EADS beats Boeing to US tanker deal

georgeob1 wrote:

If this procurement is to be overturned , it is much more likely the Democrats will do it in the next administration -- the Dems are in a seriously protectionist mood right now. It will be amusing to watch the Europeans discover that they really won't like many of the "changes" ("yes we can") that may be in the offing.

There is no way this contract can be taken away from Airbus without major consequences for American international relations. It also would be highly likely that Boeing would suffer on the commercial side as pissed off governments make sure that Airbus gets their countries orders, even if Airbus does not have the best plane for the job.

The European Aeronautic Defence and Space Company EADS N.V. (EADS) is a large European aerospace corporation, formed by the merger on July 10, 2000 of DaimlerChrysler Aerospace AG (DASA) of Germany, Aérospatiale-Matra of France, and Construcciones Aeronáuticas SA (CASA) of Spain. The company develops and markets civil and military aircraft, as well as missiles, space rockets, satellites, and related systems. The company is headquartered in the Netherlands in Schiphol-Rijk. The company operates under Dutch law.

41.63% of EADS stock is publicly traded on six European stock exchanges, while the remaining 58.37% is owned by a "Contractural Partnership".
The latter is owned by SOGEADE (27.38%), Daimler AG (22.41%), SEPI (5.46%) and Dubai Holding (3.12%).
SOGEADE is owned by the French State and Lagardère, while SEPI is a Spanish state holding company. France also owns 0.06% of publicly traded stock.

36.7% Germany
36.2% Other Europe
19.8% USA
7.30% Rest of world

I kind of have an inside source. They say Boing had to much scandal last year. Some Boing executives did some prison time over "favors" and bribes.

Maybe I should get outside more.

Boeing Co. on Monday inched closer to formally protesting a $35 billion Air Force tanker award it lost, saying it has "serious concerns" about the fairness of the competition.

The Air Force, meanwhile, insists that it chose the better plane.

Sue C. Payton, the assistant secretary of the Air Force, at a contentious hearing before the Defense Appropriations subcommittee last week, said: "Northrop Grumman brought their A game." Northrop is based in Los Angeles.

Ms. Payton also disagreed with assertions that the Air Force had tipped the scales for Airbus. She said officials had carefully followed procurement rules and an array of laws, including the Buy American Act, which she noted calls for certain countries, including Western European allies, to be treated as if they were the United States.

"Let me say I view Northrop Grumman as an American company," she said. "I view General Electric, who has jobs from this in Ohio and North Carolina, as an American company. I view the folks in Mobile, Alabama, and Melbourne, Florida, as Americans. But that did not enter into my decision here."

"You said we want a fair and open competition under the laws," she told the panel. "I complied with those laws."

General Electric is to make the engines and Northrop Grumman expects to hire hundreds of engineers in Melbourne for the Airbus group's tanker, which will be assembled in Mobile, Ala.

The victory on the Air Force contract could mark the arrival of Airbus as a major builder of tankers after decades of dominance by Boeing, which manufactured the only widely used boom.

The Boeing spokesman, Mr. Barksdale, said his company could easily pull together the new boom it promised the Air Force. "It's not a huge leap of technology," he said. "It would not be a huge deal."

But to Northrop Grumman and EADS, building the boom on spec presented a chance to demonstrate their competitive hunger.

"They had to start from scratch," said Tim Gann, a retired Air Force tanker pilot and group commander who now works for the Airbus group, EADS North America. "Up until we developed our boom, only Boeing had a boom. Boeing wasn't going to sell us the boom."

Government Cites Litany of Errors in Tanker Award

By Dana Hedgpeth and Robert O'Harrow Jr.
Washington Post Staff Writers
Thursday, June 26, 2008; Page D03

The Air Force bungled its biggest procurement deal to spend $40 billion to buy new aerial refueling tankers to replace its aging fleet, federal investigators declared last week. But what wasn't publicly known until yesterday was just how badly they did so.

In a 67-page review, the Government Accountability Office sharply criticized the Air Force for a litany of contracting transgressions, including everything from failing to follow its own evaluation criteria to miscalculating the maintenance costs, size and amount of fuel a plane could carry and holding unfair discussions with one of the bidders.

The competition featured Northrop Grumman and its partner, European Aeronautic Defence and Space, which won the deal Feb. 29, beating out Boeing. It was a bitter loss for Boeing, which built the Air Force's existing tanker nearly 50 years ago. It lodged a protest.

When they announced the winner, Air Force officials said repeatedly that they'd run an "incredibly open and transparent" process that would withstand any legal challenges.

But the GAO report made public yesterday differed about as sharply as could be imagined.


It found that the Air Force's selection process was so misguided that it was "undermined by a number of prejudicial errors that call into question the Air Force's decision."

Along the way, the Air Force seemed to guide Northrop through some pitfalls. In one instance, the Air Force first told Boeing that it had satisfied one set of objectives, but later, after discussions had been closed, decided that it had not. But the Air Force told Northrop about objectives it had not met, allowing that company to change its proposal and meet the requirements.

"It is a fundamental precept of negotiated procurements that discussions, when conducted, must be meaningful, equitable, and not misleading," the GAO said in its assessment. The GAO said the Air Force "treated the firms unequally" in holding discussions with one but not the other.

"This is a damning report," said David Berteau, a senior defense analyst at the Center for Strategic and International Studies. "It is baffling to me: how did so many smart people at high levels at the Pentagon come to the conclusion that the process was so well done and announce a winner, and then we see a GAO report that gives them a black eye in running a smooth, fair procurement process."

The GAO's report is not an evaluation of the merits of the two aircraft; it is essentially a technical critique of the Air Force's acquisition process. It sharply criticized the Air Force for not following the evaluation criteria it set out and said that "judgments in the evaluation of proposals must be reasonable and must bear a rational relationship to the announced criteria."

Top Pentagon and Air Force acquisition officials met with Defense Secretary Robert M. Gates yesterday to discuss how to deal with the contract. The GAO has essentially recommended that the Air Force start the procurement process from scratch.

Boeing's stock closed down $5.15 to $69.64 yesterday.

After the Air Force awarded the contract, which could be worth as much as $100 billion over the next two decades to the Northrop team, Boeing filed a protest with the GAO on March 11, arguing that its aircraft was unfairly evaluated. Congressional leaders, many of whom represent areas where Boeing has major operations, have rallied to get the Air Force to reconsider its decision and have threatened to withhold funding from the tanker program.

"This decision boils down to the fact that the Air Force ran a tanker competition that was neither transparent nor fair," said Sen. Patty Murray (D-Wash.). "This decision is as damning as it is unprecedented. I want to know how the Air Force got this so wrong. Whether it was incompetence or impropriety, clearly the process was completely mishandled."

The GAO said Boeing should be reimbursed for its attorneys fees and the costs of filing the protest.

It was clear in its judgment that the competition was almost a dead heat.

"But for these errors, we believe that Boeing would have had a substantial chance of being selected for award," the document concluded.