Northrop Grumman drops bid for of Air Force air tanker

After 3 rounds of competitive submissions and attempts to win the U.S. Air Force air refueling contract, Northrop Grumman has dropped out of the final phase of bidding
Written by Doug Hanchard, Contributor

KC-135 refueling B-52

KC-135 refueling B-52

After three rounds of competitive submissions and attempts to win the U.S. Air Force air tanker contract, Northrop Grumman has dropped out of the final phase of bidding. In a press release issued yesterday, CEO Wes Bush identified reasons why;

"After a comprehensive analysis of the final RFP, Northrop Grumman has determined that it will not submit a bid to the Department of Defense for the KC-X program. We reached this conclusion based on the structure of the source selection methodology defined in the RFP, which clearly favors Boeing's smaller refueling tanker and does not provide adequate value recognition of the added capability of a larger tanker, precluding us from any competitive opportunity."

Northrop had teamed with EADS / Airbus of Europe, proposing a military version of the Airbus A-330 commercial airliner. Airbus has had significant challenges of their own in delivering aircraft on-time and on budget. NATO nations including Germany, U.K. Spain, Italy and France have been waiting two years for the new cargo - transport aircraft, the A-400M. South Africa's air force canceled its order for nine last year. The A-400M is an all new design using the latest turboprop technology and materials.

The delays and design problems highlighted with the Airbus A-380, while simultaneously trying to design a medium long range aircraft the A-350 to compete with Boeing's new B-787 Dreamliner, has probably further eroded Northrop Grumman's support of its partners in the bid. Airbus has been in executive management turmoil for several years.

Northrop may have come to its own conclusions that Airbus and EADS could not maintain costs and delivery of a military version of the A330 aircraft given the recent history. There is considerable concern by the Pentagon and GAO that Boeing can and likely will increase its price to build the aircraft.

Bush states;

"We recognize that our decision likely creates a sole-source outcome for Boeing. We call on the Department to keep in mind the economic conclusions of the prior round of bidding as it takes actions to protect the taxpayer when defining the sole-source procurement contract. In the previous round, the Air Force, through a rigorous assessment of our proposal, determined that it would pay a unit flyaway cost of approximately $184 million per tanker for the first 68 tankers, including the non-recurring development costs.  With the Department's decision to procure a much smaller, less capable design, the taxpayer should certainly expect the bill to be much less."

Tarnished image across the pond

Boeing is also using a commercial version of an existing design rather than starting all new. Boeing's military reputation is also significantly tarnished with this tender. Starting in 2001/2 when the contract was up for tender, former Pentagon acquisition manager Darleen Druyun was hired by Boeing after the initial contract to lease B-767's (KC-767A) was approved. She was eventually convicted of conflict of interest and sentenced to 9 months in prison. Not alone in the scandal, CEO of Boeing Phil Condit resigned and soon thereafter the lease contract between the Air Force and Boeing was cancelled by Congress.

The air tanker replacement program is the most tainted and scandal ridden procurement program in U.S. Air Force history. The procurement process to replace aging B-707 based KC-135's has been ongoing since 2001. Ironically B-767 commercial version is no longer in production.

The European Commission may investigate. In a statement released yesterday it said;

"It is highly regrettable that a major potential supplier would feel unable to bid for a contract of this type. Open procurement markets guarantee better competition and better value for money for the taxpayer", stated Commissioner Karel De Gucht.

The contract likely will wind up on autopilot and land at Boeing.

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