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Home » The Tanker Tango » The Real Reason for Boeing’s Protest

The Real Reason for Boeing’s Protest

boeing-kc767.jpg

What’s the real rea­son Boeing filed a GAO protest over the tanker award to Northrop Grumman? After all, the GAO rarely over­turns such awards and the Air Force appears to have acted about as trans­par­ently as any­one could hope for.

Of course, it’s extremely dif­fi­cult to get a good grip on just how strong — or weak — Boeing’s case might be since most of the infor­ma­tion that would really make that clear is con­sid­ered extremely sen­si­tive pro­pri­etary data.

It looks as if Boeing has two main goals. The first and most eas­ily under­stood is that Boeing wants to get paid back for the costs it incurred prepar­ing its bid. The sec­ond goal is to give the com­pany the 100 days to trum­pet its var­i­ous claims, spread money around Capitol Hill and adver­tise, adver­tise, advertise.

I spoke about all this with a lob­by­ist and a defense finance expert, both of whom have to remain very anony­mous. Both have a tight grasp on defense acqui­si­tion bat­tles and their dynam­ics. We con­cluded that Boeing doesn’t really care about the GAO protest, though the finance expert said Boeing may have a stronger case than first appears obvi­ous. They both agreed that the company’s main object was to carve out a win­dow to give it time to ham­mer law­mak­ers, their staff and the pub­lic about just fab­u­lous their plane really is and to cre­ate so much white noise that Northrop Grumman/​EADS is forced to either share the deal or, best of all, get Congress to award the con­tract to Boeing.

The lob­by­ist said he had used a sim­i­lar strat­egy on a smaller pro­gram sev­eral years before and it worked like a charm.

The finance per­son said there are two finan­cial rea­sons Boeing filed the protest. First, it stands a decent chance of get­ting back the cost of prepar­ing its bid, which he esti­mated at around $20 mil­lion. But the biggest rea­son for Boeing’s actions may have lit­tle to do with its defense busi­ness, although $32 bil­lion is not chump change even for one of the big three defense con­trac­tors. And the enor­mously cycli­cal nature of the civil avi­a­tion busi­ness may pose enor­mous long-​​term risks for the Chicago-​​based company.

So Boeing would like to guar­an­tee rev­enue from its reli­able gov­ern­ment cus­tomer. Should the 787 Dreamliner face longer delays than it has already wracked up, our finance expert said the com­pany faces penal­ties that reach as high as $20 billion.

[PHOTO: Boeing Co.]

– Colin Clark

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May 13th, 2008 | The Tanker Tango | 283973 Comments »http://defensetech.org/2008/05/13/the-real-reason-for-boeings-protest/The+Real+Reason+for+Boeing%27s+Protest2008-05-13+12%3A24%3A29Ward You can skip to the end and leave a response. Pinging is currently not allowed.

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  1. DRG says:
    July 5, 2008 at 6:58 am

    Would it not be bet­ter for the USAF and the USA to build the first KC-​​767 tankers, while devel­op­ing a new KC-​​777. The USAF could then, based on its needs have a mixed fleet of KC-​​767 & KC-​​777 at each base. So when a B52 or B1 needs a fillup they send up a KC-​​777, and when a F15 needs a fillup they send up the KC-​​767. We must also think of the cost to train pilots and mechan­ics for dif­fer­ent air­craft types, so using boe­ings aicraft instead of a new KC-​​30 would be a huge cost sav­ing in the long run.
    I never hear any­one bring that hid­den cost point up, I won­der why?

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