Richard Aboulafia of the Teal Group said it best: the upset Boeing win over EADS in the KC-X tanker contest is the “Dewey Defeats Truman” moment of this contest.
For those who don’t know this reference, see here.
Aboulafia predicted EADS would win. So did Michel Merluzeau of G2 Solutions in Kirkland (WA). And Loren Thompson, a paid Boeing consultant. We did, too. So did Daniel Tsang of Aspire Aviation and even the Boeing shills in Europe did.
Boeing officials thought they were going to lose and so did its supporters in Congress.
Norm Dicks (D-Boeing/WA), a strong Boeing supporter, was prepared for the loss and was elated he was wrong.
Here is some good coverage of the surprise decision.
Seattle Times. Reaction, and how Boeing won.
Mobile Press-Register: EADS wants details before making decision on protest. This article contains disappointing comments from the political supporters of EADS.
Bloomberg: EADS loss threatens goal to diversify from commercial, increase US DOD revenue.
Politico: EADS senators slam Chicago politics.
We won’t know in detail why Boeing won and EADS lost for some time, but to us there are obvious reasons.
Even ignoring the WTO panel finding that Airbus received illegal subsidies for the A330-200, on which the KC-45 was based, and the withdrawal of Northrop and its reported 10%-15% mark up wasn’t enough to offset the final pricing offered by Boeing. The USAF said the difference was beyond the 1% threshold (but did not say by how much) that would have triggered the best value extra credit considerations that would have favored Airbus.
Based on these key factors, we don’t see a protest. We’ve had a perfect record so far in predicting these contests, however: we thought Boeing would win in 2008 and it didn’t; we thought Boeing would lose the protest and it didn’t; and we thought EADS would win this year and it didn’t.
But at least we’re in good company, as everyone else got it wrong, too.
EADS lost but won, too
EADS lost the tanker contract and with it the grand plan to build a US assembly plant for the A330 that would have reduced its exposure to the Euro and establish a US production footprint.
But the company won, as well. The Defense Department classified EADS as a qualified US prime contract, a huge step for future work. It was the absence of this qualification that required EADS to partner with Northrop in the first place.
EADS also surely won the gratitude of DOD for making the bid. After Northrop withdrew, the USAF was faced with a sole-source supplier situation without competition. This would have put it in an unfavorable position to get the best price and the best product. Having competition assured the best airplane offering and a competitive price. Not only is the DOD better off, so are the US taxpayers.
And EADS has a better airplane to offer future non-US customers.
Finally, though this will be well down the road, EADS might be positioned for a future KC contract.