Posted by Kyung M. Song

WASHINGTON -- When the U.S. Air Force at last reveals the winner of a $40 billion contract for aerial refueling tankers, it won't merely mark a turning point in one of the more tortuous chapters in Pentagon procurement history.

It also would help determine the fate of the American economy, its industrial base and national security.

That's according to a quintet of senators from three states who are pushing hard for a victory by Boeing.

During a press conference at the U.S. Capitol on Thursday, Sen. Patty Murray led an argument by a bipartisan group of lawmakers that awarding the tanker deal to the European parent of Airbus would deprive Americans of much-needed jobs.

Boeing has claimed that if the tankers are built with a military version of its 767 jetliner, it would support 50,000 U.S. jobs, including 11,000 in Washington state. Airbus parent EADS counters that a win for the larger Airbus A330 tanker would support 48,000 American jobs. Airbus plans to assemble the tankers in Mobile, Ala., with component parts made in Europe.

"If we are going to win the future, we are going to need to win this contract," Murray said. "We are doing this to remind the administration and the country what's at stake."

Underscoring that message, the press conference room was festooned with signs proclaiming "American jobs on the line" and "Support American aerospace."

Also appearing at the event were Sens. Maria Cantwell of Washington and Pat Roberts and Jerry Moran, both Republicans of Kansas, a major Boeing manufacturing center. A fifth senator, Debbie Stabenow, is from Michigan, where Boeing currently employs 22 people but hopes to gain 450 more jobs with a tanker contract.

The Air Force has been trying for a decade to replace its aging KC-135 refueling aircraft. Its 2001 decision to lease 100 tankers from Boeing was scotched after revelations that the company's chief financial officer offered jobs to a Pentagon acquisitions officer and her family. A subsequent tanker award to Northrop-EADS was successfully challenged by Boeing on grounds that the competition was flawed.

Further roiling the process, the World Trade Organization has recently ruled that Airbus -- and to a lesser degree, Boeing -- has benefited from billions of dollars in illegal government subsidies. Boeing partisans on Capitol Hill have argued for penalizing EADS, something the Pentagon has refused repeatedly.

The decision for this third round is expected to hinge on price. Aerospace analysts have speculated that EADS likely would prevail on that score. The Air Force is expected to name the winner shortly.

Asked if all the political interference might further delay the Air Force from upgrading its equipment, Moran said that's why the Pentagon must ensure that its latest choice of a winner "has to be absolutely, above-board correct."

http://seattletimes.nwsource.com/html/politicsnorthwest/2014254392_murraycantwel...

Boeing will build the NewGen Tanker with a low-risk approach. It will use a trained and experienced U.S..

Boeing has built and supported tankers for more than 60 years, and company employees said they are rolling up their sleeves to begin work on this newest tanker right away.

Feb 25, 2011

By Graham Warwick graham_warwick@aviationweek.com
Washington

Overturning its previous selection, the U.S. Air Force has selected Boeing to supply its KC-X replacement aerial-refueling tanker. The company has been awarded a $3.5 billion fixed-price incentive contract for development and delivery of the first 18 of a planned 179 767-based NewGen tankers to replace U.S. Air Force Boeing KC-135s.

EADS North America, with Northrop Grumman as prime contractor, won the first KC-X competition in February 2008 with the KC-45A, based on the Airbus A330-200 and similar to the KC-30 multi-role tanker/transport under development for Australia. The program was halted in September 2008 after a Boeing contract protest was upheld.

The Air Force restarted the KC-X competition in July 2010, issuing a new request for proposals (RFP) that simplified the requirements, clarified the selection criteria and reduced the financial risks to the winner. The changes were made in a bid to prevent the protests that derailed the first competition.

Boeing revised its approach after losing the first competition, dropping plans to develop an aircraft combining elements of several different 767 models and basing its “NewGen” tanker bid on a 767-200 equipped with an upgraded KC-10 refueling boom and 787 cockpit displays. The company said its price would be lower the second time around.

EADS North America stayed with its winning KC-45 design, but entered the new competition as prime contractor after Northrop withdrew from the role in March 2010, arguing the revised RFP “clearly favored a smaller tanker.” EADS’s decision to lead the bid itself likely allowed the company to reduce its proposal price.

The Air Force substantially revamped its source selection process after the Government Accountability Office (GAO) upheld Boeing’s protest over losing the 2008 competition to Northrop Grumman and EADS. The GAO ruled the Air Force did not properly assess the relative technical and operational merits of the rival tankers.

The new RFP simplified the specification to 372 mandatory pass/fail requirements the proposals had to meet to be considered. Proposed prices were then adjusted by the Pentagon based on assessments of operational effectiveness and ownership cost. Only if the resulting total evaluated prices were within 1% of each other would the Pentagon then consider each proposal’s ability to provide additional capabilities.

A long-shot bid from U.S. Aerospace, offering a variant of the Ukrainian Antonov An-70, was rejected after it missed the deadline to submit a proposal. The company’s protest was dismissed by the GAO in November 2010.

http://www.aviationweek.com/aw/generic/story.jsp?id=news/awx/2011/02/24/awx_02_2...

Mar 1, 2011

By Amy Butler

The question sweeping the U.S. defense establishment is: How low did Boeing go?

Nearly three years after the U.S. Air Force’s selection of a Northrop Grumman/EADS A330-based tanker was found by government auditors to be flawed, the service has now chosen a Boeing design to replace its aging KC-135 refuelers. The Air Force based its selection largely on life-cycle price, and Deputy Defense Secretary William Lynn says: “Boeing was a clear winner.”

Three years ago, Boeing’s price was roughly $8 million more per aircraft than EADS’s and its development price was higher, according to sources close to the duel. Right up until the source selection announcement last week, many defense analysts suggested EADS would underbid Boeing in order to establish a final assembly facility for Airbus aircraft in the U.S.

“It is very fortunate for Boeing that they got a second chance because their first bid was not competitive,” according to one defense industry analyst. John Young, the Pentagon procurement chief during the last source selection, says, “The delay [in fielding the aircraft] is unfortunate and it clearly led both teams to sharpen their pencils.”

The Air Force’s decision to select Boeing will likely sidestep a protracted debate with Congress; Boeing supporters on Capitol Hill were poised to fight on the company’s behalf, further delaying USAF’s ability to field new tankers. Boeing’s lobby in Congress is far more substantial than EADS’s, which mainly relied on lawmakers from Alabama, where the A330 was to be built, for its political influence.

Dennis Muilenburg, president of Boeing Defense Space and Security, says this KC-X proposal had a “one Boeing” tactic, including a marriage of its culturally diverse defense and commercial businesses. “We worked this as one integrated Boeing company,” he says, adding that this approach drove efficiencies and value to for the most recent proposal.

During the 2008 competition, Boeing was criticized for seeking too much profit, thus allowing for a then-Northrop Grumman/EADS team to underbid. Also, Boeing Commercial Airplanes was seen as uncooperative with government cost estimators who wanted pricing details on the 767 platform.

Boeing protested, leading government auditors to find flaws in the source selection. During this period, company officials were aggressive, publicly taking their top customer to task. Internally, however, Boeing did some soul-searching. “That was always the fear—that [EADS] could underbid again,” says one former Boeing official. “This is the last major USAF acquisition program in the foreseeable future,” and this tanker work was viewed by some in the company as a must win. 

The Pentagon’s decision—if it withstands a possible protest from EADS—could repair the chasm in the Boeing/Air Force relationship. It also shores up not only decades of business with its top defense customer as military budgets begin to flatten but also steady work for the waning 767 production line. Perhaps more critical to the commercial side of Boeing, the win stunts its European commercial rival’s efforts to establish a stateside manufacturing facility for airliners.

A win for either company would have been considered strategic—EADS was hoping to substantially boost its U.S. revenue and, perhaps more critical for the future of its commercial business, was its plan to build an A330 final assembly facility in Mobile, Ala. Since establishing its North American arm in 2003, EADS has had a goal of aggressively growing its U.S. business, and winning KC-X was the largest single step in that strategy. EADS is likely to pursue other Pentagon business, including some smaller helicopter programs, but nothing that would bring with it the scale and prestige of U.S. livery on an A330-based tanker. 

EADS North America officials were due receive a debriefing Feb. 28on the loss. Board Chairman Ralph Crosby said his company would not protest the decision unless there is an obvious error on the part of Air Force acquisition. EADS North America officials “expressed disappointment and concern” about the decision. Air Force Chief of Staff Gen. Norton Schwartz says he hopes this decision means people will “stop talking about it” and get on with fielding a tanker on schedule. The original Boeing lease—offered in 2002—called for tankers to be delivered in 2006. Investigations into the deal found a bloated price, a situation that kicked off the more recent competitions for a supplier.

A loss for Boeing would have been a blow, ending its five-decade monopoly on the U.S. refueling business as the Air Force’s interest in C-17s continues to be nonexistent. Boeing’s other defense hurdles include a downturn in missile defense opportunities and a recent guided weapon loss to Raytheon.

Pressure is now likely to mount for EADS North America to consider a U.S. acquisition to expand its stateside market share. However, uncertainty over the company’s shareholding structure and an anticipated management shuffle next year could further hinder efforts to execute its U.S. expansion anytime soon.

Though EADS has beat Boeing in previous competitions in Australia, Saudi Arabia, the U.K. and the United Arab Emirates, other countries may now turn away from the A330-based option in favor of the 767 tanker, now called the KC-46A, to achieve commonality with the U.S. fleet.

And, with 767 business established for at least 13 lots through the U.S. buy, the platform, though older than its A330 rival, could continue to challenge Airbus in the freighter market.

Boeing’s $3.5 billion contract covers the development of the system, and purchase of 18 aircraft (including those for test purposes), which will be fielded by 2017. The buy of 179 aircraft is estimated at up to $30 billion, Lynn says. Ashton Carter, the Pentagon procurement chief, says the contract will be signed soon, allowing work to begin smartly. If a protest is launched, a stop-work order will likely be issued immediately in accordance with procurement rules.

The development contract is fixed-price, a shift from the previous competition. However the process does carry risk. Production and flight-testing will be concurrent, says Jean Chamberlin, vice president of Boeing’s tanker program; if technical problems arise in flight-test, fixes may have to be retrofitted onto the aircraft. Although a different design, Boeing experienced substantial flight-test problems with its Italian 767-based tanker.

Production is slated to start in 2015, two years ahead of the first delivery. Initial flight test is also slated for 2015, Chamberlin says. The Pentagon has restructured the Joint Strike Fighter program twice in as many years to reduce concurrency. Though this stealthy fighter is more complex than a modified 767, lessons from JSF and many past programs have pointed to the benefits of discovering flaws in flight-test prior to production.

At the suggestion that Boeing bought into the program, risking its ability to make profit, Muilenburg said “We submitted an aggressive but responsible bid.”

If the decision manages to withstand scrutiny, and neither Congress or the protest reveal problems in the procurement process, this will be a pivotal step forward for an Air Force procurement corps beleaguered by missteps. They began, largely, with the Air Force/Boeing plan nearly 10 years ago to lease 767-based tankers, and continued with a problem in a competition to buy combat search-and-rescue helicopters among others. Perhaps the KC-X decision could be a fitting end to a decade of paralysis for Air Force weapons buyers.

http://www.aviationweek.com/aw/generic/story.jsp?id=news/awst/2011/02/28/AW_02_2...

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They keep on referring to this "50 year monopoly" Boeing has had in producing tankers for the USAF (the above article refers to the US refuelling business, which is even more tenuous - KC-130 etc...). Am I missing something, or did they not lose the competition eventually won by the USAF's most versatile tanker, the KC-10 (apparently with a 747 based design)!

Yeah, ok, in course Boeing acquired McDonnell Douglas, but to say they've had a 50 year monopoly is pushing the truth boat out a bit far!