Air Force goes European with new refueling planes

Hot Air ^ | March 01, 2008 | by Ed Morrissey

[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.

[dr_who_2]

I think the reports that show manufacturing up are a bit suspicious.

That's nice.

If manufacturing is up then how come almost all products in the store are made in China?

If you're shopping at Walmart or "Everything's a Dollar", I suppose you'll see a lot of Chinese goods, Vietnamese goods, Bangladeshi goods, maybe Pakistani goods if we didn't have so many textile quotas. Do go ever go shopping for earth movers?

Also, why do we have such a huge trade deficit?

Because Americans tend buy a lot of stuff from everybody when then economy is expanding.

[dr_who_2]

I’ve conversed with you long enough to realize that you’re pretty much going to believe anything you want to believe even if you’re wrong. Hope it works for ya.

[nyconse]

I shop at many different stores-department stores, grocery stores, home depot etc. All these stores have tons of Chinese products. I know Catapillar is a success story-its actually one of the few success stories concerning global trading. Chinese demand is fueling their success.

I don’t think the economy is expanding right now, judging by the market on Friday and other economic news. The deficit is huge, in earlier markets we didn’t have such trade deficits even in expanding economies.

[nyconse]

I guess we will have to agree to differ on this issue. Actually, I wish what you said was true. It would be better for the country.

[Polybius]

You left out two of their most important aircraft. The T-38 and F-5!

I couldn't find a photo of the T-38 but I did find a photo of one of the T-38 tail assembly components. ;-)

[Always Independent]

Cute! But the success of the T-38 and F-5 programs were instrumental in allowing Northrop to grow into a company that can build aircraft like the B-2, YF-23 and YF-17. Also make honorable mention of the F-89 and P-61.

[DesScorp]

"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.

Christ Jesus, what bullsh*t. USAF asked for the 767 in competition because of its ability to handle shorter, rougher runways in forward areas. Boeing repeatedly told them that if capacity was an issue, they could easily make a 777 tanker for USAF. The Air Force insisted on the 767 entry for the competition.

[Gaffer]

Right down there somewhere in the south somewhere nears ‘Al-Obama’?

[Conspiracy Guy]

Thanks. I appreciate your help.

[Oztrich Boy]

Christ Jesus, what bullsh*t. USAF asked for the 767 in competition because of its ability to handle shorter, rougher runways in forward areas.

The 767 isn't a Herc, or even a C-17, it's a frickin' airliner. It needs the concrete.

And the USAF wants a tanker. Those "shorter, rougher runways in forward areas" aren't exactly flush with the huge fuel storage needed to load up the tankers.

[SoCal Pubbie]

Tell me about your screen name.