KC-X’s latest twist: Contract after the election

Update, May 5:

The Pentagon denied the Defense News story. Here’s Defense News’ own report.

Original Post:
In a move that probably surprises no one, the Defense Department says it will issue the contract for the KC-X on November 12, which just happens to be after the November elections.

Here’s the story from Defense News.

Gollleeee. Whoda thunk it?

15 Comments on “KC-X’s latest twist: Contract after the election

  1. Which was the main reason for EADS to stall and wait till the last minute to decide to bid

    Of course there are those who really believe that it will take 4 plus months to ‘ decide ‘

    And for those same people, do I have a deal for you !

    A Prime real estate deal in Tulsa to be the site of a new aircraft carrier maintenance base . . .

    Using secret moving technology derived from the secret projects in Area 51 . .

  2. Whether or not the contract is issued in September, October or November doesn’t really make much difference. The new congress won’t be seated until January and then they will have only one decision to make. Fund the winner of the KC-X contest or don’t fund the winner of the KC-X contest. Any chance for congressional input into the contest is long past. If they want another bite at the apple the only thing that they could do would be to cancel round 3 and start again with another contest.

  3. OV-099:

    Better to be positive than realistic at this stage of the contest.

    • Of course, it’s a good thing to be positive, but I would digress that he’s not realistic. As I’ve indicated in earlier comments, I believe that this contest will be much closer than what most people seem to believe.

  4. In general the more boisterous a poker player is the weaker their hand is. Had Gallois made a less noisy bet such as a British well make a good showing type claim I would have been more impressed. As it is Gallois looks like a dimestore poker player, making such claims at this time, before Boeing has even released KC-767NG design seems like, well an idol boast meant to cover up what someone feels like is a weak hand.

    • Whatever.

      Meanwhile, Gallois had already waived a larger bonus of 1.55 million euros the previous year after EADS posted a 2008 profit of 1.57 billion euros.

      Gallois had asked the company to give the 2008 bonus to charity as a signal to staff at a time when the company was tightening its belt due to the recession. He is expected to return to the issue at a shareholder meeting on June 1.

      Gallois’s basic salary was unchanged from 2008.

      His earnings are dwarfed by those of his counterpart at Boeing, James McNerney, who earned $19.4 million including salary, bonuses, stock options and pension changes in 2009, according to a March proxy filing.

      http://www.reuters.com/article/idUSLDE6421IM20100503?type=marketsNews

      • And what does Gallios’ compensation have to do with the topic at hand?
        It is pretty obvious that EADS is betting that the republicans will control congress after the elections. Whether that results in them getting the tanker contract remains to be seen.
        I wish Gallois and the European EADS membership would quiet down their rhetoric and let the officers of EADS NA do the talking. The more Mr. Gallois talks, the more reason there is to believe that the KC-30 is really a European bid rather than an American one.

  5. Actually, the A330MRTT/KC-30/KC-45 is a European bid. The A330 with GE engines has already got 40 percent plus in US value content, even without a US final assembly line. EADS NA only has to provide for a minimum of 51 percent on the KC-45 in total US value content to be in complience with the Buy American Act (BAA). Now, EADS will in all likelihood exceed the 51 percent threshold by quite a bit. For a starter, the KC-45 fuselage sections could be shipped to Mobile without any wiring looms, pneumatic and air-conditioning ducting and insulation. This would be a smart move as well, since EADS wouldn’t have to disassemble anything before the military conversion work. However, the fuselage sections for the A330-200F would be shipped to Mobile with all the above mentioned systems already installed.

    As for Gallois’ lack of compensation; sure, it hasn’t got much to do with “the topic in hand”, but it kind of underlines the fact that he’s a doer more than a talker, and that consequently it’s somewhat foolhardy to dismiss his claims as just “loudmouthed boasting”.

    • OV-099,

      Are you sure the A330 is already 40 plus percent US contract. I have seen numbers all off the map in terms of US content with respect to Airbus products. Airbus itself has cited 21%, 33% and 48% for total US content for all Airbus products at different time in the past 2 years depending on which audience they were speaking with. If I had to take a guess I would guess that 21% is the total US content for all prdoucts and 48% would be the high US value content for an A380 with Engine Alliance engines. However, I have not seen a citation for US content for an A330. 40% may not be a bad estimate given a 1/3 airframe, 1/3 avionics, 1/3 engines rule of thumb, but in terms of the actual content it seems very much to depend on who is asking the question. If you have an Airbus reference would you be kind enough to provide it, thankyou.

      Also, I personally tend to favor Enders as he seems the most straightforward of the two executives, but I certainly never made the comment that Gallois should be dismissed out of hand, that was your spin and your interpretation of the comments, I can’t speak for you I can only speak for myself and statements such as if I were a betting man don’t exactly provide a warm fuzzy at this point in the game. EADS outlining where they think they are better in terms of scoring for this contest and what they are going to do to improve their offering in terms of the primary criteria would give a better feeling in terms of their bid chances. For this game you pretty much have five primary cards once you get past the mandatory requirements hurdle.

      1. Offering Price
      2. MILCON Adjustment
      3. Fuel Burn Adjustment
      And per SecDef Gates IFARA will award points for:
      4a. Points will be awarded for greater mission fuel offload.
      4b. Points will be awarded for ramp space considerations (e.g. getting more booms in the air)

      So far Boeing is holding cards 2, 3, and 4b. While EADS only holds card 4a, with card 1 being a question mark at this point. Additionally Boeing has so far specifically pointed out how they are improving their performance with regards to lowering the offering price, improving fuel burn and hence their IFARA score as well. So far EADS has only said getting rid of that leach known as NG will allow us to offer a lower initial price, otherwise are cards are all the same. Given this situation I do say that Boeing has the stronger hand with regards to this contest. If that isn’t the case why did NG withdraw?

    • John, the US content (by value) of Airbus airliners is roughly following this formula:

      US content (by value) on A300/A310 < US content (by value) on A32X < US content (by value) on A330/A340 < US content (by value) on A380.

      Also please do note that there is really no rule of thumb on this as one can just take the example of the 777-300ER where the GE90-115B engines cost slightly more than the airframe (no avionics, landing gear, galleys, seats etc).

      On the A330 the cost of the engines and airframe account for about one third and two-fifths of the total costs respectively. The remaining costs are divided between avionics, landing gear, internal outfitting with galleys, lavatories, seats, In-flight Entertainment (IFE) systems etc.

      The CF6 engine has about 75 percent US value content with Snecma, MTU and Volvo Flygmotor accounting for the remaining 25 percent. This means that the US content (by value) of the CF6 engines account for roughly 25 percent of the total value of an A330.

      Vought is producing 17,500 lbs of structure for the A330 (including the expensive wing leading edge assemblies), or about 8 percent of total fuselage and wing structural weight, and thus roughly 8 percent of total US content (by value) of A330 wing and fuselage (rough first order analysis/approximation).

      http://www.voughtaircraft.com/ProdProg/commercial/airbus_A330_A340.html

      So, just airframe and engine will give you 33 percent of US content (by value) on the A330. If just a little more than one fourth of the remaining systems and components are US made then we'll have reached our 40 percent figure.

      If you'll have a look at the following link, you'll find a list of the major suppliers to the Airbus A330/340 aircraft program:

      http://www.airframer.com/aircraft_detail.html?model=A330_A340

      Clearly, if an airline goes for the maximum possible US content on an A330 (i.e. there's competition between the vendors on quite a few systems), you'll have more than 40 percent of US content (by value).

      Quote:

      1.Offering Price
      2. MILCON Adjustment
      3. Fuel Burn Adjustment
      And per SecDef Gates IFARA will award points for:
      4a. Points will be awarded for greater mission fuel offload.
      4b. Points will be awarded for ramp space considerations (e.g. getting more booms in the air)

      Please do note that the inputs into the IFARA model are; (i) tanker characteristics, tanker basing, ramp fuel loads, track locations, air refueling requests and deployment schedule, combined with (ii) “Planner Optimization”, for (iii) the Combined Mating And Ranging Planning System (CMARPS). The output is thus the IFAR(A) assessment.

      As far as I know, this was how the IFARA model was run last time around as well. With the IFARA scores at 1.79 for the KC-767AT and 1,9 for the A330MRTT (KC-45), the EADS offer is “just” 6 percent more effective than the KC-767 in the IFAR(A) assessment while it can off-load 20 + percent more fuel than the KC-767 in all mission scenarios.

      Apart from the MILCON Adjustment, we’ve been through all of the other points several times before.

      “Given this situation I do say that Boeing has the stronger hand with regards to this contest. If that isn’t the case why did NG withdraw?”

      As I’ve repeatedly stated; this will be a close fought contest. NG apparently withdrew primarily because they didn’t like the fixed-price contract and thus less future profit potential for them. Airbus, on the other hand, is used to fixed price contracts where important customers that are buying Large Commercial Aircraft (LCA) in bulk are typically granted huge discounts. The Air Force would become the largest single customer ever of Airbus/EADS. By just looking at the A332 side of the equation, and not the A330MRTT, the Air Force would thus be granted the largest discount percentagewise in Airbus’ history if they order 179 “green” A332s. As for the military side of the equation it’s abundantly clear that the EADS offer is much closer to realization than the KC-767 “Frankentanker”.

      • “As far as I know, this was how the IFARA model was run last time around as well. With the IFARA scores at 1.79 for the KC-767AT and 1,9 for the A330MRTT (KC-45), the EADS offer is “just” 6 percent more effective than the KC-767 in the IFAR(A) assessment while it can off-load 20 + percent more fuel than the KC-767 in all mission scenarios. ”

        Thank you for your answer on the A330. The USAF has indicated that IFARA will be run basically the same as lastime. Although the scenarios (4 same as last round) and inputs will be different which will lead to different scores. The description of IFARA as a limitations based model is from Sec Def Gates testimony to Congress in September 2009. His simplified description to congress of the model was that the larger plane would gain points for greater fuel offload and the smaller plane would gain points for being able to get more booms in the air where they are most needed. I tend to think in terms of how IFARA will give an advantage to one aircraft or another that is a pretty accurate description. Although as you point out the inputs and the actual model itself involve a great deal more, but in essence for one aircraft to gain advantage over the other they need to do one of those two things.

        We’ll need to wait and see each offer’s specs to get a better idea of which way the IFARA and Fuel Adjustment will go. Right now I would say the ball is in Boeing’s court to describe which version of the KC-767 they are offering. My guess would be it will be an update of the KC-767AT from the last round, but there could still be some surprises.

  6. No comment to the above statement. I’d be here all night. 🙂

    And thank you Scott for the kind words about military families.

    OV-99, the KC-45 will not win. As Mr Hamilton has perceptively pointed out, the Obama Administration has already removed this from the mid term elections debate. The party in power is already going to take a beating. This salvages some for Labor, although I’m not convinced that the Republicans are as Airbus-friendly as some here believe.
    Either way, it seems clear to me that the “better” aircraft for this RfP has already been decided.

  7. . . .”And per SecDef Gates IFARA will award points for:
    4a. Points will be awarded for greater mission fuel offload.
    4b. Points will be awarded for ramp space considerations (e.g. getting more booms in the air)

    I suggest you are missing a significant point- the points award will ONLY come into play IF the bid figures are within ONE percent.

    At least that was what I recall in the PR and release of the most current RFP early this year.

    But given the other political changes, etc , perhaps they amended that OR are counting the beans in an ” corrected” fashion ??

  8. Don,

    You are thinking of 93 non-mandatory requirements that come into play if the adjusted price is within 1 percent. The IFARA is part the evaluation process where 1) MILCON, 2) Fuel Burn and 3) the IFARA or mission effectiveness is calculated. The three adjusted scores are then use to revise the offerer’s price to come up with the Total Evaluated Price or TEP, if the TEP is within 1% then the 93 non-mandatory requirements come into play.

    The IFARA is fundamentally a limitations based model, if 7 KC-30s can refuel a flight of F-15s vs 9 KC-767s for the same mission the KC-30 will get extra credit or it will have a higher mission effectiveness (IFARA) score. Similarly if you can station 9 KC-767s vs. 5 or 6 KC-30s at a foward base thus meaning you would need fewer long range tanker sorties to accomplish a mission the KC-767 would gain points. In the last round the IFARA score was 1.79 for the KC-767 and 1.9 for the KC-30 meaning the AF said the KC-767 was 1.79x more effective than the KC-135 and tghe KC-30 was 1.9x more effective. Using the IFARA adjustment equation and the previous IFARA scores and $200 million unit cost for the KC-30, the KC-30 would get about a $2 billion credit if the scores from the last round are used. This would need to be evaluated against the credit Boeing would gain from the fuel adjustment score and the MILCON adjustment.

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