Boeing is irresponsibly trying to ensure that, if it doesn’t win the U.S. Air Force’s $35 billion aerial refueling tanker competition, nobody does, a competing executive charged Wednesday.

“I believe there’s a substantive difference if you look at the campaigns that have been waged by either side,” EADS North America Chairman Ralph Crosby Jr. said Wednesday. “Our campaign has been based on enabling the understanding of the superior capabilities and value of our system under the rules that are established. And what I see in terms of advertisement and sort of third-party and paid surrogate statements is that, well, whatever (Boeing executives) do, they may or may not win, but they sure want to keep us from winning and, frankly, from my perspective, if that’s anybody’s approach then I think it’s irresponsible to the warfighters.”

So does that mean EADS North America wouldn’t protest if it lost?

“Unless there is some egregious process error, I wouldn’t expect that we would protest,” Crosby said.

Responding Wednesday, Boeing tanker spokesman Bill Barksdale said: “Rather than take shots at our European competitor, the Boeing Company continues to focus on being ready to build tankers if we’re honored with a selection and contract award.

“The selfless men and women of America’s Air Force deserve no less.”

Boeing’s 767-based NewGen Tanker is competing against EADS North America’s Airbus A330-based KC-45 tanker for the contract to replace Eisenhower-era KC-135 tankers. Both companies submitted their final revised proposals Thursday, a day ahead of the Air Force’s deadline.

Actually, delivery of EADS’ proposal to Wright-Patterson Air Force Base, in Dayton, Ohio, didn’t go as smoothly as planned, Crosby said.

“We started out with a great plan for delivery of our final proposal revision. We had commercial airline reservations, we had a dedicated charter aircraft and we had a van,” he said. “And, by the time we got there about 4 o’clock on Thursday afternoon, an airplane had broken (down), another airplane had tried to leave without the proper documentation and our employee in Dayton who was going to meet the airplane fell ill and passed out three times before we got there.”

The final price is lower than EADS North America’s original bid, and company executives think it’s below Boeing’s price, Crosby said. He declined to say how much EADS cut its price, quipping: “Just enough to win.”

The Air Force’s criteria would award the contract to the aircraft with the lowest price, after adjustments for required modifications to air bases, fuel costs and mission performance factors, assuming one bid is more than 1 percent lower than the other and both aircraft meet the mandatory requirements. If the bids are within 1 percent, the Air Force will consider additional, non-mandatory factors.

“We believe we don’t win until we get a bid that’s more than 1 percent below Boeing’s total evaluated price,” Crosby said. “We can’t assume that our non-mandatory score would be greater than Boeing’s.”

Northrop Grumman, EADS’ former lead tanker partner, dropped out of the competition in March, saying the criteria favored Boeing’s smaller offering.

The departure of Northrop and its need to also make a profit on the tanker is one reason EADS North America can offer a lower price, Crosby said Wednesday. He added that Airbus is producing A330s at a higher rate than Boeing is building 767s, lowering costs, and existing A330-based tankers and refueling systems are closer to KC-45 than existing 767-based tankers and systems are to NewGen.

“We are so much farther down the development, test, manufacture of our system that we have much, much greater confidence and, consequently, in this competition are able to have what we think is a lower development price for the airplane,” he said.

“After four years (Boeing appears) to be delivering tankers to the Italian Air Force that can’t do tanking,” he added. “By my understanding, at least, their (refueling) probe and drogue system is not yet certified.”

Responding Wednesday, Barksdale said: “Our tanker features the most advanced refueling technology ever created but at a low risk since it will be built by an American team that has been delivering this nation’s tankers for nearly 60 years.”

Crosby acknowledged that KC-45 would bear a somewhat higher cost for modification of air bases because it’s larger, but said this is “not a key determinant of an outcome.” He also questioned Boeing’s claims about fuel cost savings of the NewGen tanker.

“I find it hard to comprehend how our competitor says that there will be a $30 (billion) to $40 billion savings by operating the 767 as a tanker over the KC-45,” he said. “Indeed, by our math that looks like it could be as large as a billion to a billion and a half dollars.”

Barksdale responded by saying: “The NewGen Tanker is 24 percent more fuel efficient than the A330 and will save taxpayers billions over the life of this new tanker fleet.”

The larger EADS tanker had about a 6 percent advantage in the “IFARA” mission performance evaluation in the previous tanker competition, which it won, Crosby said. Defense Secretary Robert Gates threw out that award after congressional auditors found major flaws in the process.

KC-45 might have an even bigger IFARA edge in this competition, Crosby said. He hinted that this is the real motivation behind moves by Boeing’s congressional supporters to throw out this part of the evaluation in the wake of the Air Force’s mistaken release of IFARA evaluations to the competing companies.

“This is the one place where the EADS North America KC-45 offering has the opportunity to substantially speak to the advantages of a larger and more modern aircraft refueling system,” he said.

Crosby objected to the push to throw out IFARA and similar moves to force the Air Force to account in the competition for illegal subsidies a World Trade Organization panel found that European nations gave to Airbus programs, including the A330.

“Our competitor continually wants to introduce changes into the evaluation criteria. It’s a little bit like the ninth inning of a baseball game where you’ve played by the rules, you appear to be in jeopardy of losing, so you try to introduce new rules and, if they don’t take, put together reasons that the game may be canceled and start all over again,” he said.

Speaking of subsidies, Crosby noted that a separate WTO panel found that Boeing also got illegal subsidies and pointed to 1982 Senate testimony by H.W. Withington, former vice president of Engineering at Boeing, that “NASA participated in significant portions of the research leading to the development of propulsion, structural, flight deck, avionics and aerodynamics advancements in” the 767 and 757.

“I can’t find a better source,” Crosby said. “Development of the 767 was, in fact, substantially underwritten by NASA.”

And EADS North America can offer a lower price on the tanker because of the factors like its production rate and aircraft maturity, not subsidies, he said. “There seems to be the view that this WTO issue is the enabler for us to win. … It has nothing to do with that.”

Crosby also addressed Boeing’s contention that its tanker would supporting more American jobs and that EADS’ claim of KC-45 supporting 48,000 U.S. jobs was overblown.

“I promise you some new and substantial news on that next week. We’ve gotten a bit tired of the last, best liar wins, so we’ve commissioned an independent study on jobs that takes it down to the individual district where jobs are done,” he said. “What I’m talking about more than substantiates 48,000 that we’ve said in the past.”

Finally, Crosby responded to questions about the failure and partial loss of a boom on an A330 tanker for the Royal Australian Air Force in January.

“The investigation activity continues and we ought to have a release on that fairly quickly,” he said, adding that EADS has the only boom in flight test with more than 1,500 aircraft contacts.

Crosby declined to confirm the details in or respond to a new Australian Aviation report (pdf courtesy of Leeham News) that, according to preliminary findings, the boom’s probe snapped off near the receptacle of an F-16 receiving aircraft, “causing the boom to spring up and strike the underside of the tanker, snapping off one of its two guiding fins and causing the boom to oscillate wildly until it detached from its supporting mast and fell to the ocean below.”

Airbus Military said in the report that it hopes the incident will not further delay first delivery of the Australian tankers, which has been pushed from an original plan of late 2008 to the end of 2010 to a current target of around March.

http://blog.seattlepi.com/aerospace/2011/02/16/eads-boeings-being-irresponsible-...

MOBILE, Ala. -- The U.S. Air Force on Thursday selected Boeing Co. to build its next-generation fleet of refueling tankers, saying the Chicago-based company was “the clear winner” in a competition with the European Aeronautic Defence and Space Co. for the potential $40 billion contract.

The news was met with jubilation in Washington state and Kansas, where Boeing is proposing to assemble its KC-767 jets, and bitter disappointment in Mobile, where EADS had laid ambitious plans for a $600 million aircraft production plant.

The decision confounded industry analysts and elected officials close to the competition, who boldly declared EADS as the favorite in the days leading up to the announcement. Those predictions vanished in a blink on Thursday afternoon, followed swiftly by the cancellation of arrangements for a ceremonial groundbreaking Monday at the Brookley Aeroplex.

“It hurts. I think we all felt great confidence because we truly believed that EADS had the better plane,” said Mobile Mayor Sam Jones. “But we went into this competition knowing that it could go either way. So we’ve just got to regroup and go after the next opportunity.”



Backers of Boeing, meanwhile, confessed surprise at a victory that few saw coming. U.S. Sen. Patty Murray, D-Wash., said she spent a sleepless night worrying how best to respond to a Boeing loss; U.S. Rep. Jay Inslee, D-Wash., fired off an e-mail bearing the phrase “Decision will not stand” in its subject line. The message was quickly retracted.

“We knew that Boeing had the best airplane. But we just didn’t know what the Air Force was going to do,” Inslee spokesman Robert Kellar told the Seattle Times. “We were just assuming the worst.”

With the selection made, the Pentagon’s next task is to make it stick. The Air Force has failed in two previous attempts to award a contract for new tankers, and the decade-long effort to replace the aging KC-135 fleet has been marked by delays, ineptitude and political infighting.

A 2001 deal to lease 100 tankers from Boeing collapsed in a corruption scandal, and a 2008 decision to buy 179 tankers from EADS was rescinded after it was challenged by Boeing. This time, according to top U.S. Department of Defense officials, the contest should hold up to scrutiny.

“We structured a competition that was fair, and Boeing was the clear winner of that process,” said Deputy Defense Secretary William Lynn.

“We will stand behind this work,” said Air Force Secretary Michael Donley.


EADS, the parent company of Airbus, said it would wait to hear details of the Air Force’s selection process before deciding whether it would protest the award. That meeting could occur as early as next week. EADS said prior to the announcement that it did not anticipate a challenge unless it saw “egregious” errors by the Air Force.

"This is certainly a disappointing turn of events, and we look forward to discussing with the Air Force how it arrived at this conclusion,” said Ralph D. Crosby Jr., chairman of EADS North America. “With a program of such complexity, our review of (Thursday’s) decision will take some time.”

Boeing, which built the Air Force’s fleet of more than 400 KC-135 Stratotankers, hailed the decision as a win for American aerospace workers. The initial phase of the contract calls for the delivery of 18 tankers to the Air Force by 2017 for a price of $3.5 billion. The Air Force said the new aircraft would be designated as the KC-46A.

“We’re honored to be given the opportunity to build the Air Force’s next tanker and provide a vital capability to the men and women of our armed forces,” said Boeing Chairman and Chief Executive Jim McNerney.

Boeing, the nation’s largest exporter, spent millions on a marketing campaign that effectively painted EADS as a threat to U.S. jobs. According to the Center for Responsive Politics, Boeing spent $17.8 million lobbying Congress in 2010, compared to $3.2 million for EADS.

On Thursday, Boeing’s political supporters said they were eager to begin production. The average KC-135 is nearly 50 years old, and replacing the flying gas stations is the Air Force’s top priority.

“I hope EADS will step down now. We need to get going,” said Washington Gov. Christine Gregoire. “They got a shot at it ... they were good competitors. And I hope now they will step down and not appeal.”

Defense experts, however, said a challenge was likely. Under federal law, EADS will have 10 calendar days from its briefing with the Air Force to decide whether to appeal the award to the Government Accountability Office. If that happens, the watchdog agency would have 100 days to rule on the complaint.

“I have no doubt” that EADS will contest the award, said Richard Aboulafia, an aerospace analyst for the Teal Group in Arlington, Va. “Even if EADS didn’t want to file a protest, their political allies would insist on it. This is by no means the end of the contract.”

Alabama elected leaders said they were not ready to concede defeat.

“Unfortunately, the best tanker for our military was not selected. I intend to demand a full accounting as to why,” said U.S. Rep. Jo Bonner, R-Mobile. “This competition has been challenged before and it’s not unlikely it will be challenged again.”

U.S. Sen. Richard Shelby, R-Tuscaloosa, took aim at the White House, suggesting that Boeing’s ties to President Barack Obama may have tipped the decision its way. Boeing labor unions were major supporters of Obama’s 2008 presidential run, and Obama shares the same Chicago hometown as the aerospace giant.

“I’m disappointed, but not surprised,” Shelby said. “Only Chicago politics could tip the scales in favor of Boeing’s inferior plane. EADS clearly offers the more capable aircraft. If this decision stands, our warfighters will not get the superior equipment they deserve.”

U.S. Sen. Jeff Sessions, R-Mobile, said his hometown remained a prime location for the aerospace industry.

EADS had announced plans to expand the tanker plant to include production of Airbus A330 freighters for the commercial market, and state officials said the freighter plant could still be viable at Brookley, a former Air Force base with prized access to interstates, rail lines and the Port of Mobile.

“EADS would not have chosen Alabama if they did not firmly believe that our state was a great place to do business in the global economy,” Sessions said.

Gov. Robert Bentley said he intended to discuss the Airbus project with EADS. On Thursday, however, the former doctor was busy comforting a crowd of stunned observers who’d gathered at the Arthur R. Outlaw Mobile Convention Center to watch the Air Force’s announcement.

“We’re all disappointed. I think everybody in that room believed we were going to win,” Bentley said. “But there’s sunshine behind every cloud. I know we will reap dividends from the hard work that went into this effort.”

http://blog.al.com/live/2011/02/air_force_tanker_contract_eads.html

By CHRISTOPHER DREW

When a European company offered a larger tanker than Boeing for a lower price in 2008, the Air Force grabbed what seemed like a bargain.

But aviation analysts say Boeing won a rematch this week because the government’s preference had shifted to a plane with fewer bells and whistles but one that could be much cheaper to operate in the next few decades.

The changes in the bidding rules for one of the Pentagon’s richest contracts were relatively subtle, making the $35 billion award to Boeing on Thursday a surprise for the company’s executives.

In the end, the proposed size of the aerial fueling plane offered by Boeing’s rival, the European Aeronautic Defense and Space Company, or EADS, seemed to work against it. And Boeing may have won, several analysts said, because its jet could save billions of dollars more in flying costs than any discounts EADS might have offered on its sticker price.

Perhaps the most decisive advantage occurred through a change advocated by one of Boeing’s biggest supporters, Representative Norm Dicks, Democrat of Washington. Mr. Dicks said that after the earlier bidding collapsed, he persuaded the Pentagon to alter a crucial rule to better reflect the long-term cost of the planes.

Under the change, the Air Force agreed to project the cost of the fuel used to power the tankers over a 40-year period, rather than 25 years. Air Force officials have said that the lengthier projections made sense, given that many of its tankers have already been operating for 50 years.

Mr. Dicks promoted the change publicly before the latest bidding started, and EADS officials said on Friday that they knew about it. But they say it was one of several rule changes that could help explain how Boeing, America’s top aerospace firm, reversed its prospects on the bid after faltering so badly in 2008.

EADS, bidding with Northrop Grumman, won the earlier contest only to have government auditors block the award after Boeing filed a formal protest. The auditors found that the Air Force had been too subjective in evaluating the bids and had given EADS too much credit for some of the extra features of its plane.

The successful protest rattled the Pentagon. It had already been embarrassed after an effort to lease tankers from Boeing in 2001 collapsed in a corruption scandal, and it was wary of the intense advertising and lobbying campaigns that both sides had mounted.

So top Pentagon and Air Force officials sought to make the evaluation more objective this time, creating a mathematical formula that weighed the bid prices, how well each of the planes met war-fighting needs and the 40-year operational cost estimates.

EADS executives said on Friday that they had no reason to question the Air Force’s selection. Louis Gallois, the chief executive of EADS, told reporters that he was “disappointed” and “perplexed” by the decision. But he said EADS would not consider its next steps until the Air Force briefed the company on Monday about the award.

EADS has 10 days after that to protest if it decides that the Air Force deviated from the bidding rules. The company, which planned to build an assembly plant in Alabama if it had won, has strong support from lawmakers in the gulf states counting on the jobs to help the region recover from Hurricane Katrina.

EADS supporters say that the size of its plane, about 25 percent bigger than Boeing’s, had impressed Air Force officials in 2008. The plane could carry up to two dozen pallets of cargo along with the fuel needed to transfer to bombers and fighters in flight.

But since then, the Air Force revised its needs, saying it already had more cargo planes than required.

The Air Force also penalized Boeing more substantially than EADS in 2008 for not being as far along in developing its tanker. This time, the Pentagon insisted on a fixed-price contract and did not deduct any points from either bidder for possible production delays.

Representative Dicks acknowledged in an interview that his push to weigh the operating costs over 40 years rather than 25 “may have made a big difference,” and independent analysts agreed.

The Air Force plans to buy 179 tankers, and it has assumed that fuel prices will rise by an average of 2.5 percent annually over those decades.

Boeing’s supporters had said earlier this week that Boeing thought that rate should be higher, and they contended that parts of the Air Force’s formula seemed to favor EADS.

But Edmund S. Greenslet, publisher of the Airline Monitor, an industry newsletter, said commercial models similar to the EADS tanker burned about 1,900 gallons of fuel per hour, while Boeing’s plane used less than 1,500 gallons. With fuel costs rising, that difference could have offset any advantages for the EADS plane, he said.

Both the EADS and Boeing planes could carry more fuel than any of the aging tankers in use today. Analysts also said the Air Force would have had to make greater operational changes if it had bought the EADS plane.

Boeing held a celebration Friday at its plant in Everett, Wash., where it made production changes last year to cut costs. As she left the rally, Senator Maria Cantwell, Democrat of Washington, said in a telephone interview that Boeing had “used sweat equity to get down to brass tacks” and lower its bid.

Hundreds of Boeing workers attended the rally, cheering that the contract would save many of their jobs and add thousands more. A job at Boeing, once seen as a ticket to a comfortable life, has become dicier as competition has intensified in the aerospace industry.

Boeing’s tanker is based on its 767 passenger jet, and the company had planned to end production of that plane if it had not won the tanker contract. The passenger version of the 767 will be replaced by Boeing’s new 787 Dreamliner.

Mr. Greenslet noted that the long delays in the 787 program had prompted Boeing to keep the 767 line open longer than planned. And if the new plane had not been delayed, Boeing might not have been in as good a position to bid for the tanker work, he said.

Boeing officials had also feared that EADS, which is partly owned by European governments, could rely on subsidies to undercut Boeing’s price or to absorb losses if it won the contract with a low bid.

But Guy M. Hicks, a spokesman for EADS’s North American unit, said that while the company’s bid was low, it had still projected a profit. He also said that EADS might have had a more realistic sense of the costs than Boeing, since it is building more tankers for other countries. 

http://www.nytimes.com/2011/02/26/business/global/26tanker.html?_r=1&adxnnl=1&sr...