Bidding War To Start Anew In 2009
Boeing and Northrop Grumman revealed hints last week on how each
company will approach the next round of their bidding war for a US
Air Force tanker contract.
The infamous KC-X competition is expected to start anew in 2009.
Northrop won the last competition... only to have the award
overturned on challenge, and the entire contract process overturned
by the Defense Department. The Air Force has been left to fly its
half-century-old KC-135 tankers years longer than expected, and is
committed to making the next competition as protest-proof as
possible.
The contenders are lobbying hard for bidding terms which will
favor their designs. The Mobile Press-Register reports top
executives from both Boeing and Northrop tipped their hands on
strategy at last week's Reuters Aerospace and Defense Summit in
Washington, DC.
Boeing favors an approach in which the Air Force would define
needed capabilities first, then award the contract to the
manufacturer which delivered those needs at the lowest cost.
Reuters predicts that approach may look compelling in a period of
economic challenges, and appeal to a new administration which has
promised military spending cuts.
Northrop Grumman, and its European partner EADS, are pushing for
a "best value" approach, using a common formula to rate both
entries on price and capability, leaving the door open to
capabilities beyond minimum needs.
"We would hope that we see a rapid restart of the program and
... that the competition will be conducted as a best-value
competition, very much as the F-22 and the F-35 were ... as opposed
to just simply a low-ball bid," Northrop CEO Ron Sugar told
attendees.
Boeing defense chief Jim Albaugh, while offering assurances that
Boeing, "...will play by any set of rules that they put in place,"
criticized the best-value approach as more complicated and more
susceptible to challenge. That's a big deal to the Pentagon, which
has taken over the bid evaluation process from the Air Force to
allow tighter supervision.
At stake is a 179-plane order worth at least $40 billion to the
winner, and the chance for EADS to penetrate the US defense market.
But it's not clear the simpler cost-basis structure Boeing wants
would really be an advantage in the bidding.
In the last round, Northrop was awarded the win based on "best
value," but also came in $3 billion dollars lower than Boeing's bid
for the first 68 aircraft... and Boeing knows it. As the losing
bidder, Boeing got to see details of the winning Northrop bid.
Details of Boeing's bid were not disclosed.
James McAleese, a defense industry consultant, would be
surprised if that happens again. He commented at the summit, "I
don't think (Boeing) will be caught sleeping a second time."
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