US Sen Patty Murray (D-WA), the most vocal critic of the USAF contract award to Northrop Grumman for the KC-45A, struck out in her request to have the US Commerce Department shoot down the Northrop claims of 48,000 jobs for the program. This compares with the 44,000 jobs claimed by Boeing for the KC-767.
Murray, along with Sen. Maria Cantwell (D-WA) and two other Senators, wrote Commerce on May 9 asking the Department to confirm–or debunk–Northrop’s claim of 48,000 jobs. The Senators correctly noted that Northrop claimed 25,000 jobs prior to the February 29 contract announcement and upped this a few weeks later, after the award, to 48,000 jobs.
The question was indeed a fair one, and one that we raised as well in this column on our Corporate website. We questioned the nearly doubling of jobs creation as well as how Northrop’s KC-30, with a stated US content of 58%, could generate more direct and indirect jobs than Boeing’s KC-767, with a stated US content of 85%.
Northrop, in our report, explained itself–something that Boeing never did–until a liberal think tank did a 15 page study we linked to in a previous report on this website. The think tank interviewed Boeing but not Northrop and came to the conclusion that both Boeing and Northrop overstated the jobs creation but that Northrop did a greater job of overstating than did Boeing.
Of all the jobs data we’ve seen, we tend to believe the think tank’s analysis more than any other, even if the report is open to criticism for failing to talk to Northrop.
That being said, Murray’s gambit to have Commerce debunk Northrop’s claim failed. Why is this significant? Because Murray has long challenged a 2003 Airbus claim that its US-sourced work supported 100,000 direct and indirect jobs. In 2003, Murray asked Commerce to verify the claim and, according to Murray, Commerce could not–inferring, if not outright suggesting, that Commerce studied the matter and could not confirm the Airbus claim.
The facts appear to be somewhat different.
In Murray’s May 9 letter, she refers to her 2003 inquiry of Commerce. Commerce, in its reply, acknowledges the 2003 inquiry and writes:
“As the Department stated in its 2003 letter…, estimates of the total job impact require a variety of assumptions about the direct and indirect impacts of production performed in the United States. Predicting the full impact…is extremely complicated…. Therefore, the Department of Commerce is not in a position to investigate the assumptions…especially when those claims are made in connection with the award of a US government contract by another Department.”
The correspondence between Murray and Commerce may be found here (Murray-Commerce), a three page PDF file.
The media campaign on both sides of the tanker debate continues as the US House of Representatives gears up to hold some hearings on the issue.
This item published in American Spectator is another in a series of op-ed pieces originating with the Center for Security Policy, which bills itself as a non-partisan think tank. The Center has consistently opposed the Northrop Grumman KC-30 in the competition and the subsequent award. None of the op-ed pieces has disclosed previous ties to Boeing. According to the 2005-2006 Annual Report (published every two years, so the 2007-2008 report isn’t out yet), a couple of Boeing officials served on the advisory boards to the Center. This taints the op-eds and the perceived independence of the Center. (Tanker War Blog is written by an employee of the Center, and while this blog doesn’t disclose the Boeing connection in its “About Us,” the blog has never made any pretense of objectivity.) The writings often have interesting and valid points–but the Center is not as independent as the image would have readers believe.
Human Events published this piece by former Gen. John Handy. Handy also supports the Boeing KC-767. It turns out that Handy’s name appears in a series of e-mails in connection with the 2002-2004 tanker scandal. He was one of many internal Air Force recipients copied on correspondence. The emails emerged when Sen. John McCain, now the presumptive Republican nominee for president, was investigating the first procurement.
Alabama Sen. Richard Shelby (R-Northrop) moved to block a bill introduced by several Members of Congress who are closely tied to Boeing that would all but guarantee a contract to Boeing. This item in The Mobile Press-Register explains the issue.
This analysis in the same newspaper takes a broader look at the Air Force procurement process. The tanker wasn’t the only example (in 2004 or 2008 ) of the Air Force muffing a procurement.
A 15 page study by the University of Buffalo raises concerns that technology transfer by Boeing to Japanese heavy industry, beginning with the 767 and peaking at the moment with the 787, sets up Japan’s emerging aerospace industry to become a serious rival.
The 787 production model has been a concern to the authors of the report since the 7E7 was announced in 2003. Furthermore, the Japanese government funding to the “heavies” is a violation of World Trade Organization rules, the authors report–to no small irony given Boeing’s complaints to the WTO about Airbus launch aid.
The paper is worth reading.
Innovation Analysis Group has a 15 minute podcast with Aviation Partners, which revealed that they are working on winglets for the Boeing 777–with a prediction that the product could be ready for installation within two years.
This follows the winglets for the Boeing 767, which Aviation Partners suggests will provide a 5%-7% fuel burn improvement.
If a similar improvement is made for the 777, this will close the gap between the 777 and the projected fuel savings for the Airbus A350. Airbus projects a 20 operating cost savings over the 777, although we recognize that the remaining 13%-15% advantage still is nothing to sneeze at.
Aviation Partners is also working with Airbus, though AP declined to discuss it. It’s known, however, that Airbus and AP are getting ready to test a winglet on the A320 family. AP did discuss the prospect of winglets for the A380–which would be 17 feet tall. The wingtip fences on the Airbus family are old technology, AP says.
The podcast may be found here.
Boeing delivered 126 aircraft in the second quarter, including 100 737s, six [correction–18–see the comment below] 777s, five 747s and three 767s. This is the equivalent of 33 737s a month (33.3 to be precise), six 777s, 1.6 747s and one 767.
Boeing has quietly been increasing the production rate of the 737 and has the capacity at its Renton plant to go to 40 a month–if the supply chain can perform. Boeing has been studying whether to go this high, which would match Airbus’ planned 2009 rate. There is a reluctance on the part of some to do so because of haunting memories of the 1997 737 production fiasco (though the current rate now exceeds the rate then), and also because of the emerging economic uncertainties.
But the 737 line is dramatically oversold in 2010, and Boeing is losing sales now because the line is essentially sold out to 2014. With a two year lead time required for suppliers to gear up, it would be mid-2010 before the production could be dramatically increased.
The 777 line average rate of six per month for 2Q08 is one less than the seven a month capacity of the Everett line. Boeing is offering the 777 as interim lift to accommodate airlines hurt by the 787 delays.
The 767 line, at one a month, has lots of room to grow if the supply chain is there to support it. But suppliers are pressed, running at full capacity serving Boeing and Airbus on other models. Increasing 767 parts production is problematic. Boeing has been thinking of going to 2-2.5 767s a month to support aggrieved 787 customers, and now with the uncertain prospect of winning some of all of the KC-X USAF tanker business, Boeing has some decisions to make. A full tanker award would be another 1-1.5 767s a month.
We haven’t read it, but here is it, all 67 pages in PDF form. b-311344__boeing__redacted_decision.
Update, 1215 PM PDT: We’ve completed a quick read of the GAO decision. In it, the GAO found–as previously reported–for Boeing on a number of key elements. The GAO also rejected Boeing’s protests on far more complaints than were sustained, but only a small number of these are discussed in the report. Some of these were key elements in Boeing’s public relations campaign. But that’s neither here nor there–the elements detailed by the GAO in sustaining the protest are enough.
The GAO report also makes it clear that in defending the decision, on occasion neither the Air Force nor Northrop Grumman provided information for the record that refuted Boeing’s complaints–thus leading the GAO to side with Boeing.
It is clear from our reading of the report that a rebid, correcting deficiencies outlined in the GAO report, is indeed warranted. The news report we posted earlier today suggesting that the Air Force may proceed with the award as issued without a rebid is an unwise course of action.
Among the key points in the GAO report is the conclusion that Boeing’s KC-767 did indeed score better than the KC-30 in the more important criteria identified in the USAF RFP, while the KC-30 outscored the KC-767 in criteria that was less important to the requirements of the aircraft. While the GAO sides with the Air Force that the KC-30 does offer “more” as the Air Force stated when announcing the award, the GAO concludes that the RFP doesn’t allow for the extra credit that was awarded for this extra capability–yet this was the key to the USAF’s decision announced on February 29.
The GAO also sides with Boeing about the “survivability” assertion that the KC-767 scored better. Furthermore, the GAO says the record calls into question the KC-30’s ability to maneuver safely in emergency break-away situations, largely because neither the Air Force nor Northrop provided adequate documentation or analysis for the record to enable the GAO to conclude otherwise.
A fair reading of the GAO decision leaves room for no other conclusion: the USAF process was fatally flawed. A recompete is necessary.
We will be re-reading the report in greater detail and may update our report here in the coming days.
Update, 230 PM PDT: Teal Group analyst Richard Aboulafia opines on the tanker mess in his monthly newsletter. Catch it here: Our long national nightmare.
A reader just brought this report to our attention, which if true, is a real bombshell; it’s from DefenseTech.org.
Top OSD Officials Think Tanker Deal Can Go Ahead
Senior Pentagon and Air Force officials who have read the full 67-page report about the tanker bid by the Government Accountability Office think they can still grant a contract before the end of the Bush Administration. John Young, the Pentagon’s acquisition czar, has reportedly drafted a letter for the four congressional committees that oversee defense spending and policy informing them of the Pentagon’s decision to go ahead and award the contract to Northrop Grumman.
There have been reports that the GAO ruling on the tanker contract could add two years or more to the contract award, something that has greatly concerned Air Force leaders eager to start building new tankers after almost a decade of trying.
“Their finding is that the full document is quite different from the summary,” issued last Wednesday, said a source familiar with the issue. The source said Air Force leaders believe much of what was challenged is “procedural” and can be resolved without rebidding the deal.
The 69-page report is expected to become public today.
The GAO said in its summary that it found “a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman” and recommended that the bid be reopened. By law, the Air Force has 60 days to inform the GAO of how it will respond to the recommendations.
Any Air Force decision to press ahead with the contract award to Northrop Grumman is likely to spark outrage on Capitol Hill among supporters of Boeing, who include Rep. Norm Dicks (D-Wash.), the Nr. 2 member of the House Appropriations defense subcommittee, as well as Washington’s two senators and lawmakers from Kansas.
New, at 1035 AM PDT: The Hill has this article about the USAF and the tanker.
The full, 69-page GAO report is expected to be issued this week, redacted of proprietary information. The report could be issued as early as today, we’re told. As soon as we get it, we’ll post it.
Meantime, fired Air Force Secretary Michael Wynne said the USAF “leaned over backwards” to be sure Northrop Grumman remained in the competition for the tanker. Here is the full story from Military.com.
The Wall Street Journal, a conservative newspaper now owned by right-winger Rupert Murdock, has this editorial on the tanker. It’s tone is far more moderate than one would think would come from The Journal on the issue.
Government Executive opines that the Air Force might follow a quaint rule: Do as you say. You may read this piece here.
The media in Alabama reports that it’s possible EADS, the parent of Airbus, might decide to proceed with a plan to move A330 freighter production to Mobile even if the USAF contract for the KC-30 is overturned in a rebid. Readers will recall that Airbus and EADS announced plans to assemble three or four A330-200Fs in Mobile, contingent upon the tanker award. Although the companies, and Northrop, profess confidence that the award will be sustained in a rebid, EADS and Airbus officials are considering what to do if it’s not.
We’re told there is a contingent in Airbus that thinks the company should go ahead and assemble the tankers in Mobile. This would help mitigate the dollar-Euro problem facing Airbus. But a new financial analysis is necessary for the capital costs and economics without the tanker before any decision can be made to proceed.
Newsweek has a piece about US Sen. John McCain and the KC-X tanker competition, quoting an unidentified Pentagon official about McCain’s involvement. This is the first article we’ve seen quoting a Pentagon official.
As readers know, we were in Washington, DC, when the GAO announced its decision upholding the Boeing protest of the award to Northrop Grumman. We’ve been told by a Boeing partisan of something that, if true, will create a procurement scandal if not quite equal to the illegal activities surrounding the first tanker award to Boeing in 2004 will at least rock the Air Force to its procurement core. This may or may not come out in the 69-page GAO report that is being sanitized for proprietary information before its release, perhaps as early as this week. If what we’re told is true and it’s not in the report, it should be, or certainly should become the subject of Congressional investigations of the thoroughness and aggressiveness undertaken by McCain following the Boeing tanker award in 2004.
If what we were told is true, not only was the process examined by the GAO flawed but it was outright subverted.
Meanwhile, fired Air Force Secretary Michael Wynne, on his last day in office, said a rebid is likely and suggested that a fly-off between Boeing and Northrop might be worthwhile. This Reuters story may be found here.
New, Monday, June 23, 1030 PDT: An interesting twist to the GAO decision. Readers will recall that we’ve previously mentioned that there was a “shadow group” looking over the shoulder of the Air Force the whole way during the evaluation process. It turns out that the GAO was a member of this shadow group. Now if one presumes that the role of the shadow group was to keep the USAF on track and not to simply look over the shoulder and not say anything or raise questions about whether there were irregularities, then one has to ask: just where was the GAO itself during this process? Perhaps the 69-page report will say.
New, Monday, June 23, 315 PM PDT: Loren Thompson has a fresh commentary on the tanker fiasco here.
New, Tuesday, June 24: Politico reports the Air Force is considering a KC-767/KC-30 flyoff. The Hill reports the Defense Department acquisition group may take over the rebid process from the Air Force in this report.
New, Tuesday, June 24, 945 AM PDT: Here’s an amusing piece from the United Arab Emirates about the tanker program. It’s amusing because it takes a shot at CNN’s Lou Dobbs, a once-fine financial reporter who has gone off the deep end on anything not US. The piece also has some interesting facts in it.
In the meantime, JD Crowe, the cartoonist with the biting wit for The Mobile Press-Register, inked this one today:
The Press-Register’s Washington reporter has this look at the current situation in the wake of the GAO protest.