Author Topic: Boeing lost air tanker deal decisively, says analyst  (Read 1796 times)

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Offline Wretched Excess

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Boeing lost air tanker deal decisively, says analyst
« on: March 04, 2008, 03:46:18 PM »

a follow up to my earlier thread about boeing losing the tanker deal . . . the moral of this story is
that there can be big differences to flying gas stations . . .

Boeing lost air tanker deal decisively-analyst

WASHINGTON, March 3 (Reuters) - Details emerged on Monday about how dramatically Northrop Grumman Corp (NOC.N: Quote, Profile, Research) and its European partner beat Boeing Co (BA.N: Quote, Profile, Research) to win a $35 billion tanker aircraft competition, as furious Boeing supporters called the contract "a multibillion dollar gift to Europe."

"This was not a close outcome in any sense of the term," defense analyst Loren Thompson of the Lexington Institute told Reuters, describing how Boeing failed to beat Northrop in any of the key criteria for the aerial refueling contract.

"Northrop won decisively and completely," said Thompson, who has close ties to the Air Force.

Kenneth Miller, special assistant to Air Force Secretary Michael Wynne, met with Boeing supporters on Capitol Hill on Monday to explain the decision even as union leaders demanded legislative action to block contract awards to foreign companies that receive anti-competitive subsidies.

"This will go down in history as the moment when the Department of Defense sold the U.S. aerospace industry to the French," Gabriela Lemus, head of the Labor Council for Latin American Advancement, said in a conference call.

Miller did not provide many details about how the bids compared, but Air Force officials said on Friday the Northrop plane was superior and offered more for the money.

This could make it difficult for Boeing supporters in Congress to argue for a reversal of the Air Force decision, and might give Boeing pause about protesting it.

In a report on Monday, Thompson wrote that Boeing matched the appeal of the Northrop bid only in the area of proposal risk. And that came only after Air Force reviewers pressed Boeing to stretch out its aggressive development schedule for a new version of its 767 jet, which added to the cost.

The Boeing proposal was initially rated "high-risk" because reviewers worried that Boeing's plan to build a new version of the 767 using parts from other versions would add to the cost.

Northrop proposed a tanker based on the Airbus A330 aircraft built by Europe's EADS (EAD.PA: Quote, Profile, Research). Northrop-EADS won in four of the five criteria set by the Air Force: mission capability, past performance, price, and an integrated fleet assessment, according to Thompson.

"Although some observers expected that the Northrop team would offer a better price, nobody expected that they would be better in every significant regard," Thompson told Reuters.

The Air Force will buy 179 refueling planes over the next 15 years to begin replacing its Boeing-built KC-135 tankers, on average 47 years old. The new planes will refuel fighter jets and other warplanes in midair, extending their range.

Thompson's report said Air Force reviewers concluded that buying the Boeing tanker would have resulted in a slower replacement rate. They predicted that Northrop would have "49 superior tankers operating by 2013, whereas if they went with the Boeing proposal, they would have only 19 considerably less capable planes in that year," he wrote.

Northrop's refueling capacity was seen as superior at a range of 1,000 nautical miles and "substantially superior" at 2,000 miles, Thompson said.

Air Force reviewers were also less confident about Boeing's past performance due to "poor execution" in three relevant programs, including long-delayed tanker deliveries to Japan and Italy, Thompson said. Northrop got higher ratings due to "satisfactory" execution on six programs considered relevant.

Boeing has said it would review its options and whether it would file a protest after it receives a detailed briefing from the Air Force around March 12.

The Government Accountability Office (GAO) that reviews contract protests said Boeing had five days to file a protest after the briefing if it wanted to halt Northrop work on the contract, and 10 days to file a regular protest.