Northrop Grumman announced the grounding breaking for its KC-45A tanker even though the Government Accountability Office hasn’t rendered its decision on the Boeing protest of the tanker contract award by the USAF to Northrop.
This strikes us as incredibly premature and reminds us of another premature declaration:
Groundbreaking for the KC-45 Tanker Manufacturing Facilities
Set for June 28
Mobile, Alabama Site to Provide KC-45 Tankers to United States Air Force
WASHINGTON – May 13, 2008 – Northrop Grumman Corporation (NYSE: NOC) and its key subcontractor, EADS North America, will join local, state and federal officials and the citizens of Mobile, Ala., in a groundbreaking ceremony on Saturday, June 28. Ground will be broken at Mobile’s Brookley Field, where two adjacent manufacturing facilities will be built to produce the nation’s new fleet of aerial refueling tanker aircraft.
The ceremony has been scheduled pending the outcome of the Government Accountability Office review of the tanker contract award. “We anticipate a favorable decision and look forward to starting construction on this historic facility,” said Ronald D. Sugar, Northrop Grumman chairman and chief executive officer. “We’re committed to transforming Mobile into the centerpiece of an expanding aerospace corridor.”
“This event underscores the fact that we are ready to get to work now,” Sugar said. “We need to move forward quickly to provide our men and women in uniform what the Air Force has identified as its number-one acquisition priority – the new refueling tankers they so desperately need.”
Northrop Grumman and EADS North America are committed to the U.S. Air Force and also have contractual agreements in place with one another, the state of Alabama and the city of Mobile to ensure construction of the facilities is ready to move forward.
“We are excited that Brookley Field will once again be a hub of American military aircraft manufacturing,” said Rep. Jo Bonner of Alabama’s 1st Congressional District. “There is no doubt that Mobile is poised to be the crown jewel of a rapidly growing aerospace center of excellence in the Southeastern United States, bringing thousands of jobs and creating endless opportunities for our entire region.”
EADS North America will deliver the KC-45 aircraft platform to Northrop Grumman. Airbus, an EADS company, is responsible for manufacturing at its Mobile final assembly facility and will assemble, test and certify the aircraft before delivery. Following delivery to Northrop Grumman, the aircraft will receive the necessary military modifications to turn the commercial airframe into a U.S. Air Force KC-45 Tanker. In keeping with U.S. Department of Defense requirements, only Northrop Grumman and U.S. government employees with appropriate security clearances will militarize the tanker aircraft.
“EADS North America is fully committed to providing Northrop Grumman with an aircraft built in the U.S.,” said Ralph D. Crosby, Jr., EADS North America chairman and chief executive officer. “More importantly, our men and women in uniform require and deserve the most capable system available. They have been waiting far too long for a modern tanker. Our entire team is ready to get to work now.”
Northrop Grumman’s architectural and engineering firm for the facility, BRPH Companies Inc., was selected last year and is prepared for the construction phase. Northrop Grumman’s facility is scheduled for completion and initial operation late next year. BRPH is leading a team consisting of KBR’s Mobile office and Thompson Engineering, headquartered in Mobile.
The groundbreaking ceremony occurs just a few days after the 60th anniversary of the start of the Berlin Airlift. This is significant because Brookley Field was the base from which C-54 transport aircraft supported the airlift.
About the KC-45
The KC-45 Tanker aircraft will be assembled in Mobile, Ala., and the KC-45 team will employ 48,000 American workers at 230 U.S. companies in 49 states. It will be built by a world-class industrial team led by Northrop Grumman, and includes EADS North America, General Electric Aviation and Sargent Fletcher.
Northrop Grumman Corporation is a global defense and technology company whose 120,000 employees provide innovative systems, products, and solutions in information and services, electronics, aerospace and shipbuilding to government and commercial customers worldwide.
US Sens. Patty Murray (D-Boeing) and Maria Cantwell (D-WA) have asked the White House to investigate the claim by Northrop Grumman that 48,000 direct and indirect jobs will be created with the KC-30 program.
The KC-30 will be assembled in Mobile (AL) for the USAF’s KC-45A program.
Murray, who is actually D-Washington, is Boeing’s most vocal and hyperbolic advocate (along with US Rep. Norm Dicks, also D-Boeing/Washington), and has vowed to block the Air Force award to Northrop because the KC-30 is based on the Airbus A330-200, and Murray has been leading a crusade against Airbus for years.
Murray, Cantwell and a couple of other members of Congress want the White House to determine how Northrop’s job count increased from 25,000 to 48,000 after the award was announced and after the jobs issue erupted as a major point of controversy, according to this report in The Seattle Post-Intelligencer.
It’s a fair question and one we raised at the time in this report on our Corporate website. We were surprised and skeptical of the doubling of jobs claim as well. Our report details how Northrop got its new number.
Whether one accepts Northrop’s methodology or not is a matter of debate, but at least Northrop offers up one. Boeing does not for its job claims of 44,000 direct and indirect jobs for the KC-767 program, despite having been asked several times by reporters and analysts (including us). Furthermore, there is ample reason to suspect the Boeing figure.
In 2001, Boeing claimed 22,000 jobs were tied to the 767 program when the company was producing these at a rate of 36 a year–two to three times the rate proposed by the Air Force for the KC-45A program. Boeing also claims just 25,000 jobs associated with the C-17, which is has more US content than the 767 (the 767 fuselage, tail and certain wing components are built in Japan, Italy, the UK and Canada while these are built in the US on the C-17). The production rate for the C-17 is similar to that proposed for the KC-45A.
So how can Boeing claim there are twice the jobs at as little as one third the rate for the KC-767 vs. the commercial 767 at its peak? How can there be nearly twice the jobs associated with the KC-767 vs. the C-17? Boeing has never answered either of these questions.
As long as Boeing boosters want an investigation about Northrop’s jobs claim, this should be expanded to include Boeing’s job claims.
Having said all that, on the merits of the award, the entire jobs issue is irrelevant anyway. Jobs were not part of the RFP or evaluation process. This issue has been political from the get-go, and should have no bearing on the award at all; the award should be entirely about technical merits.
In a rare confluence of timing, Boeing and Northrop Grumman issued press releases on the same topic at about the same time. Here they are, in their entirety; our commentary follows after the Northrop release:
Boeing KC-767 Tanker: Sized Right for the Fight
Wednesday May 7, 12:23 pm ET
According to the Statement of Objectives for the KC-X program, the primary mission of the new tanker would be aerial refueling rather than hauling cargo or transporting passengers. In order to meet the documented mission requirements, Boeing offered the KC-767, which efficiently fulfills the vital mission of a mid-sized aerial refueling fleet while also exceeding the highest requirements for airlift, passenger and aeromedical evacuation capabilities.
“Tanker flight crews are asked to bring the right amount of fuel to the fight in the most efficient, reliable manner, and the KC-767 meets that fundamental requirement,” said Mark McGraw, vice president, Boeing Tanker Programs. “Asking these aircrews to fly longer missions in larger, less survivable planes with more fuel capacity than needed and vast amounts of unused cargo and passenger space just doesn’t add up.
“The Boeing KC-767 exceeded the requirements in a manner that still kept the plane right-sized and efficient,” McGraw said. “Our competition likes to talk about offering more, more, more — but in reality, the KC-30 will cost more to operate, more to maintain, and more to house, with the U.S. taxpayer footing the bill.”
A larger plane — like the KC-30 tanker offered by Northrop Grumman and EADS — simply results in wasted capacity, wasted efficiency and wasted taxpayer dollars.
The contrasts between the KC-767 and the KC-30 are notable and worth considering in determining the appropriate tanker for the mission:
-- Fuel Capacity -- The historical average offload on a tanker mission is 60,000 to 70,000 pounds of fuel. The Air Force fuel offload requirement was set at 94,000 pounds of fuel at 1,000 nautical miles, comfortably above the historical average. The KC-767 exceeded the 94,000-pound requirement by 20 percent while remaining within the optimum size for medium tanker operations. The KC-30 fuel capacity exceeded that requirement by 50 percent -- meaning more than half of its fuel load would be unused during an average mission. The result: a large tanker that burns more fuel and requires significantly higher costs in maintenance and support. -- Cargo/Passenger Capacity -- In 2006, the Air Force moved less than 1 percent of its cargo and passengers in tankers. The KC-767 does offer significantly more cargo and passenger capacity than the KC-135, but not at the expense of airplane size or efficiency. Again, the KC-30 carries more passengers and slightly more cargo based on weight, but with a bigger, less survivable and more costly plane. -- Aeromedical Evacuation -- The Air Force Request for Proposals set an objective requirement of being able to carry 24 litters and 26 ambulatory patients. The KC-767 carries 30 litters and 67 ambulatory patients, far exceeding the highest requirement. The Air Force praised the KC-767's superior aeromedical crew stations, its ability to generate oxygen onboard, and the power provided for aeromedical crew systems. The KC-30 again offered more quantity with less quality and less survivability.
Setting The Record Straight On Northrop Grumman’s Tanker
Today’s Boeing ad in The Washington Post, “The Tanker Decision. Oversized Aircraft, Oversized Costs. It Doesn’t Add Up” raises a fundamental question: Who should decide the capabilities of the KC-45 refueling aircraft, and how it should be used, the Air Force, or Boeing? Moreover, Boeing continues to make up facts to suit its arguments.
In its request to the Government Accountability Office to throw out Boeing’s contract challenge, the Air Force noted that “Boeing’s protest misconstrues the solicitation evaluation terms for aerial refueling, and its interpretation creates a patent ambiguity” regarding what the Air Force wanted.
The Air Force stated in its proposal request that it sought a versatile, multi-role tanker that would meet or exceed its requirements for both refueling and airlift. Boeing argues that its tanker is good enough for refueling – and, based on past operations, additional capability was not needed. But the Air Force made clear it saw great value in Northrop Grumman’s KC-45 because it could carry more fuel, operate from more bases, and transport more materiel, troops and cargo – and evacuate more wounded soldiers from the battle theater. While Boeing’s offer was looking at the past, the Air Force’s selection of Northrop Grumman is all about the future.
The Air Force was abundantly clear about its desire for a versatile tanker throughout the bidding process. In December 2007, Defense Daily interviewed TRANSCOM Combatant Commander Gen. Norton Schwarz and wrote, “The bottom line, Schwartz told Defense Daily, is that unlike tankers of old, the KC-X aircraft will be multi-mission machines. ‘We need, for the benefit of the joint team, to get as much out of that as we can.'” The Air Force also made this clear in the RFP, and in the entire military did the same in a White Paper published a month later. Boeing disparages this recommendation, arguing it knows better than the Air Force what will be needed. Why does Boeing keep trying to redefine the requirement?
Boeing continues to distort the truth even though the company has the real data, claiming that Northrop Grumman’s KC-45 will burn $30 billion more in fuel. To reach that number, they made up their own assumptions and their own formulas. The fact is, the Air Force concluded – in a document provided to both companies – that the KC-45 is actually 6 percent more fuel efficient than Boeing’s proposed aircraft and the life cycle costs of both aircraft was about the same. Who should we believe – the United States Air Force or Boeing?
Boeing also claims that its proposed aircraft would have $19 billion less in infrastructure and maintenance costs. In fact, the Air Force determined that the life cycle cost of both aircraft, which includes these factors, was about the same. Who should we believe—the Air Force or Boeing?
Boeing then claims its can provide more aircraft to battle theaters – conveniently ignoring an important factor in the Air Force’s decision:
Northrop Grumman’s larger, more versatile aircraft can complete the entire host of combat scenarios using fewer aircraft than Boeing – something the Air Force found was a significant value to taxpayers AND battle commanders.
Finally, Boeing tries to bolster its faulty arguments by selectively pointing to criteria included in a 2002 tanker decision. Not only is that document outdated, but it relates to a contracting scandal that led to the contract being competitively bid. Relying on that outdated document, Boeing claims that the Air Force “and taxpayer get an oversized aircraft with oversized costs.”
In fact, the Air Force made clear in the document explaining its selection that “Northrop Grumman’s offer was clearly superior to that of Boeing’s for…aerial refueling and airlift. Additionally, Northrop Grumman’s…superior aerial refueling capability enables it to execute…with 22 fewer aircraft…an efficiency of significant value of the government.”
Here are a couple of items about the refueling capability of the KC-30/KC-330 tanker, which is one point of controversy in the continuing saga of the Boeing-Northrop Grumman tanker contract award.
Boeing likes to point out that Northrop’s KC-30 hasn’t passed gas through its bloated airplane (sorry, we couldn’t resist the puns) and that there are delays in the EADS/Airbus KC-330 program to Australian. The KC-330 is the basis for the KC-30.
Aviation Week has this story about the KC-330 and some issues with the refueling boom. Northrop Grumman provided a link to this video showing fuel transfer on an Airbus A310 test-bed aircraft.
Northrop likes to point out that Boeing’s sixth generation boom proposed for the air force hasn’t been built, nor has the airplane to which this boom will be installed.
New, 0920 PDT: A Reuters report published in London’s The Guardian raises precisely the issue we raised weeks ago: that efforts by the US Congress to overturn the tanker award based on jingoism can potentially do more harm do Boeing in the global market than letting the USAF award stand, assuming the GAO reject’s Boeing’s protest.
The last 24 hours have been busy news days on the tanker and the 787.
Reuters published a story yesterday about the Air Force calling the CEOs of Boeing and Northrop Grumman on the carpet for the vitriolic nature of the protest. Boeing has been engaged in a high profile advertising campaign that many view as a scorched earth approach toward the Air Force. This was the subject of an in-depth column we did last week on our Corporate Website.
Although Boeing kicked off the latest round with its post-protest ad campaign, Northrop hasn’t distinguished itself, either. In e-blasts, Northrop’s language is as over-the-top as is Boeing’s rhetoric. Both companies, which by their nature fall into the “world class” category, ought to be embarrassed by their respective efforts.
Other tanker news in the last 24 hours: US Sen. John McCain, the GOP presidential candidate who killed the Boeing KC-767 tanker lease deal in 2004 and who has been blamed (unfairly, in our view) by Democrats for killing Boeing’s chances this time around, told the parties to “get on with it,” as outlined in this report by The Moble Press-Register.
The Citizens Against Government Waste awarded US Reps. Norm Dicks (D-WA) and Todd Tiahrt (R-KS) the “Porker of the Month” award (named for pork-barrel projects, a US term for wasteful government spending) for their efforts to kill the USAF tanker contract with Northrop Grumman. This makes a good sound bite, but The Washington Post previously reported that Northrop helps fund CAGW. Northrop did not confirm or deny the funding story when The Post inquired. So take this one with a grain of salt.
On the 787 front, Jon Ostrower last night obtained a memo to employees from Boeing CEO James McNerney, discussing the 787 program and the production model. Ostrower’s Flightblogger has the write-up and the memo. Dominic Gates at The Seattle Times followed with his story and copy of the memo in today’s paper.
Boeing’s first quarter earnings call is tomorrow at 10:30 EDT. The webcast may be found here. Boeing is expected to reaffirm its 2008 earnings guidance (as it did on the program update), but maybe there will be some information about penalties and lost/deferred revenue. We provided an analyst estimate recap in our own estimate on revenue lost through 2013 in our column last week on our Corporate website. The analyst estimates of penalties range from $800 million to $5 billion. Our guesstimate on revenue loss through 2013 is about $30 billion. Extra production costs are on top of these numbers.
An ominous political development for the Northrop tanker award by the USAF may be developing in the US Senate.
An article today in The Washington Post discusses the future of Sen. Robert Byrd, chairman of the Senate Appropriations Committee. Byrd is 90 years old an ailing. He’s been frequently absent from his Senate duties, and here’s where this could become ominous for Northrop. According to The Post, Byrd at times last year turned to Sen. Patty Murray (D-WA) to assume the lead role in appropriations matters.
Murray, known within Washington State (and probably Washington, DC, too) as the Senator from Boeing, has made it her mission to kill the Northrop award. If Byrd’s ill health means turning over reigns, even on spot-issues, to Murray, this does not bode well for Northrop–which, along with partner EADS, has blithely dismissed Murray’s effectiveness as a Senator.
(As a constituent of Murray’s we can attest that she is far more effective than either Northrop or EADS give her credit for.)
Assuming the Democrats gain seats in the Senate in the November election, as conventional wisdom currently concludes, Murray could gain even more clout as a senior member of Appropriations. Regardless of the outcome of the Boeing protest to the GAO over the contract award, Murray’s increasing influence and stature on Senate Appropriations isn’t good news for Northrop.
Boeing and Northrop continue their tanker public relations war. Boeing fired off this press release about the KC-767’s “survivability” vs. the Northrop KC-30.
Northrop fired off a release about jobs, steering people to a 3 1/2 minute National Public Radio report.
Northrop partisans also made sure we saw this biting cartoon.
(For the record, we previously have asked Boeing to send us any similar cartoons supporting the KC-767, but were told none existed. If there are any, we’ll post them.)
Here’s a pro-Boeing cartoon, which for some reason we can’t insert the image, so here’s the link.
In a remarkable piece of reporting, Reuters‘ Andrea Shalal-Esa uncovered the price offered by Northrop Grumman to the US Air Force for its KC-30 and from there the extrapolation of the price Boeing offered for the KC-767.
Reuters also details a number of other cost details in this report.
Here are some new developments on the continuing USAF tanker saga:
A move in the US House to adopt legislation to overturn the USAF tanker award to Boeing is ill-advised on a number of levels.
According to a story in The Seattle Post-Intelligencer, Boeing supporters in the House, incensed over the award by the Air Force to Northrop Grumman and Airbus parent EADS selecting their A330-based KC-30 for the KC-45A tanker, are thinking about adopting legislation to block the award. The details, according to the news story:
There are so many things wrong with this approach.
Let the GAO deal with this, like the law allows. If the GAO upholds Boeing’s protest, so be it. But if the GAO rejects the protest, Boeing and its supporters need to let this one go. In fact, Boeing would be better off calling off the dogs on this Congressional fight. Boeing might win the battle but lose the war. The EU won’t sit back idly if Congress interferes, and Boeing will be the one to pay the penalty, not some member of Congress with a few district jobs to protect.
As we previously said, Boeing would be far better off to devote its engineering resources to fixing the 787 program and developing the Blended Wing Body for the KC-Y competition scheduled for 2020. A KC-BWB, and subsequent commercial applications of the BWB, would be far more advanced than the KC-30 or anything else Airbus has to offer, and superior to the KC-777. Go for this gold, and the advanced technology that comes with it. Don’t stick with an airplane originally designed in the late 1970s-early 1980s. Think ahead. Be bold.
Blended Wing Body test model. Source: Boeing