Air Force refueling tankers: Pay no attention to taxpayers
Don't count on the U.S. Air Force buying the aerial refueling tankers it, you know, actually wants. That's the message I gleaned from a news story published in The Times' Business section today, which details the particularly lucrative fight in the already pork-laden world of defense procurement to win the $35 billion contract to build the next generation of Air Force tankers. An extended excerpt:
But it was only a matter of days before the process was under attack.
Interest groups, politicians and the contenders -- Boeing Co. and Northrop Grumman Corp. -- began blasting the way the bids were evaluated, prompting some defense industry analysts to question whether the Air Force would ever get its much-needed tankers.
"I don't see how either of these two companies walk away being the sole winner of the contract," said Loren Thompson, defense policy analyst for the Lexington Institute in Virginia. "The Pentagon says the competition will be objective, but that's going to be hard. It's a very complicated framework."
Handing out one of the largest military contracts in U.S. history hasn't been easy for the Pentagon. Twice it has held a competition to replace its fleet of 415 Eisenhower administration-era Air Force refueling tankers, and both times it has failed amid accusations of underhanded politics and discriminatory rule-making. The process first started in 2001. ...
Then a collection of eight leaders from conservative groups went on the offensive for Chicago-based Boeing.
They collaborated on a letter that was sent to each member of Congress, asking them to factor in a recent World Trade Organization ruling that found that European Union governments illegally subsidized Airbus, whose parent company, European Aeronautic Defense & Space Co., is teamed with Northrop in the tanker contest. ...
Boeing won the first contract in 2004, but it fell apart because of an ethics scandal that resulted in prison terms for a former senior Boeing executive and a former high-ranking Air Force official.
The competition was relaunched and in 2008 Northrop took home the $35-billion contract to build 179 tankers based on a modified Airbus A330 passenger jet.
It was a huge upset since Boeing had built all of the tankers in the current fleet.
This tidbit is particularly infuriating:
I've singled out the paragraph above because last year, not long before the Department of Defense announced it had chosen Boeing's competitor to build the tankers, an executive from the U.S.-based aerospace giant said the Air Force was unlikely to opt for the "split buy." The concern was that splitting the order -- say, half Boeing planes, half EADS-Northrop planes -- would be more expensive for taxpayers and logistically more complicated for the Air Force, among other things. Now that the Air Force has displayed some immunity from protectionist instincts, Congress may do precisely what Boeing once said was bad for the Air Force and taxpayers. Go figure.
Putting aside Murtha's game-rigging proposal, notice what seems to be of little concern to anyone: which plane is actually better for taxpayers and the Air Force. Boeing's allies want the Department of Defense to consider the World Trade Organization's ruling that EADS -- Northrop's partner and parent company of Airbus, which would supply the A330-based airframe -- received illegal subsidies from European governments to build new airliner families (as if the Pentagon's opinion matters at all, given that if it favors the EADS-Northrop bid, Congress will no doubt "consider" the WTO case for it). The Air Force has rightly decided to disregard the WTO dispute, which Boeing should chalk up as a wash since the EU is pressing a trade case of its own against Boeing.
My sense is that members of Congress are uneasy about Boeing having to compete with a foreign defense contractor (incidentally, Boeing bought out McDonnell-Douglas, its lone stateside competition for building large airliners, in 1997). Memo to Congress: Aircraft building -- both for airline and military use -- has long been a global business. U.S. defense contractors have sold fighter jets to Egypt, Turkey, Israel and dozens of other countries. As far as large military jets are concerned, robust foreign competition is an absolute must. Only two major aircraft builders in the world, Airbus and Boeing, make planes that can be converted to large aerial refueling tankers.
I understand this is new territory for the Department of Defense and lawmakers, considering the U.S. once boasted several aerospace companies that could have competed for such a contract. But the U.S. no longer enjoys this near-monopoly; in fact, Brazil is emerging as a major global player in aircraft manufacturing, and China doesn't want to stay far behind for much longer. Going forward, it's doubtful Boeing will have the luxury of facing just a single foreign competitor in Airbus. For the sake of taxpayers and its own armed forces, members of Congress would do well to adjust to this new reality now and avoid skewing the Air Force tanker competition.
-- Paul Thornton
When is someone going to report that this is about catching a whale for the Chicago team. Bill Daley is on the Boeing board. A ruthless hit job has been conducted against Jack Murtha by University of Chicago Law School grad Melanie Sloan, a Rahm operative and ED of CREW. The Chicago boys want this deal and they are willing to do a character assassination on a 35 year house member and a patriot, John Murtha.
Posted by: Mark P | October 05, 2009 at 08:03 PM
Anybody on the credit watch team.
Posted by: uri sadler | October 06, 2009 at 03:17 AM
Basic training would prove to be more cost effective.
Posted by: Hydler Smith | October 06, 2009 at 03:20 AM
Buying 2 different planes would require stocking 2 different parts for the tankers. Again Rep Murtha is proving to be a fool and playing politics. It's time for Term Limits for Congress.
Posted by: chatmandu | October 06, 2009 at 10:11 AM
I used to do Federal Procurements. One memorable one was when the Mt. St. Helens visitor center went to the "wrong" bidder. We were told we would have to award one of the design contracts to a Washington State Bidder.
We also had to split procurements re Insecticide. We wanted a sole source but once a contractor stepped in we ended up splitting that one.
Also recall Norm Dicks getting involved with a property appraisal. He told us we would not get Jobs Bill monies if the evaluation didn't reach a certain level.
Its all corrupt once you get congress involved.
Posted by: Jerry Flynn | October 06, 2009 at 08:11 PM
Has anyone even read the House language on this subject? Makes sense to me...
AERIAL REFUELING TANKER REPLACEMENT PROGRAM
The Committee firmly believes that the Department must act
promptly to recapitalize the aging Air Force aerial refueling fleet.
The Department’s current program has been beset with countless
setbacks, from allegations of corruption to a protest of the previous
source selection decision. In the meantime, our nation’s aerial refueling
tankers continue to age, with the average age of a KC–135
being almost 50 years old today. The aerial refueling replacement
program (KC–X, KC–Y and KC–Z) plans to procure between 12 and
15 aircraft per year to eventually replace the current fleet of 513
aircraft. This method of recapitalization will take decades to complete,
with the current fleet of Eisenhower-era tankers being 80
years old by the time the last legacy aircraft is retired. During this
period, the Air Force will invest billions of taxpayer dollars in
maintenance of an ever aging and increasingly unreliable fleet.
Based on studies conducted by the Department of Defense, total
fleet costs are anticipated to increase from $2.1 billion per year to
$3 billion per year by 2040 due to increasing depot maintenance
and forecasted modernization programs in avionics and aircraft
systems. Additionally, the Department anticipates depot maintenance
costs increasing from $320,000,000 to $1,100,000,000 in 2040
due to aging aircraft related maintenance. Never in the history of
our Nation has the military purposely planned to maintain aircraft
past 50 years, much less 80 years of operation so even these estimates
may understate the actual cost. In addition to the cost of
maintaining the aging tanker fleet, the cost per flying hour of a
new tanker is almost half the cost of the existing fleet. The lower
cost per flying hour alone will save the taxpayer $1,795,500,000 per
year for a fleet of 513 aircraft (current total aircraft inventory) or
$3,500,000 per plane per year replaced.
To address these concerns, the Committee recommendation includes
a general provision providing $439,615,000 and the option
for choosing one vendor or dual sourcing for the aerial refueling
Tanker replacement program. Along with this authority, the Committee
believes that it is in the best interest of the taxpayer to pursue
recapitalization at a rate of 36 aircraft per year vice 12 or 15
aircraft. This quantity will allow for recapitalization in one-third
the time and thus allow for a rapid retirement of the current KC–
135 aircraft. This plan will result in avoiding a large sustainment
and modernization cost of the legacy KC–135 fleet by allowing
them to retire earlier than is currently programmed. Additionally,
having more than one aircraft provider will allow for competition
to help control the procurement cost, promote cost reduction measures,
and allow for a faster aircraft replacement rate.
Further, the Committee directs the Secretary of Defense to, prior
to the release of a draft or final request for proposal soliciting bids
for an aerial tanker replacement aircraft, submit a report to the
congressional defense committees that includes a description of key
mission requirement and performance parameters that will be used
as the basis for determining the key selection criteria in the source
selection process; a full and complete characterization and definition
of ‘‘best value’’; a description of the process that the Department
of Defense intends to use to ensure open, balanced and transparent communications with potential offerors; and a full description
of the corrections made to the source selection process that addresses
the issues raised by the Government Accountability Office
in its ‘‘Statement Regarding the Bid Protest Decision Resolving the
Aerial Refueling Tanker Protest by the Boeing Company, B311344
et. al, June 18, 2008’’.
Posted by: Mike S. | October 07, 2009 at 06:56 AM
Memo to Paul Thorton,
All of Boeing's competitors from Airbus, to the Chinese to the Russians and the Brazilians subsidize their aircraft industries with direct government loans and aid. In addition all of these countries discriminate against the purchase of US aircraft. What is the last time you saw the EADS nations of France, Germany and Spain purchase a US product when a home grown alternative that was nearly as good was available. The short answer is you haven't! None of these countries would even consider purchasing a US product when their tax dollars could go to supporting a suitable domestic alternative. The only time France, Germany or Spain purchase US products is when their domestic industry can't produce a competive product in the required timeframe. The last time France did this was to buy 3 E-2D Hawkeyes for their single carrier since it would have been too expensive to develop a domestic alternative when only 3 frames were needed. If the US doesn't wise up to how the global aircraft market handles we will loose our aircraft industy in the same way we have seen our auto industry dissappear. It is time the US woke up and start playing by the same rules as everyone else in the World when comes to trade, and that is recognize that such things as free trade and fair trade are myths. Yes you have a global marketplace, but you support the home team, because if you don't the home team will be eaten alive. It nearly happened to Europe's aviation industry until they formed Airbus in 1970 and started showering Airbus with illegal launch aid and other subsidies. And it will happen to our aircraft industry unless we wake up and start taking similar measures. Giving EADS a contract in this case is like slitting our own throats, but after sacrifizing most of our industry and millions of jobs to the false and mythological god of free trade what's one more industry after all?
Posted by: Jeff | October 07, 2009 at 08:17 PM