Boeing vs. Airbus/Northrop: $35 billion tanker deal up for grabs - again
Filed under: Boeing
It looks like the Pentagon is poised to try for a third time to award a $35 billion contract for 179 airborne refueling tankers. This contract, which could ultimately be worth $100 billion by 2030, is going out to two bidders: Boeing (BA), and EADS' Airbus subsidiary in partnership with Northrop Grumman (NOC). The competition pits Boeing workers in Washington state and Kansas against Northrop employees in Alabama.
The previous two attempts to bid out this contract have resulted in failure, but the Air Force is hoping the third time will be the charm. The first one, in 2003, was tainted when it turned out that Boeing's then CFO offered Darleen Druyun, then the Air Force's number two acquisitions official, a job at Boeing even as she was involved in awarding the tanker contract. The second failure took place last July when presidential politics and a June 2008 Government Accountability Office report detailing "significant errors" in awarding the contract combined to scuttle the deal.
How will the Air Force attempt to make the process work right this time? It is going to publish the 373 mandatory requirements for bidders and will award the contract on a so-called "best value" comparison of price and nonprice factors such as maintenance costs and overall cost of ownership. And the Pentagon will make its announcements anonymously to prevent bidders from lobbying individual decision-makers.
It will take until the summer of 2010 to complete the process. The Request for Proposal made public on September 25 will be followed by 60 days of comment by bidders and Congress. The final RFP -- modified in response to all this commenting -- will be released after that, and the bidders will have 60 days to submit their bids. Four months later, the government will award the contract.
While it is likely that this bid will get caught up in politics -- particularly next year -- it would be nice if the winning bidder was the one that offered the best product for the Air Force while employing the most American workers.
Peter Cohan is a management consultant, Babson professor and author of eight books including, You Can't Order Change. Follow him on Twitter. He has no financial interest in the securities mentioned.
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Reader Comments (Page 1 of 2)
9-25-2009 @ 12:19PM
OINKJOHNSON2 said...
Why would we need 179 of these monsters? Despite our world-wide defense presence, I simply can not envision how we would need more than 50 or so. As to the actual acquistion, I believe that EADS/Northrup offered the superior aircraft the last time. However, I am sensitive to the Boeing jobs which would be lost if the major portion of the airplances were to be built in France before shipping to Alabama for final assembly. Maybe the Congress should define a percentage of the overall value to the American content, which would be known up-front. In that manner, EADS/Northrup would know just how stacked against them the procurement is and then decide whether to bid or no-bid.
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9-25-2009 @ 12:44PM
demofred said...
The Airbus would have been so BIG it would NOT fit into any existing aircraft hangars, so the Air Force would have to spend huge amounts of money to build larger hangars for maintenance and protection all over the world. That additional cost would make the total overall expense much larger than the Boeing offering.
Usually tankers orbit over an area, then refuel fighter aircraft which normally don't carry as much fuel as transport planes. The Airbus would have carried so much extra fuel, it would have to "dump" a great deal to land, thus there would be NO advantage to the greater capacity.
Boeing has been building refueling aircraft forever. It's a US company. Airbus is a French company. They ONLY went into a partnership with Northrop to try to get this contract. I believe Northrop is a minor partner in this deal. Please name a French automobile that's worth anything... The French government has funded the Airbus to save "face." They've given away their airplanes for below cost in the hope they'll make up the difference in selling parts, engines, and related "required" different equipment. Again, Boeing aircraft can use existing Air Force AGE (Aerospace Ground Equipment) which saves huge amounts of money.
This should be a "no brainer" IF there's no politics involved. Personally, I would rather have a US manufacturer if a war breaks out. What if France decides NOT to supply parts because the disagree (as usual) with the US?
9-25-2009 @ 3:46PM
Scott said...
Screw Boeing! Any company that wants to move it's corp, R&D, and outsource more jobs to China can get the hell out of the USA. They can't even build a dreamliner and have a CEO that speaks many tongues. Boeing, go! and let a real american company take over your empty buildings and hire your screwed over employees and build a safe and economical airplane for the public and military without needing a congressman in the back pockets! One that is once again driven by pride and product and not wall street profiteering!
9-25-2009 @ 4:03PM
Dave said...
How do you arrive at the number of Tankers at 50?
9-25-2009 @ 12:27PM
Yon said...
Keep the bidding going again and again until Boeing gets the job and sells the Air Force plastic rejects from the commercial division. We need more bladder airplane crashes.
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9-25-2009 @ 12:34PM
Richard said...
What a joke ! Give me the contract and I'll do it for $50B...There are plenty of old tankers that could be converted for less than half of the price. All of this state-of-the-art BS is just lining the pockets of big companys and their lobbyist.
The refit, older tankers, without glass cockpits and tons of cool new EXPENSIVE stuff, will do the job just fine . I know,my buddies and I used to drive these things ! ! !
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9-25-2009 @ 1:25PM
KP said...
I agree with Peter's final comment : which bidder employs the most U.S. workers? Both companies are equal in technology, but not necessarily in home-grown employment. EADS may have to move production of these tankers lock-stock and barrel to Alabama should it be discovered they are not employing as many as Boeing. I hope the decision-makers at the Pentagon take this issue into account.
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9-25-2009 @ 1:26PM
ginger said...
Boeing is contemplating moving to China and it's lastest aircraft is being built by 60 0/0 Italian labor. It appears that we no manufacture airplanes.
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9-25-2009 @ 2:08PM
Mike said...
here's how it should have been done, Get 10 of each and fly their asses off. Then, compare purchase price, maintenance costs, performance and durability. Then you'd got your answer. based on what I heard before, the airbus has the distinct advantange, but had foreign connections.
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9-25-2009 @ 2:10PM
Rudolf Boentgen said...
U.S. taxpayer dollars should not be used to purchase a foreign sourced airplane, especially for military purposes. Even if the project is more costly if made in the U.S., the extra monies should be spent. In times of war we would be at the mercy of foreign suppliers to keep our planes flying- not a good situation. We already have been exporting too many jobs and capabilities overseas. "BUY AMERICAN"
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9-25-2009 @ 2:32PM
John Galt said...
Frankly, I'm a bit confused. We are considering spending $35 billion dollars on 179 refueling tankers and we can't even find a man hiding in the mountains or villages of Pakistan, Afghanistan or wherever he is....It seems that technology and military might was no factor in determining the outcome of the wars in Viet Nam, and presently in Iraq or Afghanistan. The only time it seemed to be a factor was in the Persian Gulf War where Norman Schwarzkopf was allowed to take ownership in the outcome. Sooooo.... pare down the number of tankers and spend the money in intelligence efforts or get the heck out of the Middle East which is probably the best idea of all.
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9-25-2009 @ 3:28PM
scott said...
I can not believe that the United States governmenment would even consider a piece of crap airplane from France. It is proven they fall apart and besides where is the support for U.S. built products? Oh that's right, Obama has a say in it.....stupid me. Suprised that idiot doesn't buy a thousand Piper Cubs and fill them 5 gallon gas cans.
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9-25-2009 @ 4:30PM
Sharon said...
You're an idiot. Obama is the first president in a long while that has tried to create jobs for Americans unlike Bush whose idea od dealing with Americans was to send as many of them as possible to war to get killed
9-25-2009 @ 4:10PM
robert said...
More waste of tax payers money.
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9-25-2009 @ 4:10PM
Rocco said...
Dictate a fair market price, split the order in half and save the taxpayers a lot of time and money putting out this bid. Keep all the jobs in the states and make sure any important technology is hidden from the French.
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9-25-2009 @ 5:39PM
duane said...
would it be so hard to have a total bid of 179 tankers and a bid of 50 or so many per. my idea would be is to share the wealth of 90 tankers per company bidding. helps the economy in two areas of the country. But that would be way to easy for these guys to see the light
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9-25-2009 @ 4:35PM
glelear2 said...
GO BOEING!!!!!! GO USA!!!!!
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9-25-2009 @ 4:38PM
Trevor said...
The Airbus product is a "throw away airplane". I'm a 25 year, licensed aircraft mechanic. The Boeing is a superior product and a bit heavier because they're made out of REAL metal. Just saying......
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9-28-2009 @ 11:08AM
Rodemarz said...
Only buy 100% American-things are starting to spiral out of control elsewhere-we are a nation that can take care of it's own destiny!
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9-25-2009 @ 4:48PM
kabaracuda said...
Only American companies , use american workers . This way we cant be held hostage later if we need parts or service !
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