Yes, but there are Dems down here in the south who are happy for the jobs and will not want to see it reversed.
The partisan divide comes mostly from Boeing’s being in predominantly Dem states like yours (Washington state, right?). There are a few Republicans whose states would have gotten Boeing jobs (Kansas?).
There are those with heavy influence, such as Ranking Republican of the Armed Services committee, Duncan Hunter that DO NOT want airbus to get such a contract.
If we were talking about an NG design being sourced to subs around the world, that would be one thing. What's happening here, is the whole entire plane is coming from a foreign country. And the parts aren't just being manufactured overseas for an American design, the design is from a foreign company. A state supported one at that.
NG is just the front man for a foreign tanker by Airbus, that was already in the works, that was being marketed to other countries. I'm not disputing that they'll add milspec nav, and data links and other things to the project, but they are the junior partners here.
Putting NG in the mix has had the desired affect. Getting some folks to say what's wrong with NG, they're an American company. Nothing, and if they were designing and building this bird, I'd be cheering. They ain't!
They're selling it to YOU!
EADS wants into our defense contracts in a big way. If this goes through, then look for more stuff to go to them and other foreign countries, and after a while, an American front company may no longer be required.
Well, we’ll see. I want to hear from the Air Force’s review board which oversaw the bidding process from beginning to end.
Do you know who is on that board?
Well at least there's competition. Why do you assume Boeing will go on losing? Maybe they'll put in a better bid next time.
I didn’t mean to imply differently. My point is, it doesn’t matter.
I hate to say this, if McCain gets elected don’t expect any reversals in Boeing’s decline. Maybe, if Hillary wins she’ll throw a bone to Deacon Gregoire for Boeing, otherwise I don’t see much silver in them there clouds. I certainly ain’t gonna vote for Hillary NO MATTER WHAT.
No, I don’t expect the results to be reversed. It’s a longshot. But Boeing will survive just fine. It needs to get the darn 787 in the air though soon.
He's saying that the bid evaluation criteria were changed after issue of the RFP, which specified a medium AC and specific capabilities. Furthermore, the evaluation model was controlled & executed by one of the bidders(oddly, the winning bidder!). And, that the changes made, with USAF approval, allowed an AC that would have been outside of the specification to be included but that the AF promised to use subjective opinions to re-level the evaluations.
If true, any of those actions would invalidate the entire procurement. With the McCain bias and the Druyrian (sp) onus on Boeing, they wasted their ink unless they do protest.
a) changes to the RFP (allowing for a larger AC than specified) are OK, IF all bidders are advised of the change, given time to adjust, and the change is not designed to favor one over the other(s). This seems to have been intended to favor EADS because they wanted to use a larger airframe from the git-go while Boeing would have to go back to the drawing boards. I'm not sure that Boeing even has the existing larger airframe available - meaning cost for the larger AC would have blown them out in any event...this was not intended to be a competition for new design - or tanker specific - aircraft due to AF cost constraints.
b) Allowing one of the two bidders to own, write, and execute the evaluation model is simply insane. If the AF cannot review & evaluate the program, independently confirm the findings using their own software, and repeat the scores, it would be more than insane. It would be criminal. (Harkens to the Stalin line about "..it's who counts the votes.")
c) Government frequently uses subjective criteria when determining fee payments (over and above cost, in addition to baseline price, etc.) and they reflect cash on hand & desire to improve Officer's performance ratings more than contractor performance. Absolutely stellar performance (note comments about unprecedented cost-price data / transparency, which are VERY RARE comments in a community defined by distrust) is often ignored while the 'subjective comments' focus on someone's perception or something from the distant past.
Remember that "I just don't like you" is a subjective criteria...I'd bet that they gave a 'subjective shrug' and moved ahead to the desired result.
In addition:
Rating the two equal in past performance implies that one commercial helicopter is a challenge equal to dozens of military specified aircraft delivered over decades. Northrup was included in the team solely to provide the bona fides of a US company with a military record (F22 is going OK, yes? So is C17 but there aren't many left to be built). Nonetheless, Airbus is the senior party and determining factor - the entire program will depend on Airbus delivery of parts, support to the end product, and costs - not on Northrop's ability to integrate.
Check out Airbus' performance on their passenger ark and on coming up with an alternate to the 787. Boeing's delays pale in comparison, and Boeing does not have the government backing that EADS has. (By this reasoning, we could arm the services with M16s built by NORINCO so long as Smith & Wesson fronted for them.)
Boeing pretty much sucks, Airbust sucks worse; this procurement will be delayed one way or another, either by EADS/Northrup inability to perform or by formal protest, or both.
However, either a 'souped-up 767-400' or a 777-200 would have put first delivery at least 3 years behind what Northrop Grumman/EADS could promise for the KC-30.
Boeing had to bid the KC-767 to match EADS delivery timetable, and even then was gambling that shoving the cockpit and wings of a -400 onto a fuselage of a -200F (where all of the boom work had been completed) wouldn't have any unexpected hitches.
Further, this replacement should have been in the works by the late eighties. And certainly after the first Gulf War. But it's not a sexy platform like an F-22. And having it in the works then would have allowed competition from American sources like Lockheed and MD. Defense company consolidation has its downsides, and this is one of them.
And one more thing. At least Boeing has a lot of experience in building and maintaining tanker aircraft. This is a first ever for Airbus. Let other foreign countries pay for their growing pains.
Put this contract up for re bid. Boeing can add the triple seven to the mix if in fact the AF likes the bigger footprint. From a graphic I saw on another thread, the 777 beats the A330 in the larger AC metrics. BTW: while not as large as the A330, the 767 was cheaper. But hey, since you're paying for it, and you want to go with the bigger bird; why not buy American!
If you sit on your butt for two years after you start losing perhaps you should start thinking it important.
That’s why I want to hear from the oversight board. Nothing personal, but some here seem to be presenting one side of the issue. I want to hear both sides on the technical merits. (I’m not persuaded by the American jobs argument, nor by the military secrets issue.)
Fox said Murtha’s starting his hearings tomorrow. Will the oversight board members make public testimony?
Not this century
This is a first ever for Airbus. Let other foreign countries pay for their growing pains.
Actually we are.
His stepping in during the last tanker fiasco saved the taxpayer one helluva lot. His concern about FCS is well founded as well
His stepping in during the last tanker fiasco saved the taxpayer one helluva lot. His concern about FCS is well founded as well
This will delay the start of the program for at least one year. The Air Force and Pentagon are going to remember this for a long time.
Very true. The KC-767 lost in head to head competition with the KC-330 MRTT in the UK, Australia, UAE, and Saudi Arabia.
Japan already operates an AWACS version of the 767, so their selection of the KC-767 is understandable.
His attempted “peace dividend” military cuts and missile defense freeze in the 1990s were the height of stupidity. He’s a chump.
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