Predictable and disappointing

Northrop Grumman’s opposition to granting Boeing’s request for a six month response time instead of 45-60 days for the re-bid on the KC-X competition is predictable and disappointing.

Boeing also threatened to no-bid the contract if it doesn’t get its way on the request.

As readers know, we have always felt the KC-30 was the more capable airplane for the KC-X than the KC-767 offered by Boeing. We’ve sided with Northrop on any number of issues during the competition. But not this one, as we opined on August 22.

Northrop believes that Boeing is stalling on the bet that the Democrats will increase their majorities in the House and the Senate in the November election, and that this will increase Boeing’s sympathy in Congress. We have no doubt this is part of the Boeing calculus. So what? EADS decided to locate the KC-30 production facility in Republican Alabama at a time when the Republicans controlled Congress. That was hardly a coincidence. Politics have permeated this process from the start and while there is plenty of reason to stop now, that’s not going to happen.

Boeing, in its political gambit, is taking a risk that falls into the “be careful what you ask for category,” however. While it seems certain Democrats will increase their majority in Congress, it’s hardly a sure bet today that they will win the White House. Sen. John McCain is giving Barak Obama a run for his money and if McCain wins, this won’t be good news for Boeing.

We see no harm in giving Boeing the six months. We think both sides will produce a better bid, and that’s good for taxpayers.

Meantime, Steve Trimble at Flight International has an interesting take on his blog about how the re-bid can flip-flop some of the suppliers.

Update, 09:15 AM PDT Aug. 26: Innovation Analysis Group does a six minute podcoast with an Israeli reporter discussing Israel’s plan to update its aerial tanker fleet. The air force could use the KC-135/707 for another 20 years if necessary, but it really wants to buy the same aircraft used by the USAF.

Update, 2:30 PM PDT Aug. 26: So far, no final RFP has emerged from DOD; it was thought that it might be issued yesterday. We’re picking up rumblings that it may not come out this week.

Update, 350 PM PDT Aug. 26: Reuters now reports the final RFP may be issued next week.

Update, 12:00 PDT, Aug. 27: The St. Louis Post Dispatch has this piece looking at the strategic implications of the tanker competition.

12 Comments on “Predictable and disappointing

  1. The original KC-767 lease deal was in 2001.

    The KC-X RFP was released in January of 2007.

    The KC-X was awarded in February of 2008.

    The KC-X protest was upheld in June of 2008.

    Now another 6 months for Boeing to redesign their tanker offering yet again? And if the NG/EADS offering is selected again, will Boeing again protest?

    After listening to the IAG podcast with Boeing’s Dan Beck, it appears to be Boeing’s position that they carefully read the customer’s RFP, then custom tailor an offering to exactly match that RFP. The implied assertion by Boeing is that if the customer subesquently doesn’t choose Boeing, it didn’t choose the product that best matched the RFP, and it’s off to the protest races again.

    The only aircraft that Boeing can offer that has any chance of meeting the specified delivery dates is the already bid 767AT. Boeing knows that, and if they don’t get the extra 6 months (with a corresponding 1 year pushback of all original program milestones?) then they’ll protest again.

    If Boeing doesn’t like losing the KC-X contract, they can do what they did the last time they lost a USAF tanker competition: Buy the winning company!

  2. The dynamics and intracacies of this rfp will make a very interesting book one day…and it will be a lengthy one. The process was complicated by too many misunderstanding and miscues on all sides. There is plenty of blame to go around. Just read the recent GAO report.

    There are too many lobbyists involved as well as Lawyers. This is not a simple bidding war but a political issues in the military-industrial complex arena. States as well as candidates are weighing in milli0ns of dollars have been spent to get back to this point where it may start all over again. Just mindboggling!

  3. We agree to disagree.

    But if you please, would you mind providing what would be the definition of a ‘better bid’ from ‘both sides’?

    As to somone buying a company, given the marauding Russian Bear is once again at large, I’d like to see NG buy the Russian stake in EADS. Perhaps EADS would like to see that as well?

  4. Yes Boeing is trying to play the political card just like the other team has. Of course they want to win this competition and keep Airbus out of North America (what I believe to be, at best, a delying action).

    What rubs me is this “poor Boeing” routine that they, and their supporters continue to play.

    Back during the debrief in March, the Air Force made it abundantly clear that they preferred the NG/Airbus offering because it had “more”!

    Based on this, a forward thinking company would know which way the wind is blowing and would take certain proactive steps to remedy the situation, based on the assumption their protest would succeed.

    Such a company would have used the past 5 plus months to prepare themselves to make a proposal for a larger aircraft, based on these Air Force comments.

    To say that the new draft RFP is now indicating something larger and that they were not aware of this, indicates either a remarkable degree if naivete or, what I am more inclined to suspect, an incredible amount of cynicism.

    Having said that, I do agree with Scott that a rebid would be the best for the American people, and the Government, in that it could get them a better deal.

    Question is, what about the poor military (warfighter!? Who came up with that term?) that has supposedly been desperately requiring these new tankers for about 7 years now?!

  5. The harm in giving Boeing six more months is the clear statement it would send to all industry players that the government is allowed no discretion in its choice. That cannot be right.

    When a large enterprise issues an RFP to suppliers and receives two strong bids which meet the criteria but are nonetheless different, it is right and efficient that it can choose which of the two it prefers. This is competition in action, and produces value for money for the purchaser.

    In the case of government, it is important that it then accounts publicly for its choice. The accountability process here has thrown up some concerns. I would bet the next big contest will be run better than this one!

    For now, Boeing’s strategy is transparent, but the military should not give in to it. Make no mistake, this is a power play and the government, not the supplier, need to be seen to have the ultimate say.

  6. Air Force is giving 2 months and Boeing is asking for 6 months.

    Suggest that Air Force gives them 3.75 months just to make the point that is willing to give more time to prepare, is not willing to split the difference in half, giving into a common bargaining tactic, but also giving the message that it will not tolerate any political and business games from a supplier that is bidding on a potentially $100 billion project.

    Boeing needs to show that is committed to the needs of the Air Force and their requests for speed and that is a true partner to a home insitution.

    What you have are the French being more Americans than Boeing by listening to the Air Force and offering a solution that is more than they asked at a lower price than the American competitor.

  7. Lack of alternative plans would expose any company as short sighted and incompetent. Boeing has apparently admitted to that when Dan Beck was quoted in a Bloomberg article as saying “Our 767-200 doesn’t fill the bill. We’ve been looking at other configurations” because USAF’s “priority is fuel capacity.” To me this is an astonishing admission. So they have been looking at alternative configurations only NOW? What happened to the Rand study, which narrowed the possibilities to Boeing’s 767, 777, 787 or 747 jets and Airbus’ A330 and A340.
    What has happened to the KC-777, which has been touted? Have they asked the Air Force in their numerous meetings, ‘What is your priority’? I simply cannot believe that Boeing needs extra six months to come up with the real winner. In my opinion it is a bit naive of some commentators to believe that either.
    On the other hand what other choice do they have? Bid the same B762AT? Lost last time and will do so again. Bid the 777? Very expensive, long development program and no early availability of aircraft to fit with the USAF time scales. Same goes for the 747. So what is left?
    They are clearly playing a political card here. They and their political supporters (oh yeah, $8million annual lobby budget is doing wonders) are doing one of two things:
    1. Wait for the expected arrival of the Democrats, who will simply scrap the procurement all together. Then either restart this whole process yet again or
    2. Gather enough political support to push the bill through the Congress to direct the USAF to buy Boeing.

    Scott’s, 2nd point, which defines a ‘better bid’ doesn’t stand up to scrutiny. Pushing the program further to the right inevitably increases costs. Boeing and NG are not charities and will of course pass them on to the Government. If we extrapolate your thought on to, for example 5th or 6th attempt to buy the tankers, the overall costs would probably double. So I simply do not believe that by extending the timescales by 6 months, USAF will get a better deal. If point 1 (see above) happens, then the overall cost of the program will skyrocket. And that is how the defense programs are executed :o)

  8. Boeing is reasonable in asking for 6 months, and it would be reasonable to give it to both bidders. Here’s why:
    1) The USAF changed the RFP when NG/EADS objected and threatened to no-bid due to their perception that it favored Boeing’s bid.
    2) The RFP has been fundamentally changed since the DoD took it over after the GAO ruling. Boeing’s KC-767AT bid was appropriate based on the original RFP which stated that no additional credit would be given for exceeding off-load requirement. The GAO ruling validated that. Now that the DoD amended RFP is going to give extra credit for offload – that changes the game and Boeing if it wants to win this would be wise to change its bid and likely it’s aircraft.
    3) Responding to a bid takes time, resources, and money. Neither bidder is going to loose focus and develop alternate bids for what ifs. They put their time and money into the response they think will win based on the scoring criteria outlined in the RFP. Will, that scoring changed after the DoD amended the RFP. Therefore, you evaluate your original bid and see it you feel it is still correct.

    All the pro-NG supporter comments, you sound like the fans of a team who won due to a bad call and don’t want the referee review to count. You want the win even though the head ref. agrees a mistake was made in the original call and the play has to be played over. You don’t want to win fair and square, you want the win as it was originally called because you feel you might loose if it is played over.

  9. To GasPasser,

    in your game analogy, the only way that the “supporters/fans” of NG (& Airbus) are afraid of losing is through a ref that has been ordered to let a specific team win, at all costs (i.e. fix the game). This is what Boeing is waiting for, a change in government which would force the contract to be awarded to Boeing.

    Rep. Dicks, Senator Murray, Rep. Murtha and their cohorts have all but said that this is the case, if Boeing does not get the contract through competition. Speaking of the newest competition, most analysts seem to agree that even with the 6 month delay, the Boeing offer will most likely not be as good as that from NG/Airbus.

    So the question is, “Why flog an apparently dead horse and throw away more money in a losing cause?” I am certain that most of us here know the answer to that one.

    I say, “Bring on the competition, and let the politicians keep their noses out of it, other than to ensure that it has been fairly run and awarded.” Something which we all know they won’t do.

    Speaking of politicians, Senator McCain has been quiet (to my knowledge) on this no-bid issue. I am certain he is waiting to see if Boeing will indeed refuse to bid. I am eagerly awaiting his reaction to such a decision and anticipate some highly entertaining reading after that.

    Regards all,
    John

  10. RE: the referenced ‘reasons’ post. Yes, I read it, and commented there. But reasons why it might be ‘possible’ do not define what ‘better’ is. With the exception of your ‘costs’ argument which I addressed in that thread I see no specificity as to what would be ‘better’. Also as ‘cost’ has been secondary to ‘value’ all along, any allegedly better ‘cost’ numbers need some more perpsective wrapped around them before interpreting.

    GasPasser, call a ‘Howdy’ next time will you? Since you repeat the oft-stated claim that NG got changes it wanted made to the RFP, can you provide us with exactly what changes were sought by NG and what changes were made? Cite anything other than that sourced by Boeing please. (Since I don’t like making blind ambushes here’s a tip for you: yes there were changes before the final RFP on the original bid, and yes this is an invitation for you to step in it.)
    Also GasPasser, please illuminate the masses how a decision to no-bid BEFORE final RFP is any way out of the normal and accepted contractor behavior, and how that compares to the threat of no-bidding AFTER the competition was lost and AFTER a recompete was wrangled out of the DoD using political force? Why do I state ‘political force’? Keep in mind, the DoD did not HAVE to recompete the contract by law, and it is quite apparent that only the political costs involved drove the DoD to this point and are still driving it.

  11. GasPasser,
    You have missed the point. The NG supporters (as you refer to them) are not afraid of losing a competition, they are afraid that Boeing is not interested in one and will use every political means to turn it their way.

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