This article first appeared in Aviation Week & Space Technology.
The decision by Northrop Grumman/EADS North America not to submit a bid for the U.S. Air Force’s KC-135 replacement competition is largely seen as continued posturing by the team, rather than an end to its ambitions to win back the $35-billion deal to rebuild aerial refuelers.
Northrop Grumman officials have publicly criticized the Pentagon’s KC-X plans — specifically the draft request for proposals (RFP) released last September — but so far the Defense Dept. appears unmoved.
“We very much want a competition,” Deputy Defense Secretary William Lynn said during the Credit Suisse/Aviation Week Aerospace and Defense Finance conference here last week. “But we are very cognizant that we have to do what we’ve done all the way along, which is play this down the middle. We can’t favor one side over the other. We can’t compel the contractors” to enter the competition.
His steadfastness is a stark contrast to the KC-X competition of two years ago under the oversight of his predecessors. At that time, Northrop Grumman threatened not to bid, complaining the Pentagon’s source selection process would favor a smaller aircraft than its Airbus A330 option. The Pentagon then added another factor to the evaluation criteria — a factor many observers believe helped the company’s bid win.
Financial analysts are not taking seriously Northrop Grumman’s threat to walk away. Robert Spingarn of Credit Suisse says Northrop Grumman’s announcement is “merely a posturing move” and is “part of a negotiation process because [Northrop Grumman] has concluded it would have to bid the current RFP at a massive loss in order to win.”
Another financial analyst suggests the timing for the no-bid threat was plotted to ensure the company’s options are kept open. If Northrop Grumman were to pull out after the final RFP is issued, it would have less leverage and room to maneuver to possibly re-enter the competition.
Lawmakers on Capitol Hill could get involved if the team sticks with its plans not to bid. They could again embrace an option to buy both tankers at once, splitting the work with the lion’s share annually going to the best-performing team.
Air Force Chief of Staff Gen. Norton Schwartz seemed chagrined during a luncheon speech at the conference here. “I do find it curious that some have indicated they understand our requirements better than we do,” he said. Industry should be postured to “satisfy the needs of the customer long before satisfying the marketing imperatives of the producer,” he noted.
By default, Northrop Grumman’s decision to walk away from the deal would mean the Pentagon could justify a sole-source deal to Boeing, but the Senate Armed Services Committee, and especially ranking member Sen. John McCain (R-Ariz.), have pushed for a competition. The Pentagon may be compelled to make some concessions if Congress rejects a sole-source contract.
Read the rest of this story, see Germany’s renewed deployment mandates, wait with baited breath for the A400M first flight and get a read on Eikenberry’s testimony from our friends at Aviation Week, exclusively on Military.com.
– Christian
{ 10 comments… read them below or add one }
Couple of observations-
PART1
1. The title of the post does not match the content. It should read more like "Industry observers believe NG/EADS will compete…"
2. NG may very well "compete" even if they think they can't win just to be a good citizen for the DoD. I hope not, and I think not, because of leadership changes over the past few years at NG have trended away fom 'airplane' guys and more towards 'money' guys. NG with more interest in making NG attractive to a broader spectrum of shareholders. As a very minor shareholder in NG (and Lockheed Martin and Boeing and others), I think that is a mistake- and another story. Also as a shareholder, I hope NG doesn't bid again in order to further highlight Boeing's underhanded machinations of the process the last time. If they do no-bid,
PART 2
3. You've buried the best summary of the real problem in the body of the text. Schwartz, humourless and dour as usual, lamenting "“I do find it curious that some have indicated they understand our requirements better than we do,”
clearly illustrates the problem. General, the RFP is supposed to make the bidders fully understand your requirements as well as you do, such that they may make a competent bid. If there is a problem with the RFP that favors one competitor over the other, then it is the AF and DoD's fault and nobody elses.
If the gov't restructures the contract such that it does not drive competitors to offer existing airframes, it would remove any possibility that either offerer would be favored, but of course it is the Warfighter that would suffer from longer delays in getting a new airframe.
If this was reversed and outside the USA your senators and congressmen/congresswomen(?) would be leaping up an down about bribery and corrupt practices.
Boeing lost, called in their favors from the bought and payed for, result they get a second chance.
The politicians do not give one seconds thought to the military. 'Gravy Train' occupies their every othe thinking moment. The other thinking moment is devoted to 'what lies do we need to tell to get re-elected'.
NG/EADSA had a proposal based on something that existed, Boeing was peddling vapourware.
Either Russ didn't read the GAO report or is so biased as to not have an actual opinion of his own. I will grant you that Boeing has been calling in favors all along. Some of these favors were bought illegitimately and many others are very legitimate. The USAF is a big fan of Boeing–for good reason. Northrop-Grumman doesn't have a lot of those same fans in the USAF, so it's been calling in plenty of political power to help it out, which has worked pretty well up to this point.
That being said, Boeing got its second chance not because of political maneuvering or protectionism (which may well have bought it time) but because of how badly the USAF botched the awarding of the contract to NG. Just look at the GAO response to Boeing's protest to see that. It was ridiculous.
Boeing's aircraft was far from vaporware. It was a frankentanker, to be sure, but the plant that NG/Airbus want to build the KC-30 at is just as much vaporware as the model of 767 Boeing is touting. Both have risk involved.
Both aircraft have their tradeoffs, both production plans have their risks, and both companies have politicians in their pocket and are using them to their full advantage. At this point, I just want to see the warfighter get the tanker as soon as possible.
Cheers,
Logan
I've studied the draft and final RFPs, the public data available on the protest, the draft and the GAO report. The GAO found exactly what their masters wanted them to find and they had to twist themselves into pretzels to do it.
I'll propose a bigger challenge for anyone: find a GAO report on any major weapon system aquisition activity, at least since the 1970s, that concluded in general that things were as they should be. The only reports that come close are those commissioned on the behest of some Congressional interest trying to protect an existing rice bowl. Holding the GAO 'report' up as anything remotely resembling 'proof' without other supporting or opposing sources for perspective is dangerously close to a fallacious appeal to authority. We are in the political world on this one. The last RFP met warfighter's needs but favored the bigger plane. This RFP then does…..what?
SMSgt Mac,
Don't be such a fool. All relavent parties fully understand the requirements. The RFP is clear on the requirements So were the RFPs in the 1st two solicitations. NG/EADS understands the requirements well enough to recognize that its chances of winning are not good because CLEARLY the 767 is a MUCH better match to the requirements than the A330.
What Gen. Schwartz is commenting about is how NG/EADS does not want to offer a competative platform but instead (just like in the last solicitaion) is trying to force the USAF to alter its requirements/criteria so that the noncompetative A330 can be competative.
The only thing the GAO had to 'twist themselves into pretzels to do' is stay within the limits of its authority.
This issue is so far over your head you probably think the driver for Boeing is just winning the contract. The new comment format, while ready made for drive-by trolls like y'self, doesn't allow sufficient space to give you the royal pounding you so richly deserve. So it looks like you get the benefit from enforced restraint, boy!
There were no 'changes' to the requirement in the last RFP: only a clarification to the non-tanker criteria's requirements and how they would be weighted. One could cavil and call that a 'change' to the document, but it was not a change to the requirements. As to "competitive", the Boeing entry was more expensive than the NG/EADS and the KC-45 beat the KC7-67 in EVERY category. How’s that for “competitive”?
The first competition that LM won reminded me of a guy who went out shopping for a minivan and came home with a large 4×4 SUV. Sure the 330 was bigger and better, but it didn't quite match the spirit and intent of buying a new plane that was cheaper, easier to maintain, and an inline replacement for the KC-135.
The AF tried to sneak a bigger and better plane into the hangar, and the GAO popped out like a nagging housewife and sent them back to the dealership to pickup the dodge caravan of tankers.
continued….
BTW: The GAO had no authority except to make observations, piss poor as they were. the AF and DoD were under no obligation to accept them, but they know better than to PO the GAO's Masters.
"Fool" eh? Kind'a personal there, but hey…. I got your 'fool' hanging. Now, how about you stop being such a mouth-breathing ignorant tool instead? Keep on lurking and learning little one. Someday you might make a valid point, but I'll bet you'll find it by tripping over it first. Search up "Boeing BS Watch" and argue your points at my place if you have a hair.
I would like to make one modification to my earlier observation: "If the gov't restructures the contract such that it does not drive competitors to offer existing airframes, it would remove any possibility that either offerer would be favored, "
There is another possibility, however remote, that would also level the playng field for the competitors: describe the required operational parameters such that each offferor also proposes a CONOPS optimized for whichever airframe they offer. Make the requirement to deliver x pounds of fuel (or cargo) and y numbers of sorties to specified points on earth. Grade each competitor on how well they do it at the best cost.
It aint gonna happen, and I still hope NG doesn't bid if they don't think they can win. they owe it to the shareholders (like me) .