Updating the KC-X competition

Update: The Mobile Press Register has this story saying that the USAF won’t include the WTO dispute in the KC-X competition because WTO rules prohibit doing so while the case is pending–something we’ve been telling the doggone politicians since they started their campaign to include it.

Original Post:

While the drama over the 787 Line 2 siting dominated the news last week, there was some stuff happening on the KC-X tanker front.

Boeing released this video about its tanker program. Note that KC-767 is shown with winglets, which in airline service are improving fuel burn by more than 4%.

[youtube=http://www.youtube.com/watch?v=ZYIY2I3jQdE]

Northrop, meantime, not only has threatened to not bid (as we previously posted), it is pondering suing over the USAF release of the Northrop cost basis of the KC-30 in the 2006 competition and the inability to get Boeing’s cost-basis on the KC-767AT.

The Pentagon says it is open to revising the specifications outlined in the draft RFP.

Northrop says the DRFP favors Boeing because it is a price-based document even though the Air Force says this is a best-value competition. (We agree this is price-based, not best value. Whether this puts Northrop at a disadvantage remains to be seen.)

Boeing CEO Jim McNerney said on the company’s October 21 earnings call that Boeing is placing a lot of emphasis on the World Trade Organization’s Interim Report in which it is said the WTO found Airbus benefited from $5bn in illegal launch aid for the A330 (few people have actually seen the report so far). Boeing supporters believe this $5bn should be added to the Northrop/Airbus base price in the KC-X competition. McNerney essentially said he can’t compete on price if it is not. We don’t quite understand this: the 767 tooling should be totally amortized by now, which ought to give Boeing a heck of a price advantage over Northrop/Airbus, which plans to build an entirely new assembly plant in Mobile (AL) to put the tanker together, complete (we presume) with new tooling.

KING5 TV (NBC-Seattle) had a report last week that suggests Charleston’s win for the 787 Line 2 might help Boeing in the tanker competition because it will pick up Congressional support in South Carolina for its bid. We’re not so sure that Boeing didn’t already have this state’s Congressional support, so we think the siting of Line 2 there probably won’t have much influence.

At long last, the EADS/Airbus KC-30 MRTT destined for the Australian Air Force passed gas through its aerial refueling boom. According to Inside Defense, a headline says the KC-X requirement will force Boeing to retool its refueling boom (the article itself is available to paid subscribers only).

MRTT wet contact #2 10-21-09

Photo: EADS, as seen via the closed-circuit TV system on the MRTT.

Boeing supporters Monday (November 2) signed yet another letter urging the Air Force to take into account the WTO Interim Report about Airbus. With the WTO still to issue its Interim Report in the EU case against Boeing “subsidies,” we continue to oppose a one-side inclusion of this issue. If this happened and Boeing won the contract on price, Northrop would have a ready-made protest that certainly would be upheld, and another year or more would go by while the KC-135s get older.

If Boeing and its supporters insist on the WTO Airbus finding being included, then let’s wait another 6-9 months for the WTO Boeing report to be issued. Only then will a “fair and open competition” be fair and open.

8 Comments on “Updating the KC-X competition

  1. any wise words on the whole:
    “B got price information and it’s not fair”
    vs.
    “it’s inaccurate, old and not related to the new contest”

    ???

  2. I think in evaluating the current RFP only the two major contestants have a very good idea on who is favored. I tend to agree with NG/EADS though that the current RFP favors Boeing. Since; 1) NG’s supporters are certainly yelling louder than Boeings. On Boeing’s side it’s pretty much just Norm Dick’s while on NG/EADS it’s the entire Alabama congressional delegation and both NG and EADS management. And 2) NG/EADS supporters started the current round of complaints well ahead of Boeing. Almost as soon as the RFP was released NG supporters started complaining about the lowest cost bidder nature of the RFP. Boeing’s supporters only seem to have chimed in after about 2 or 3 weeks of an NG/EADS offensive and at least to me, appear to be engaged in what may be termed defensive measures to try and head of any major changes to the current RFP.

    To me it looks like the real value of the WTO ruling for Boeing and it’s supporters is that they are in essence saying to the AF, if you make any major changes to give more credit for the greater fuel and cargo capacity of the KC-30, we’ll force you to add in the estimated $5 billion cost of the RLI given to Airbus. So don’t even think about changing the current RFP to give any more credit for greater fuel or cargo capabilities than it already does, because if you open up the current RFP to major changes you know what we will demand.

    • Actually, just today 37 Members of Congress once again wrote yet another letter in support of Boeing; and Boeing’s supporters were bleating even before the DRFP was issued.

      As for Dicks being the only Boeing supporter vs. the Northrop crowd: hardly. Sen. Patty Murray, Rep. Todd Tiahrt and Sen. Sam Brownback have been leading the charge, with Dicks, for Boeing.

      We wish they would all just stay the heck out of it and let the USAF do its job.

      • True enough, but it does fit the timing I laid out. Boeing supporters complained before he draft RFP was issued as pointed out in the article, but not immediately after the RFP was released, in fact Murray gave cautious praise for the RFP immediately after it was issued. As far as the letter from the 37 Boeing supporters, again the timing I am laying out is prior to the draft RFP both Boeing and NG complained, after the draft RFP NG/EADS complained and then Boeing supporters responded. The 37 members of congress are in this case responding to the new conference held by Sentaor Shelby and friends approximately 1 week ago.

        I will admit it is a little thin at this point to read the tea leaves as too which side is genuinely upset that RFP is unfair and which side is trying to prevent the other one from modifying the current draft RFP because it favors their chosen solution. We’ll have to wait a bit longer to see which case is true. I certainly don’t mean to imply one side has any claim to moral superiority over the other. In fact both sides have been pretty shameless in their efforts to manipulate the process in their favor. It just seems that the timing of Boeing salvo of the letter from 37 congressmen is coming a little to close on the heals of complaints from the Alabama delegation to not be viewed as an attempt to blunt NG’s request to change the RFP. I’ll hold any fire till we see more evidence of which side he draft RFP favors, but the timing of the complaints still seams to me indicate Boeing is happier with the current draft RFP than NG/EADS is.

    • There must be a reason why everybody on the Boeing side
      clamors for the WTO judgement ( not yet published ) to
      be weighted in and at the weight that partisan interpretation
      calls for.
      My guess is that the finally published ruling will support
      the initial complaint in a wet firecracker way: subdued
      and full of funny smells.
      If one is hell bent on buying local this should be reflected
      in the RFP.
      Having a runner team for the goalposts just does not cut it.

      uwe

  3. I don’t know why they are all complaining.
    Let the Europeans spend all their money on EADS and let the USAF reap the benefits of a cheaper
    tanker, partially paid for by the citizens of the EU!!

  4. One thing JayPee!
    If the KC30 is selected, the original suppliers of RLI will benefit from a royalty on each tanker sold.
    An interesting twist?

  5. South Africa cancelling Airbus A400M order
    —————————————————————

    The South African government decided on Novem er 4th to cancel the order of 8 pcs. A400M military transport aircraft. This shortens the order list of A400M from 184 down to 176. It is the first cancellation in the A400M program.

    South Africa said Nov. 5 that it had cancelled a big contract for Airbus military planes in a new setback for the troubled A400M program that prompted Airbus to insist the plane was almost ready for test flights.

    The decision also left South Africa with a headache with its aging Herculus military transport fleet.

    Both sides face contractual issues over cancellation payments and conditions.

    Airbus described the decision as a “complete surprise.”

    South Africa said it had cancelled a contract to buy eight of the aircraft because of delays and a seven-fold cost rise in rand terms.

    The A400M version of the Airbus plane has been bedeviled by cost overruns and delivery delays. The entire 20 billion euro ($28 billion) project was put in doubt at one point.

    South African government spokesman Themba Maseko said “the cost escalation would have placed an unaffordable burden on the taxpayer” in an economic downturn.

    The director for programs at Airbus, Tom Williams, said at the group’s headquarters in Toulouse that the cancellation was a “complete surprise.”

    “We are so close to the first flight. I have a lot of confidence it will fly before the end of the year.”

    Airbus would now have to review the contractual situation with South Africa. “It’s up to us to go back and have discussions,” he said.

    A spokeswoman for Airbus Military said it was looking into “the potential financial impact of this announcement.”

    The contract for the A400M was agreed five years ago, when the South African government said the planes would cost about 830 million euros ($1.2 billion), or 6.4 billion rand.

    Source:
    http://www.aviationnews.eu/2009/11/06/south-africa-cancelled-airbus-a400m-order/

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