Boeing: Back to the public well

This story in The Seattle Times outlines plans by Washington State legislators to pony up new tax breaks for Boeing for the 737 replacement.

The information came out of the new Aerospace Futures Alliance, which media revealed previously is about 50% funded by Boeing.

Our regular readers know that Washington State tax breaks are one of the key objections in the EU complaint filed with the World Trade Organization over Boeing’s “illegal” subsidies for the 787 program. Our regular readers also know that we don’t like tax breaks of any kind to any corporation, and we especially don’t like Washington State tax breaks because we live in this State and residents have to assume the tax burdens of tax breaks granted to corporations.

If this were Christmas, we’d say, “Bah humbug.”

Aerospace sector tanks

In some non-tanker news, the aerospace sector tanked on the New York markets today.

BE Aerospace, down 12.13%, $3.69 to $26.74

Spirit AeroSystems, down 8.63%, $2.04 to $21.60

Boeing: down 6.9%, $5.15 to $69.64.

and so on….

Interestingly, Northrop Grumman was up 1.62%, $1.12, to $70.37 despite the GAO report detailing the rationale and findings of the decision to uphold the Boeing protest.

GAO Report issued

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.

USAF to GAO: Drop Dead

A reader just brought this report to our attention, which if true, is a real bombshell; it’s from

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.

Full GAO report expected this week

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

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.

Cargo leader’s son killed

According to this story, the son of Connie Kalitta was killed in a racing car accident.

Connie is the owner of cargo carrier Kalitta Air, a Boeing 747F operator. He also was a race car driver before retiring but continues to own a race car team.

Connie is well known in aviation circles. His Kalitta Air recently lost a 747-200F after the pilot aborted the take off following a bird strike or two that generated a compressor stall. There were no fatalities in that accident. Kalitta Air had 18 747s prior to the accident.

We’ve casually known Connie for years and express our thoughts to him and his family.

GAO decision–only the tip of the iceberg?

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.

Economist piece on Airbus

In a welcome reprieve from the tanker saga, here’s an interesting piece about Airbus and the A380 from The Economist.

What’s next on the tanker?

We’ve been asked by media across the country, What’s next for the tanker competition?

We stated our position long ago: if Boeing lost the protest, it should accept the GAO decision. On the other hand, if the Air Force lost, then the service and Northrop should accept it.

This means the deal, in our view, should be rebid as recommended by the GAO.

As for what should happen, we’ve been clear about that for a long time: double the production and appropriation and split the order between Boeing and Northrop. Then everyone can get on with their lives and be put out of collective misery over this interminable saga.

Details beginning to emerge in tanker ruling

All those interested in the GAO tanker decision are waiting for the 69-page decision to be sanitized of proprietary information, but one detail about life cycle cost emerged, according to this Bloomberg report: that Boeing wound up with a $91.8m life cycle advantage after the Air Force corrected a math error. This math error was one of seven “significant” errors identified by the GAO in its three page press release in recommending a recompete.

To put this in perspective, this is a difference of $2.3 million per year over the projected 40 year life cycle, out of a $35 billion program. This is a rounding error, and not one we’d call particularly significant. It’s also a far cry from the hyperbolic, hand-ringing $40 billion promoted by Boeing.

We hope the 69-page decision is a bit more definitive and substantive than this.

New, 100 PM EDT: The Mobile Press-Register’s JD Crowe is at it again with this cartoon following the GAO decision: