TANKER USAF - Appels d'offres

New delay likely in tanker competition

We have been told by two sources, including one that is very close to the competition, that the Air Force is likely to announce a new delay soon in evaluation and award of a contract in the long-running KC-X tanker competition.
One source says the delay will be until the first quarter; the other didn’t have a new timeline but said the USAF was preparing to notify the competitors any time now.
We have written on several occasions, [Vous devez être inscrit et connecté pour voir ce lien], that another delay was likely. The USAF has already delayed the current competition, the third, from August and November to December and hinted a week ago another one was coming.
Boeing and EADS are the remaining bidders for the contract after the Government Accountability Office threw out a protest from US Aerospace, which was late submitting its bid.
The Air Force is evaluating the Boeing and EADS bids, and we’ve been told that the evaluation is proceeding more slowly than anticipated. The USAF issues what are called Evaluation Notices, or ENs, to the companies when it seeks additional information. This process is going slowly, we’re told.
There is also a point in which Boeing and EADS will be asked to submit Final Proposal Revisions, or FPRs (pronounced “fippers”), that amount to the best-and-final submissions. As of early this week, the FPR date had not been provided to the two companies.
The slip to after the first of the year has unintended political implications. Pundits are certain the Republicans will win control of the House of Representatives, which means US Rep. Norm Dicks (D-Boeing/WA), Boeing’s biggest booster in the House, will lose his chairmanship of the House Defense Appropriations Subcommittee that will be the first stop for funding the tanker award. Dicks has long vowed to block any funding should EADS win the contract. Conventional wisdom, though generally overstated, is that EADS is closer to Republicans and Boeing is closer to Democrats in the tanker fight. In fact, there are members of both parties who are supporters of both companies.
In Washington State’s tight Senate race, incumbent Patty Murray (D-Boeing) is in a tight race over Republican Dino Rossi. Murray generally leads Rossi in polling by 2-4 points, within the margin of error, with a few polls giving her a six point lead, beyond the margin of error. Rossi, if elected, will still support Boeing, but Murray is now the #4 ranking Democrat in the Senate, which is expected to remain in Democratic hands. She will be in the better position and have the clout to work harder to block funding for EADS than would the freshman Rossi, particularly as a member of the minority.
There is no clear-cut beneficiary to a new delay. But there remains a clear-cut loser, and that’s the Air Force which is faced with continued reliance on 50-year old Boeing KC-135s.

Does GOP House takeover mean Boeing must win tanker outright?

The Republican takeover of the U.S. House of Representatives probably eliminates one fallback play for Boeing and its allies if the U.S. Air Force awards the KC-X aerial refueling [Vous devez être inscrit et connecté pour voir ce lien] contract to EADS North America.
Boeing's congressional supporters have repeatedly warned (see [Vous devez être inscrit et connecté pour voir ce lien] and [Vous devez être inscrit et connecté pour voir ce lien]) that Congress wouldn't fund the program if the Air Force doesn't consider illegal [Vous devez être inscrit et connecté pour voir ce lien] in the contest (presumably helping Boeing's bid). The Pentagon has repeatedly refused to do so.
That threat's going to be a lot harder to carry out with Democrats' loss of the House and, perhaps more importantly, with U.S. Rep. Norm Dicks, D-Wash., no longer chairing the House Defense Appropriations Subcommittee.
If Sen. Patty Murray, D-Wash., loses her lead over Republican rival Dino Rossi, that would have a similar impact. Murray would remain in the majority, has seniority and sits on the Senate Defense Appropriations Subcommittee.
The election has taken some of the bipartisan sheen off of Boeing's team, with Kansas Republican Rep. Todd Tiahrt losing his primary bid for a Senate seat and Kansas Sen. Sam Brownback elected governor of his state. That said, Kansas has a lot to gain from a Boeing tanker win, so I expect its senators and representatives will continue to back the company.
I suspect the election won't have much impact on what happens in the event of a Boeing contract win, because there are no signs that EADS supporters stand to gain relevant posts.
See more insights on the subject from [Vous devez être inscrit et connecté pour voir ce lien] and [Vous devez être inscrit et connecté pour voir ce lien].

Elections results and the KC-X

The election results could have a major affect on the KC-X tanker competition.
The headlines are:

• The Republican takeover of the House means Norm Dicks (D-Boeing/WA) loses is chairmanship of the House Appropriations subcommittee on defense, a position from which he could conceivably block any funding of a USAF award of the contract to EADS;
  
• Todd Tiahrt (R-Boeing/KS) lost his primary bid to move over to the US Senate, so he’s out of Congress altogether. This is a key Boeing ally.
  
• Patty Murray (D-Boeing/WA) widened her razor-thin lead in Washington State over Dino Rossi (R). Although Rossi fumbled a key question about the tanker competition during the race, there really was never any doubt that Rossi would support Boeing’s bid. But if Murray wins her fourth term, and the Democrats retain control of the Senate, both of which now appear likely, Boeing retains a powerful voice in the Senate to block any EADS contract;
  
• Norm Dicks’ successor is a bit up-in-the-air; the two ranking Republicans have a tenure that under House GOP caucus rules would require a waiver; the third ranking Republican is from Kentucky; none of the three have any particular partisan leanings in the tanker competition;
  
• Sam Brownback (R-Boeing/KS), another influential and vocal Boeing backer, was elected governor of Kansas and will be leaving the Senate; and
  
• With Republicans likely to end up with 49 seats in the Senate (depending on whether Independent Lisa Murkowski gets elected in Alaska and caucuses with Republicans, given the GOP abandoned her for the Tea Party candidate), pro-EADS Sens. Shelby and Sessions will have more power to block a contract to Boeing than they might have had when the Democrats effectively had 60 seats.
  

The USAF has said it expects to award a contract this fall (technically, through December 20) but it still hasn’t notified Boeing and EADS of the date to submit the best and final offers; Evaluation Notices (ie, questions-and-answers) are still being issued and worked through. We understand a decision could well slip to the first quarter.

Another KC-X deadline passes

Today was supposed to be the day the KC-X contract was to get its go-ahead, but as has so often been the case, another deadline has come and gone.
The USAF suggests it will be done this fall, which is through December 20. We’ve previously written we believe the award will slip to the first quarter.
Meantime, here is an interesting story on the KC-X saga. Hat-tip to Flightglobal’s Steve Trimble for spotting this one.

Own the Sky

The American military is the strongest and most agile on the planet for one reason - the refueling tanker. But replacing the 50-year-old airplane has turned into a decade-long saga, one that has cost a CEO his job, sent two officials to jail, and wasted millions of dollars.




Modern wars aren’t fought just with guns, tanks, missiles, and bombs. To fight wars today, the US military depends on a 27-foot telescopic rod that dispenses a torrent of jet fuel at the rate of 1,000 gallons a minute. Without this metal boom and the airplane that tows it across the sky, the American military machine doesn’t move beyond our own shores.
When the first American forces deployed to Afghanistan in 2001, they were carried in the bellies of cavernous transport planes that would never have completed the journey from base to battlefield without refueling along the way. When stealth aircraft launched a preemptive strike on the purported hideout of Iraqi president Saddam Hussein in 2003, a refueling tanker kept them from plummeting into the ocean. These essential rendezvous usually happen 25,000 feet above the earth.
The receiving plane approaches the tanker from behind. When the two planes are nearly touching, a boom operator lying on his belly in the tanker’s tail, peering out a glass window like a 1940s bombardier, guides his instrument into a fuel port near the nose of the thirsty plane and starts pumping. A tanker can top off the 35,000-gallon tanks of the gargantuan C-17 cargo plane in half an hour and smaller planes in less than five minutes. At that rate, it could refuel the average automobile in less than two seconds.
Take away the tankers and you neuter the US armed forces. As the attendants of these midair pit stops are fond of reminding their customers, “You can’t kick ass without tanker gas.”
Yet just how long the tankers can keep kicking ass is a question. The workhorses of the refueling fleet are 50-year-old airplanes that went into service when Dwight Eisenhower occupied the White House. To keep these 400 or so old planes flying—and from falling apart—they’ve been fitted with new engines, new electronic guidance systems, even new wings. But the planes otherwise are ancient.
Today’s tanker pilots are flying airplanes first flown by their grandfathers. These planes won’t all be replaced until the middle of this century, at which point they’ll be 80 years old. The pilots who will fly the planes then haven’t been born yet.
For nearly a decade, the military’s leadership and its overseers in Congress have tried and failed to replace the tankers with newer models. With any luck, they’ll achieve the mission sometime in the coming weeks. By late December, the Air Force has promised to award a contract for new tankers, potentially worth up to $40 billion, to one of two companies—Boeing, the largest aircraft manufacturer in the United States, or the European Aeronautic Defense and Space Company (EADS), which owns Airbus, the largest plane builder in Europe.
If the Air Force meets its deadline, the award will bring to a close the most controversial, politically contentious, and personally ruinous military contract in modern history. The damage this deal has wrought, measured in wasted taxpayer dollars and wasted lives, includes two people who have gone to prison; one CEO who has resigned in disgrace; two members of Congress who have died unable to close the deal and another who has been indelibly tainted by scandal; the destroyed credibility of some senior military leaders; and, in the end, a US military that is still being moved around the world by an airplane that will, sooner rather than later, be unfit to fly.
This is not the story of how the US government bought an airplane but of how it has failed to buy an airplane. And of how a generation of leaders has abrogated the wise stewardship of the public’s wealth in favor of narrower institutional concerns and petty grievances. It’s a story of how business gets done in Washington.



ACT I: THE PLANES ARE FALLING
On January 13, 1999, a KC-135 Stratotanker with the Washington Air National Guard was on its way back to Geilenkirchen Air Base in Germany after a refueling mission. While the tanker was approaching the runway, its horizontal stabilizer, a wing-like structure attached to the tail section, spontaneously locked into an extreme “nose-up” position. The tanker abruptly pitched and became almost perpendicular to the ground. Then it stalled and crashed short of the runway. All four crew members died.

The Air Force grounded 350 tankers and inspected their stabilizers. Investigators never determined the cause of the malfunction, but for the Air Force brass the crash was yet another reason to replace the aging KC-135 fleet. The stabilizer was so antiquated that it was no longer commercially manufactured. Air Force crews had to reverse-engineer the design and then build new ones out of spare parts.

And there were other spectacular accidents. Four months after the crash, a tanker blew apart during a routine cabin-pressure test. Photos of the demolished plane ran in the military trade press.

By 1999, the typical tune-up cost $3.5 million to $4 million a plane, a fourfold increase from a decade earlier. On average, a tanker spent 400 days at a stretch in the maintenance depot for repairs, almost three times as long as in the 1980s. Crews were also exerting double the number of normal work hours to keep the planes airworthy. Tinker Air Force Base in Oklahoma, the primary depot for the KC-135s, had to turn tankers away because there was no place to put them. “They are stacked up like cordwood,” one official told the Air Force Times.

The tankers were also coming apart. Senior Air Force leaders visiting the maintenance crews watched as workers peeled the skin layers apart and powder fell out from the middle. Corrosion and fatigue were overtaking the planes.

“We were in a race between the cost of operating the aircraft and trying to find money to replace this stuff,” says Whitten Peters, then the Secretary of the Air Force. “If this were your car, you’d trade it in.”

But the Air Force faced a dilemma. As badly as the service wanted new tankers, the new F-22 stealth fighter topped its wish list. “The [Air Force] chief of staff came in to see the ranking member eight times in two years,” says one former staffer on the House Armed Services Committee. “Every time, the message was ‘F-22s.’ It was the Air Force’s end-all, be-all.”

Every new and expensive program—such as replacing the tankers—threatened to take money away from the fighters. But salvation was on the way, in the guise of a generous uncle.

Uncle Ted’s Idea
Ted Stevens, the senior senator from Alaska, had long been a booster of the Boeing Company. Not for reasons of constituency—the country’s largest aircraft manufacturer built most of its planes in Washington state, where it had an unflagging supporter in Representative Norm Dicks, whose beneficence toward his state’s largest private employer had earned him the title “the congressman from Boeing.”

But for Stevens, whose fellow Alaskans dubbed him Uncle Ted in tribute to his largesse with the pork barrel, the connection to Boeing—and aviation—was more personal.

Stevens joined the Army Air Corps a year out of high school, in 1943, and flew cargo runs behind Japanese lines in China and Burma. Decades later, when he became chairman of the Senate’s powerful Appropriations Committee, he grew incensed at the deterioration of the Air Force’s tanker fleet. According to one former service official, Stevens thought it a disgrace and a danger to those in uniform to ask them to fly planes coming apart at the seams. In the late 1990s, years before the Air Force brass made plans to replace the fleet, Stevens suggested a fast way to do it. Instead of buying the planes, the Air Force should lease them.

A formal competition could take two years. The Air Force would probably have to wait another three before the first planes arrived. Stevens thought it smarter to skip the first part of the process and lease existing commercial aircraft modified for military duty. For the cash-strapped Air Force, the math was obvious. Leasing tankers would cost more in the long run, but the up-front costs would be smaller and the payments would be spread out over time.

If anyone could grease the skids for a multibillion-dollar leasing deal—early estimates put the price around $20 billion—it was the man who held the government’s purse strings. Stevens’s staff on the Appropriations Committee wrote a draft lease. How it made its way into Boeing’s hands remains unclear. But in February 2001, Boeing approached the Air Force with an unsolicited offer to lease three dozen 767s—midsize wide-body jets put into service in 1982—for $124 million each.

That same month, Air Force officials said buying the planes would cost far less—about $52 million per tanker. That didn’t account for maintenance costs, but the lease, which would be run through a third party, clearly was the more expensive option.

In peacetime, replacing the tankers wasn’t a top priority. But Air Force officials warned that if the country went to war and had to deploy forces to a faraway battlefield, the strain would push the tankers to the breaking point. On the morning of September 11, 2001, hijackers flew a pair of Boeing 767s into the World Trade Center towers. Two more Boeing jets crashed at the Pentagon and in Pennsylvania.

America was at war, and the tankers moved to the front lines.



A Run over the Hill
Air Force officials had never seriously considered any company other than Boeing to replace the tanker fleet. The Defense Department usually conducts long and high-stakes competitions for major weapons systems, pitting companies against one another to wring out the lowest price and the greatest innovation. But the Air Force wanted the planes quickly, and Boeing, which had built the KC-135s, needed a lifeline.

The 9/11 attacks crushed the market for commercial planes. The company laid off workers in its manufacturing plants. By the time airlines and foreign governments started buying planes again, they’d want the next generation of aircraft, not the older 767. Boeing needed a customer now. The Air Force was the only one with an open wallet.

Proponents of the lease deal in the Air Force, along with Boeing’s backers in Congress, made no pretense about using taxpayer money for a corporate bailout. In the throes of a national crisis and faced with the threat of losing a major military supplier, it seemed like an uncontroversial and even advisable move. The Air Force would get its planes. Members of Congress would score a win for their constituencies and American industry. And Boeing would be saved. The three points in the “iron triangle” of the defense business were all satisfied.

But the deal faced several opponents. Chief among them was Arizona senator John McCain, a former Navy fighter pilot who was constantly on the hunt for what he saw as pork-barrel giveaways. Because he was a member of the Senate Armed Services Committee, any leasing deal would come up for his stamp of approval.

To win support, the Air Force mounted a campaign that avoided a direct fight with McCain. Heading the charge was the service’s most senior career acquisition official, Darleen Druyun. In the small world of federal procurement, Druyun was notorious. Known inside the Pentagon as the “dragon lady,” she was a shrewd and stone-tough steward of the Air Force’s multibillion-dollar budget. She was also a political climber who “would rather burn you than be your friend,” says one former Hill staffer.

Five weeks after the 9/11 attacks, Druyun ordered a general and a colonel on her staff to keep negotiations with Boeing closely held. They were to discuss the deal only with company officials and Stevens’s chief of staff on the Appropriations Committee.

In October, Patty Murray, a Democratic senator from Washington state and a stalwart Boeing supporter, joined the company’s CEO, Phil Condit, in pitching the lease to members of the Senate Appropriations Committee and the majority leader, Tom Daschle.

Meanwhile, General John Jumper, the new Air Force chief of staff, tried to win over Kent Conrad, a North Dakotan who chaired the Senate Budget Committee and worried that federal regulations might prohibit the Air Force’s plans. Officials wanted to pay for the tankers not out of the service’s budget for planes but with funds marked for operations and maintenance. Those were separate pots, and in DC the color of money matters as much as the money itself. The Air Force was using maintenance funds for the lease because it didn’t have enough cash to buy the planes outright. That made some lawmakers queasy.

Jumper met with Conrad three times in October and stressed the desperate condition of the tanker fleet. The price was high, but the lease offered a solution to a dilemma. Eventually, Conrad agreed. But other members were still balking, unwilling to relinquish their authority to allocate the defense budget on an annual basis. That was their strongest advantage over the military.

The Virgin Birth
In November, Stevens held a fundraiser in Seattle, the city where Boeing was founded in 1916 and kept its headquarters for 85 years. Thirty-one Boeing executives gave $21,900 in campaign contributions. This was new money: All but one of them hadn’t given a penny to Stevens in the previous ten years.

The next month, Stevens slid a line into the mammoth Defense spending bill during a closed session after the bill had passed both chambers. The legislation authorized the Air Force to lease the tankers and specified that the service should procure the Boeing 767.

Stevens had pulled off a maneuver known as the “virgin birth.” In Washington, every dollar the government spends comes from the union of two parents: The authorizing committees in Congress decide what to buy, and the appropriators decide how much to spend on it. Stevens circumvented that process, planting a seed in the spending bill as if by divine intervention.

By dictating to the Air Force what planes it should buy, Stevens was acting like an authorizer. He’d crossed into the territory of the Armed Services Committee—worse, he’d crossed John McCain.

The anti-pork crusader suited up for battle. Decrying Stevens’s tactics, he publicly cited a letter from the Office of Management and Budget, whose director was skeptical of the lease, putting the total cost at $26 billion over ten years. That was $6 billion more than the Air Force, Boeing, and congressional proponents had claimed. The Air Force also wanted more tankers now—100 acquired through a combination lease/purchase deal. McCain called the plan an act of “gross negligence” and a giveaway to Boeing.

Just two days later, Stevens—who was known to wear an Incredible Hulk tie when he was battling in the Senate—took to the chamber floor in shocked indignation. “This is not a last-minute bailout hidden from public view,” he said. “It takes advantage of opportunities to be had.”

Stevens, the brash World War II pilot, had outmaneuvered McCain, the cocky Navy fighter pilot of the Vietnam era. But for McCain, it was a minor setback. For a presidential hopeful and a self-styled antiestablishment maverick, the tanker deal was a gift. The real fight had just begun—and McCain, who would make defeating the lease a personal cause, was about to face his fiercest adversary.

“I Will Not Yield to You”
Well before he went to work for the influential military contractor Northrop Grumman, James Roche had considered McCain a friend. A fellow Navy man, Roche was a onetime commander of a guided-missile destroyer. But in the tanker war, Roche and McCain were bitter enemies.
By the time of the lease deal, Roche had returned to government as Secretary of the Air Force. He was passionately committed to replacing the tanker fleet, believing, like Stevens, that asking “our kids” to fly in dangerous airplanes was unconscionable. In his role as Secretary, he cast himself as the protective father. McCain was trying to harm his charges.
The battles between McCain and Roche were seen publicly as a struggle between Congress and the executive branch. But what has never been reported is the real root of their conflict, at least from Roche’s point of view.
In May 1987, Roche’s son, Sean, died at age 22. Roche was still recovering from that shock three weeks later when he visited the Senate Armed Services Committee’s office. As Roche tells the story, McCain approached him and asked, “Jimmy, how’s it going?”
“Not so good, John,” Roche said. “We just lost our only son.” Roche recalls that without looking at him, McCain said, “Life’s unfair,” and then walked away.
“While used to the rough and tumble of Washington, I was shattered by this unmanly reaction by my supposed friend,” Roche says. During an interview at his home in Annapolis, tears fall from Roche’s eyes and his voice chokes as he recalls the exchange. More than a decade later, when it came time to defend the tanker deal from McCain’s assault, Roche says he vowed, “I will not yield to you.”
As Roche explains, “He tried to intimidate me from doing what I believed was right for our Air Force ‘kids.’ I was willing to go through hell rather than trade off their safety for John’s ambition.”
McCain’s position was, and still is, that the best way to get new tankers is through a public competition. Roche didn’t object to that in principle, but in his view there was no viable alternative to the Boeing aircraft because it was the only company that had an operational refueling boom.
But some lawmakers worried that without competition, the government would end up overpaying for the tankers. In February 2002, under political pressure, the Air Force asked EADS—the Airbus parent and one of the world’s top aircraft makers—what kind of tanker it might offer to lease. But because EADS hadn’t developed a refueling boom of its own, the Air Force didn’t see it as a viable competitor. There was also no great appetite in Congress for handing billions of US tax dollars to a European company, particularly because the lease was intended to help Boeing recover from its lost business after the 9/11 attacks.
Meanwhile, Darleen Druyun, the “dragon lady” of the Air Force, began a quiet campaign to secure funding for the lease. Running what one Boeing employee privately called a “covert operation,” Druyun moved to put another rider onto a pending supplemental-spending bill to fund the global war on terrorism. The rider would make clear that the Air Force could pay for the lease using operations and maintenance funds. Air Force officials had managed to link the tanker deal to security at home and abroad. Behind the scenes, however, their strategy was less skillful, and it began to trap them.
Killing the Deal
In September 2002, Ralph Crosby, a veteran military contracting executive, became the CEO of EADS’s North American division. On hearing the news, Roche sent a menacing-sounding e-mail to his press officer: “Well, well. We will have fun with Airbus.”
Roche and Crosby had been rivals since their days at Northrop Grumman, where Crosby had run its aerospace division. His new employer, EADS, saw Boeing as a monopolistic force in the US aircraft market. The European company had dreams of North American expansion.
Eight months after Crosby came aboard, Michael Wynne, a senior Pentagon official, told Roche that he planned to meet Crosby for lunch and ask what an EADS tanker would cost. Roche was flabbergasted.
“Mike, you must be out of your mind!” Roche wrote in an e-mail. “Crosby has lots of baggage, as does Airbus. We won’t be happy about your doing this.”
Wynne was concerned about rules against so-called “sole-source contracting.” Roche was more worried about the politics of meeting with a European company. The United States had just invaded Iraq, and the French government’s lack of support had propelled members of Congress into a jingoistic furor. In Capitol cafeterias, French fries were replaced on the menu with “freedom fries.” EADS’s biggest aircraft-assembly plant, where it would likely build a tanker, was in Toulouse.
“Hello?” Roche wrote, implying a deafness on Wynne’s part. “Within minutes of the invite, Crosby most likely used your call to butter his personal croissant in Paris [with officials in the President’s office]. Be careful!”
What emerges from Roche’s colorful e-mails is a different portrait than that of the courageous public servant out to “protect the kids.” He looks more like a grudge-holding executive with an ax to grind. In one e-mail exchange with Druyun, who had just “read with disgust” an article on EADS and Crosby, Roche wrote, “I had hoped you would have stayed and tortured him slowly over the next few years until EADS got rid of him!”
McCain eventually got hold of these and many other e-mails, including those from Boeing employees, zeroing in on Roche as the official most responsible for the ill-advised tanker deal. “Secretary Roche’s e-mails,” McCain said in a Senate speech, “suggest that he is indeed a man who allows his personal animus to stifle competition.”
Roche says he worried that Crosby would try to convince Wynne that EADS was ready to compete when it really wasn’t, because it didn’t have its own boom. Nearly a year and a half had passed since Stevens’s “virgin birth” maneuver. Roche thought time was running out to complete the lease deal.
But while Roche was pushing against the system, Druyun was breaking the law. On October 17, 2002, while negotiating the price of the tanker lease, she met with Boeing’s chief financial officer and discussed taking a senior executive job at the company—a textbook violation of conflict-of-interest laws.
After the meeting, the Boeing executive, Michael Sears, wrote an e-mail to the company’s office of the chairman: “Had a ‘nonmeeting’ yesterday. Good reception to job, location, salary.” The job was a position in Boeing’s missile-systems unit; the salary was $250,000. Druyun went to Boeing in January 2003. The Project on Government Oversight, a watchdog group, called it “one of the most egregious examples in recent memory of the revolving door between the federal government and defense contractors.”
The “nonmeeting” wouldn’t be uncovered for several months, but as it turned out, that one 30-minute conversation killed the lease deal.

“We Can’t Fight This”
Air Force officials continued to plead their case. In 2003, a group of officers loaded pieces of a corroded tanker wing into the trunk of a car and drove it up to Capitol Hill to show lawmakers. But the tide was turning against the lease. In September, the Government Accountability Office, Congress’s auditing arm, found that the total cost could be $6 billion more than the service had said and that the terms might violate federal law.

Still, the lease proponents in Congress moved to slide money for the tankers into a high-priority $87-billion spending bill to pay for the war in Iraq and Afghanistan.
And then the bottom fell out.
Not long after Druyun went to work at Boeing, the company began looking into the backgrounds of former government employees it had hired. In the course of the investigation, Boeing discovered e-mails detailing the meeting between Druyun and Sears. The company fired them on November 24. A week later, CEO Phil Condit resigned.
Five months later, Druyun pleaded guilty to conspiracy and admitted she had increased the price the Air Force would pay for the tankers as a “parting gift to Boeing.” She also admitted to favoring Boeing in other negotiations in consideration of future employment for her daughter and son-in-law. Druyun received a nine-month sentence in federal prison. Sears, who pleaded guilty later, got four months.
As soon as the news about Druyun and Sears broke, members of Congress who had previously supported the lease began to back away. Along the way, some lawmakers who were undecided “smelled smoke” on the deal, says one former Hill staffer, but now they saw the fire and ran for cover.
Roche picked up the phone and called Secretary of Defense Donald Rumsfeld. “It’s over,” Roche said. “We can’t fight this.”
In May 2004, Rumsfeld officially “deferred” a decision on the tanker deal, in part based on recommendations from the Defense Science Board, a group of outside advisers who concluded that the corrosion problem in the tankers could be managed and that it might not be as expensive as some had thought to maintain the existing fleet.
Four months later, the Air Force grounded 29 more tankers. The pylons that hold the engines to the wings had corroded and needed significant repairs. Tanker crews had a temporary fix to bond metal to the pylon, but it would last only five years and cost $400,000 per plane.
Congress officially killed the lease in October 2004. Roche resigned three months later. Shortly after he left, the Pentagon inspector general cited Roche for two violations of military ethics rules, stemming from another ill-advised e-mail. In that message, Roche implied that he would help get a job for the brother of a White House budget official and friend if she would intercede on behalf of the tanker deal. “Give tankers now,” Roche wrote after forwarding her brother’s résumé to a contact at Northrop Grumman, Roche’s old employer. “(Oops. Did I say that?)”
In the first round of the tanker war, McCain had vanquished Roche. But in the senior reaches of the Air Force, some wondered if McCain’s real motivation had been to embarrass the service itself. Officials took note of his Navy pedigree—McCain was a pilot, and his father and grandfather were famous admirals—and speculated that McCain was taking sides in a military rivalry. “McCain is not a big fan of the Air Force,” says Whitten Peters, the former Secretary. “In fact, he hates the Air Force.”



ACT II: TWO COMPANIES, ONE PLANE

The leasing option might have been dead, but the Air Force tankers were only getting older. John McCain’s crusade had ensured that this time, companies would compete on a new tanker contract. For Ron Sugar, the CEO of Northrop Grumman, the question was whether his company should be one of them.

Sugar spent part of his Labor Day weekend in September 2005 reviewing Air Force documents that sketched out what kind of tanker the service wanted. The Air Force hadn’t yet released a formal request for tanker proposals, but Sugar knew it was coming and could pose a strategic turning point for the company.

Sugar’s predecessor had grown Northrop by gobbling up smaller firms in specialty and niche markets. Sugar continued that plan, but Northrop remained a “tier-two” contractor in Washington, good at comparatively smaller jobs or as the supporting player to larger companies. If Northrop was going to rise to tier-one status, it needed a huge win. Surveying the landscape of potential contracts, he saw that the tanker deal stood almost alone.

But Northrop wasn’t known for building airplanes. Its talent was in putting complex electronics systems inside other companies’ airplanes. That’s what it had done with Boeing on the B-2 stealth bomber as well as a radar-and-surveillance aircraft based on the Boeing 707. If Northrop was going to win the tanker contract, it first needed to find an airplane.

An Airbus jet was the leading candidate for several reasons. EADS and Northrop had a connection in Ralph Crosby, James Roche’s old nemesis. Crosby had worked at Northrop for two decades and had run its Washington, DC, office. Sugar had also said publicly that EADS’s Airbus A330 could topple Boeing’s 767 in a head-to-head competition. EADS also had invested more than $100 million developing the all-important boom, the lack of which had kept it out of the lease race.

EADS wanted to dethrone Boeing in the US commercial-aircraft market. The tanker deal would be its opening salvo. But politically, EADS still wasn’t equipped to go it alone on a high-profile American contract—despite its North American division, it was still viewed as a European aircraft maker.

Northrop needed a plane. EADS needed an American partner. Sugar signed off on the union and headed out to survey damage on the Gulf Coast, where days earlier Hurricane Katrina had torn through Northrop’s shipyards.

An American partner wasn’t enough, though, for EADS to beat Boeing on its home turf. The company would have to build its plane—or at least a major portion of it—on US soil.

In 2005, EADS launched a nationwide site search for a new manufacturing plant. The company fielded queries from 34 locales, including Boeing territory in Washington state and Kansas. The finalists all hailed from the same region—Florida, Mississippi, South Carolina, and Alabama. According to analysts who watched the process, that was no accident. EADS took advantage of Boeing’s high labor costs and its contentious relationship with unions. Says one analyst: “They wanted to beat Boeing by becoming a low-cost, non-union builder of planes. That naturally leads you to the Deep South.”

Ultimately, EADS decided to build a $600-million manufacturing plant in Mobile, where it pledged to build more than half of the tanker and employ more than a thousand workers.

Alabama government officials and its congressional delegation, now firmly rooted in the Republican Party, took an intense interest in the plant’s future. From then on, EADS would be publicly associated with the Republican Party. Boeing, with its major presence in Washington state, had a Democratic tinge. The two companies were poised not just for a corporate war but for a partisan one as well.

The Rules of the Game
Getting Northrop and EADS to pair up was half the battle. The Air Force also had to make the deal worth their while. Northrop insisted that the service use a “best value” procurement, which meant the bids wouldn’t be judged solely on lowest price. The Air Force’s evaluation team would apply a more subjective standard and evaluate each plane on its merits. As a matter of policy, the Defense Department was encouraged to use best-value judgments, largely as a way of ensuring the most bang for the government’s buck. But the approach also was essential for Northrop and EADS because they had the larger and presumably more expensive airplane. The team wanted extra consideration for the A330’s unique attributes, such as greater fuel and cargo capacity. If the Air Force judged the proposals on price alone, Boeing likely would win.

McCain, along with Alabama’s senior senator, Richard Shelby, also pushed for the best-value strategy. In late November 2006, McCain heard that the Air Force evaluation team had met and not chosen that path; the deal was shaping up, from McCain’s perspective, as another giveaway to Boeing. Executives at Northrop were prepared to walk away from the competition if it came down to a price shootout. McCain intervened, sending a letter to Secretary of Defense nominee Robert Gates that, in so many polite words, warned him not to head down this road.

The Pentagon listened. When the Air Force’s proposal request hit the streets a month later, officials publicly announced their commitment to a “capability-based, best-value approach” and a “full and open competition” that didn’t rely solely on price.




Crash and Burn
Boeing and Northrop submitted their bids in April 2007. More than 150 experts examined their proposals. The Air Force intended to buy 179 new planes as a first set to replace the KC-135 tankers.

The February 2008 news that EADS and Northrop Grumman had won stunned most of the aviation industry—the pair hadn’t been considered the clear favorites. According to an EADS spokesman, a roomful of executives fell silent for several seconds on hearing of their victory. Though hopeful, even they were surprised by the announcement. But as soon as employees started celebrating, they started worrying. The early reaction out of Boeing was telling: The company wasn’t going down without another, even bigger fight.

Under procurement rules, any company can protest the government’s contract decision. Much like a court appeal, it takes its case to the Government Accountability Office, where a team of lawyers judges whether the government followed its own rules. The more technical requirements a contract has—and the tanker bid had hundreds—the more opportunities there are to find fault with the government’s evaluation.

Boeing filed its protest 11 days after the award announcement, alleging numerous instances in which the Air Force had unfairly and inappropriately evaluated its bid. The company hadn’t acted lightly. According to a spokesman, it was the first time in eight years that Boeing had protested a contract loss. The Air Force thought Northrop beat Boeing on overall value, but both bidders had turned in plans that were essentially the same price and that met the service’s demands; whichever tanker the Air Force chose would do the job, just differently.

But the GAO condemned the Air Force evaluators, who auditors found had “conducted misleading and unequal discussions with Boeing.” Air Force officials told the company it had met one of the key tanker requirements, but later they changed their judgment and failed to alert Boeing. Yet officials continued having discussions with Northrop about the same requirement. The GAO also said the Air Force had broken the rules of the scoring process by giving Northrop extra credit for exceeding certain minimum requirements. That, of course, was the strategy on which Northrop had based its proposal: The Airbus plane was bigger, could carry more fuel, and could double as a cargo transporter.

After reading behind-the-scenes accounts of the judging, some analysts concluded that the Air Force had sided with Northrop and EADS to avoid the wrath of John McCain. The evaluators were seasoned procurement professionals. And yet the GAO found basic mistakes as well as what looked like outright favoritism. People in such powerful positions weren’t supposed to make rookie missteps. The Air Force’s decision looked politically motivated.

McCain had long been an advocate for full and even competition. But in March 2008, as he headed toward the Republican presidential nomination, news broke that top advisers to his campaign had lobbied for EADS, “taking sides,” as the Associated Press put it, “in a bidding fight that McCain has tried to referee for more than five years.”

Two advisers had stopped lobbying for the aircraft company when they joined McCain’s campaign a year earlier. But a third, former Texas congressman Tom Loeffler, lobbied for EADS while serving as McCain’s finance chairman, his top fundraiser. EADS hired Loeffler’s company to work on its behalf a few months after McCain sent the letter to Gates urging him to judge the acquisition on best value, the path that seemed to favor EADS. “They never lobbied [McCain] related to the issues,” a campaign spokeswoman said at the time, noting that the senator sent the letter before EADS hired Loeffler.

Such technical explanations put a dent in the armor of the taxpayer crusader. “The aesthetics are not good, especially since he is an advocate of reform and transparency,” Richard Aboulafia, an analyst with the Teal Group, who had closely followed the tanker saga, said at the time.

The GAO urged the Air Force to reevaluate the tanker proposals. But the 2008 presidential elections were only five months away. After an intense period of negotiations, in which it looked as though the Air Force might be able to re-award the contract, it was clear neither Boeing nor Northrop would be completely satisfied with the outcome. Defense Secretary Gates saw that the clock was winding down on the Bush administration. He decided the Air Force couldn’t settle the deal before the next President took office. “Over the past seven years, the process has become enormously complex and emotional,” Gates said in September. The Pentagon and the companies needed a “cooling-off period,” he said, so the next administration could figure out what to do.

Gates didn’t know that in a few months, Barack Obama—who hadn’t even been born when the first tankers were built—would ask him to stay at the Pentagon and that the tanker decision would remain Gates’s problem. The Secretary later joked that he had punted the ball only to find himself catching it.


ACT III: DAMAGES
After Obama took office, there was scarcely an official left in the Pentagon or the Air Force who’d worked on the tainted deal. At Boeing, EADS, and Northrop Grumman, the executives calling the shots had moved on. New administration officials who would be deciding on the tanker fleet weren’t there when the Air Force decided to buy new planes. To inherit this decision would mean taking charge of a time bomb.
In early 2009, the easiest thing to do was cut the fuse. Except the Air Force still needed tankers. It had been eight years since Ted Stevens’s back-door funding maneuver, and there wasn’t a single new plane in the fleet. Meanwhile, the United States was still fighting two wars on the other side of the planet.
The system was broken. The Air Force had seen what came with the best intentions of best-value purchasing. Amid charges of political favoritism and professional ineptitude, officials’ only choice was to make the next contract protest-proof. To do that, they stripped the evaluation of any subjective judgments. The fewer gray areas in the contract, the fewer pitfalls.
In late 2009, the Air Force released its draft request for proposals: As long as each bidder’s plane met every one of 372 technical requirements, the company with the lowest price won. It was precisely what EADS and Northrop had wanted to avoid—a price shootout.
In procurement parlance, the term was “lowest price, technically acceptable.” At Northrop Grumman, executives called it “a race to the bottom,” believing that cost was the predominant evaluation factor over capability. The Air Force’s approach didn’t appear to favor the larger Airbus plane. Northrop thought the Air Force would end up with a less capable and less dynamic tanker. The request for proposals “clearly favors Boeing” and its smaller plane, said Wes Bush, the new CEO at Northrop.
To sidestep another costly and protracted fight, some had hoped the Air Force might strike a politically expedient compromise: buy some tankers from EADS/Northrop and some from Boeing. The biggest backer of the seemingly Solomonic solution was John Murtha, the Pennsylvania Democrat who chaired the influential Defense Appropriations Subcommittee in the House, himself a master of the pork barrel.
In late January 2010, Murtha had routine surgery to remove his gallbladder. A week later, he was in intensive care suffering from complications. Murtha died on February 8, and with him went any hope of a compromise.
Then, in a twist of fate that sent chills through the boardrooms at EADS and Northrop, Murtha was replaced as committee chairman by a man presumed hostile to their team: Norm Dicks, the “congressman from Boeing.” A month later, Northrop officially bowed out of the competition.
Eleven years after the KC-135 crash in Germany underscored the importance of fixing this problem quickly, the Air Force was back where it had started—with no viable alternative to buying the planes from Boeing, and probably a more expensive plane at that. With Northrop out of the race, Boeing was theoretically free to raise its price. Whereas once a full competition had seemed like a nice idea to the Air Force, now it was essential.

Compete or Perish
In a joint news conference with President Obama on March 30 of this year, French president Nicolas Sarkozy waded into the deliberations. EADS was willing to bid, he said, only if the competition was “free, fair, and transparent.” The nearly decade-long tanker ordeal now threatened to spark an international row.


Obama replied that he wouldn’t “meddle” in the process. But the next day, Secretary Gates stepped in, granting EADS a 60-day extension to recover from losing Northrop, revise its proposal, and submit a new bid. The Pentagon was unwilling to move forward without competition. A Pentagon spokesman insisted, with nearly a decade of evidence to the contrary, “Politics are not part of this process. Never have been, never will be.”
Boeing’s friends in Congress were outraged. Washington-state Democratic senator Patty Murray called Gates’s offer “completely unacceptable.” The state’s junior senator, Maria Cantwell, complained that there was “no reason” to give EADS more time because it had already submitted a lengthy proposal with Northrop. For its part, the Alabama delegation was delighted by the news. Republican senator Richard Shelby called it “the right decision.”
But would EADS see it that way? The company wanted high-level assurances that if it competed, it wouldn’t get blindsided by political forces.
Fortunately for the company, it had just hired a Washington ace. In November 2009, Sean O’Keefe, a seasoned government insider and onetime acolyte of Ted Stevens, became CEO of EADS’s North American division. O’Keefe had run NASA during the Bush administration and was the number-two official at the Office of Management and Budget. He had begun his career in the Pentagon as a budget analyst and later was Stevens’s staff director on the Senate Defense Committee. He’d also been comptroller and chief financial officer of the Defense Department and acting Secretary of the Navy under President George H.W. Bush. One could scarcely find a chief executive who knew the complex relationships of the “iron triangle” so thoroughly.
O’Keefe ran the traps in the Pentagon, meeting with the brass to determine whether EADS would get a fair shake if it bid on its own, without its American partner.
In the end, the decision to compete was as much political as it was practical. Tankers weren’t the ultimate prize for EADS. The company wanted to erode Boeing’s dominant position in the US aviation market. This wasn’t a fight for money; it was a struggle for the future of a business. If EADS didn’t charge forward, it would cede the market to Boeing on the most crucial battlefield.
In July of this year, when bids were due, Boeing and EADS submitted their written proposals to an office at Wright-Patterson Air Force Base in Ohio. Each ran more than 8,000 pages. EADS’s showed up in a private airplane and stood almost four feet tall. The company also brought a backup copy by truck.
Things being what they are, the tanker story couldn’t have come to a close without one more complication, and this time it bordered on farce. Just eight days before the competition ended, a Ukrainian airplane manufacturer, Antonov, announced it was making a bid along with U.S. Aerospace, a tiny American company with few obvious qualifications for building billions of dollars’ worth of Air Force planes. Publicly, the group suggested as its tanker model an airplane that didn’t currently exist in the Antonov fleet. Its proposal showed up at Wright-Patterson via messenger, in an envelope.
The courier also arrived late. Air Force officials received the proposal at 2:05 pm, five minutes after deadline. Antonov and U.S. Aerospace were disqualified. The companies said that guards at the entrance to Wright-Patterson had delayed the messenger and then given him wrong directions to the office. They alleged a Cold War conspiracy: The US military was desperate to keep an ex-Soviet satellite out of the race, so it literally put up roadblocks in Antonov’s path. The Government Accountably Office found that the allegations were baseless.
Throughout this past summer, as federal officials convened behind closed doors to pore over 16,000 pages of documents, Boeing and EADS launched a media war. In political publications across Washington, they placed dueling full-page ads touting their respective tanker proposals and trashing the competition’s. Their essential themes were the same: Our plane is the best for the job, and the other side is misleading you about what theirs can do. Rarely in Washington does a company run such extensive high-priced advertising for a military contract, much less engage in such mudslinging. The fact that Boeing and EADS placed the ads in publications read mostly by members of Congress and their staffs leaves little doubt about who the rivals think is calling the shots; the ads ran nearly daily in publications such as Politico, the Hill, Roll Call, and National Journal. Both sides are also laying the groundwork for another campaign. Whoever wins the tanker contract, most analysts consider it a certainty that the loser will protest.



EPILOGUE


On August 9, former senator Ted Stevens finished lunch with his longtime friend and fishing buddy, Sean O’Keefe, at a lodge in the remote wilderness of southwestern Alaska. The two men, their six companions, and a pilot climbed aboard a red-and-white DeHavilland float plane and headed for a salmon fishing camp.
Fifteen minutes later, while flying through thick clouds and rain, the plane crashed into a mountainside, killing Stevens and four others. O’Keefe and his teenage son were among the four survivors. The float plane, which could land on water and on land, had gone into service in 1957, the same year as the first Air Force tankers. A local radio personality who’d flown in the aircraft a month earlier told reporters, “The plane is old, but it was meticulously maintained”—a line that echoed what Air Force officials have been saying about the KC-135 for years.
In obituaries of the longest-serving Republican senator in history, the poignant irony of his ultimate fate was lost. The man who’d set the tanker saga in motion with a sweetheart deal for Boeing had died in a plane crash, and Boeing’s competition had nearly died with him. If you tried to write it as a movie, you’d be laughed out of every studio in Hollywood.
As O’Keefe recovered, attention turned to the pending announcement of the winner, expected by the end of the year. If Boeing loses the tanker race, it could herald the demise of the company’s defense business. In 2001, days before Stevens launched the lease deal, Boeing lost the biggest military contract in history, the $200-billion Joint Strike Fighter contract, to Lockheed Martin. In 2008, Boeing lost again to Lockheed, this time on a $3.5-billion deal to build global-positioning satellites.
While the news for Boeing hasn’t been all bad, several analysts believe that losing the tanker program could deprive the company of the lifeline it needs to keep building planes for the military. With that dire scenario on the horizon and with defense budget cuts in store, rumors circulated in late summer that Boeing might save itself by merging with Northrop Grumman, which does business in a variety of other sectors where Boeing would like to be. The combined companies would create the largest defense business in the world.
For EADS, the stakes are lower but still significant. It has been besting Boeing in competitions around the globe. But to lose to Boeing now would be politically disastrous. The company won the first round following a process that many in Washington believe was neither credible nor fair. If EADS loses this time, many members of Congress—rightly or wrongly—will call it justice. Boeing will remain the undisputed champion of the American market.
However the story ends, the damage done to the Air Force’s reputation, and indeed to the entire military procurement system, may be longstanding. The people who know this contract well believe that military officials are being influenced by members of Congress, who have taken sides in the deal along party lines. Politics has always factored into Pentagon programs, but never on a contract of this size that was already stained by corruption and criminality.
The Air Force had intended to pick a winner before the November midterm elections, but then the date slipped to “sometime in the fall,” which officially ends December 20. This timeline solidified the impression that the military brass was using a cynical calculus: If the Democrats maintain their majority, Boeing wins; if the Republicans take over, EADS gets the nod. That this is the prevailing wisdom shows how poisoned the competition has become.
Meanwhile, the price to the taxpayer is climbing. The Air Force estimates that by 2018, the annual cost to maintain the tanker fleet will be $6 billion, three times what it is now. Just the expense of dealing with corrosion and aging will add up to about $18 billion. For many years to come, maintaining the tankers will cost the country more than buying new ones would.
And this isn’t the end. The current procurement is dubbed KC-X. The Air Force still has to buy two more sets of airplanes before it finally replaces the fleet.
In theory, the KC-Y contract will launch in 2015 and KC-Z will follow five to ten years later. Around then, somewhere in the world, the boy or girl who will grow up to be the last pilot of the ancient KC-135 tanker will be born.
This article fist appeared in the [Vous devez être inscrit et connecté pour voir ce lien] issue of The Washingtonian.

Tanker shortage cancels Red Flag exercise

A shortage of KC-135 refueling tankers, because of the high demand in Afghanistan and Iraq, forced the Air Force to cancel Red Flag, an annual exercise.
[Vous devez être inscrit et connecté pour voir ce lien] this event November 9. Strategy Page has an analysis about the aging tanker issue.

Strategy Page has a couple of obvious errors in its analysis, but the overarching point is well taken.
This illustrates the need for aerial tankers and how warfighting capability can be affected by a shortage of tankers. While the exercise was not canceled due to aging tankers, but rather competing interests, the point is nonetheless made.

AF sent Boeing and EADS details on each other's tanker bids

The Air Force accidentally sent Boeing and EADS North America information about each other's aerial refueling [Vous devez être inscrit et connecté pour voir ce lien] bids earlier this month, the service disclosed Friday.
"Earlier this month there was a clerical error and a limited amount of identical source selection information was sent to both competitors about the other competitor's offer," Col. Les Kodlick, director of public affairs for the Air Force, said Friday.
Both companies noticed the problem and contacted the Air Force, he said. "We've taken a look at what was there endeavored to make sure both competitors had access to the same sort of information and are moving forward. ... It doesn't impact our schedule."
Boeing and EADS representatives declined to comment Friday.
All parties want to make this right and move on, Kodlick said. "Everybody's got that same perspective and objective in mind."
One potential concern is that the incident could be fodder for a protest by the losing bidder, particularly if it enabled one to undercut the other's price.
Unrelated to the incident is the fact that the Air Force had already delayed the tanker award, which was originally expected this month.
"Certain aspects of the source selection have taken a little bit longer than we anticipated originally," Kodlick said. "Right now we expect the selection to happen early next year."
Responding in a statement to the mix-up Friday, Sen. Patty Murray, D-Wash., said:

I am deeply concerned by the Air Force's mishandling of proprietary information in the competition to replace our nation's aerial refueling tankers. This is a critical contract with serious consequences for our military and economy, and this mistake will further delay an award that has already been pushed back to allow an illegally subsidized company to compete.
Our men and women in uniform, Washington state workers, and the nation's aerospace industry can't afford mistakes and delays in this process -- too much is on the line. As we await specific information on the impact this error has had, I urge the Pentagon to be fully transparent with the public and both companies to ensure a fair and open competition.

The Air Force is investigating to figure out how the mix-up happened and how to prevent such incidents in the future, Kodlick said. Defense News first [Vous devez être inscrit et connecté pour voir ce lien] the incident Friday.

DayAfter a écrit:Incroyable, merci Jeannot

Ce marché est militaire, destiné aux militaires. Depuis pas mal de temps maintenant, ça dure, ça dure.

Et, entres eux, ils doivent bien se dirent " Quelles bandes de... ! "

• "There's still a lot of golf left in this hole" !
  

La phrase reste bien applicable et pertinente aujourd'hui !

Report: Tanker screw up could lead to split buy

The Air Force's [Vous devez être inscrit et connecté pour voir ce lien] to Boeing and EADS North America about each other's aerial refueling [Vous devez être inscrit et connecté pour voir ce lien] bids earlier this month could lead the Pentagon to split the $35 billion contract between both bidders, according to a new [Vous devez être inscrit et connecté pour voir ce lien].
The Air Force said the information was limited, both parties got the same details about the other and the incident won't further delay the award. The problem is that the disclosure could provide fodder for the losing bidder to protest, arguing that the foul up gave the winner an edge in the final price offered to the Air Force.
The incident ensures there will be a protest, Analyst Richard Aboulafia, of the Teal Group, told Reuters. "More than ever, it looks like a dual source buy may be the only way forward."
Air Force and Pentagon officials have consistently rejected the idea of a split buy.
EADS North American Chief Executive Officer Sean O'Keefe said Monday that he didn't see any reason to file a protest over the mix up, although he wouldn't definitively rule one out, according to [Vous devez être inscrit et connecté pour voir ce lien], which was at the news conference
O'Keefe said the government has established procedures to handle such circumstances, and the Air Force, EADS and, as far as he knows, Boeing followed them meticulously. He said the Air Force has not set a date for when bidders must submit their best final offer.

Tanker disclosure didn't include pricing data

The details that the U.S. Air Force [Vous devez être inscrit et connecté pour voir ce lien] to Boeing and EADS North America about each other's aerial refueling [Vous devez être inscrit et connecté pour voir ce lien] bids did not include proprietary or pricing data, Reuters reported Tuesday.
Air Force Chief of Staff General Norton Schwartz said each company received a single-page summary of a complex efficiency analysis of its rival's offer on a computer disk, Reuters reported.
That lack of pricing details is key because they could allow one of the competitors to undercut the other in the final price offered to the Air Force and provide fuel for a protest by the loser. The disclosure still could contribute to a protest.
Reuters also quoted Schwartz saying the Air Force has removed two people from the tanker program as a result of the mix-up. Schwartz declined to identify the people involved, but said neither was the program manager. He said further action could be taken.

EADS looked at Boeing tanker data it got from Air Force

The U.S. Air Force gave Boeing information about EADS North America's aerial refueling [Vous devez être inscrit et connecté pour voir ce lien] bid after realizing that EADS had looked at data that the Air Force had [Vous devez être inscrit et connecté pour voir ce lien] the company about Boeing's bid, The New York Times [Vous devez être inscrit et connecté pour voir ce lien] Wednesday.
The Air Force inadvertently sent both companies details about the other's bid for the $35 billion contract. Air Force spokesman Col. Les Kodlick told The Times that an EADS worker had "inadvertently opened" a file containing part of the government's scoring of Boeing's bid.
The Air Force tried to neutralize the issue by resending the information to both companies and inviting them to examine it, Col. Kodlick told The Times.
The Times' story comes two days after Boeing-funded analyst Loren Thompson [Vous devez être inscrit et connecté pour voir ce lien] that EADS had looked at the data and that the Air Force's reaction to the mistake was part of a pattern of favoring EADS.
Boeing spokesman Daniel Beck hinted in The Times story that the mix up could fuel a protest, should the Air Force choose EADS' tanker, saying: "Until we're satisfied we have a complete picture, we're keeping our options open for how we go forward."
The data could sway the competition by influencing the best and final price each company offers for its tanker.

Boeing exec: "We have a lot of unanswered questions" on tanker mix up

Boeing won't rule out a protest resulting from the Air Force [Vous devez être inscrit et connecté pour voir ce lien] EADS North America some of its data in the aerial refueling tanker competition until it gets questions answered, Boeing Defense, Space & Security President and Chief Executive Officer Dennis Muilenburg said Wednesday.
The Air Force sent both companies details about the other's bid for the $35 billion contract. Air Force spokesman Col. Les Kodlick [Vous devez être inscrit et connecté pour voir ce lien] The New York Times that an EADS worker had "inadvertently opened" a file containing part of the government's scoring of Boeing's bid and, in reaction, the Air Force resent the information to both companies and invited them to examine it.
Asked about the incident at the webcast Credit Suisse 2010 Aerospace & Defense Conference in New York Wednesday, Muilenburg said:

The recent occurrence that's been in the news is a concern to us … we know with very high confidence that our Boeing people did not look at any of our competitor's data. As to the rest of the incident, we still have some open unanswered questions. ...
Until these unanswered questions are resolved we will keep our options open.

EADS will likely win tanker, says Boeing consultant

George Talbot of The Mobile Press Register posted [Vous devez être inscrit et connecté pour voir ce lien] today in which Loren Thompson, an aerospace defense analyst who has done work for Boeing, says Boeing has concluded EADS is going to win the KC-X tanker competition.
In Talbot’s article, Thompson once again advances the Boeing line about WTO and Airbus’ illegal subsidies as evidence of a USAF “bias toward EADS.”
There is just one problem with this line of allegation with respect to the WTO issue:
US law doesn’t allow the USAF to take the WTO panel finding into account, and Thompson, Boeing and its Congressional supporters know it.

US Rep. Jay Inslee (D-Boeing/WA) introduced an amendment to the Defense budget bill in the House earlier this year that would require the USAF to take the matter into account. This action alone demonstrates Congressional recognition that the Air Force doesn’t have the authority to take the WTO finding into account. US Sen. Patty Murray (D-Boeing/WA), who has made a career out of this issue, has introduced a similar amendment in the Senate. This also validates the USAF position. “Bias” has nothing to do with its rejecting previous calls to not consider this issue. Both amendments, after initially calling on the USAF to only examine the Airbus subsidies (which had to be changed because even the US Trade Representative’s Office said this was illegal), Inslee added language to include all competitors (i.e., Boeing).
[Vous devez être inscrit et connecté pour voir ce lien], but it’s been approved by the House; it has not come up for a vote in the Senate.
But that’s not all. We said just one problem; actually there are a whole lot more:

• Even if the Inslee amendment was adopted by the Senate and became law, how in the world can you apply it?
  
• WTO-Airbus is under appeal. What if the WTO board overrules the panel?
  
• WTO-Boeing is in the early stages. What are the subsidies against Boeing to take into account (as called for in Inslee)? The Interim Report is confidential; we don’t know the number. Will the Draft Report and Final Report be public by the time the USAF issues its contract (at the rate and incompetence of the USAF, we could cynically say yes, but January is supposed to be the date now so the answer is no). How can you apply Inslee when you don’t know one side?
  
• How do you assess the subsidies? All $5bn against 179 airplanes? $5bn divided by the 1000 delivered and on order and prorate the penalty? $5bn against the 1,000+the unsold airplanes over the next decade (the assumed life of the A330 passenger program) and prorate it? What would these projected sales be? What about the freighter life beyond the passenger life?
  
• What about the appeals? What if WTO overrules its panel on Airbus and ups or lowers the subsidies calculation, wouldn’t Boeing want higher subsidies to be taken into account? What if the WTO overrules the panel and finds in favor of Boeing on its appeal (USTR, actually) and numbers change? After the USTR appeals the WTO panel finding against Boeing, what then?
  

The whole WTO issue cannot be calculated, by current law, and from a practical standpoint because it’s far from over–unless a decision is made to suspend competition for the next several years in order to wait for the conclusion of all appeals at WTO.
But, then, the warfighter–who is supposed to be all-important here–has to wait. But, of course, this has never been about the warfighter, it’s always been about Boeing vs. Airbus.
Thompson, Boeing and the Congressional meddlers know all this, of course.
The solution, as we have been advocating for a couple of years, is to double the procurement and split the contract. Politically it is the only choice. But we have also written many times there are good strategic and operational reasons to do so.
We know that Defense Secretary Robert Gates says this will cost the USAF too much money. The interesting thing is that a Rand study, [Vous devez être inscrit et connecté pour voir ce lien] issued in August 2006, concluded:
“A fleet of medium to large (300,000 to 1,000,000 pounds maximum gross takeoff weight)
commercial derivatives is the most cost-effective alternative for KC-135 recapitalization.
That is, such a fleet would provide the required refueling capability at the lowest overall cost,
defined as the present value of all future production and operating costs. Fleets consisting of
just one kind of such aircraft or consisting of two kinds of them have comparable cost-effectiveness.” (Emphasis added.)
Interestingly, the AOA also includes this phrase in its conclusions:
…the decision of when to recapitalize should be based onconsiderations other than the present value of life-cycle costs. (Emphasis in original document.)
Life cycle costs, of course, have been a major point of contention. Boeing’s KC-767 will cost less on an operating basis than the larger EADS KC-45, and US Rep. Norm Dicks (D-Boeing/WA) insisted the USAF consider this (and it has). [Vous devez être inscrit et connecté pour voir ce lien]
So we continue to encourage a split buy; replacing the KC-135s at the rate of 15 a year as currently proposed is a ridiculously low number. Strategically there are sound reasons to split the buy. Politically it is the only choice.

Tanker Wars: Why Boeing Is Losing

executives at Boeing have grown pessimistic about their prospects for prevailing in the latest Air Force tanker competition. Their counterparts at competitors EADS -- the parent company of Airbus -- are correspondingly confident. This is surprising, because the Boeing entry in the competition has much lower life-cycle costs than the bigger EADS entry, while still carrying much more fuel than the plane it would replace. Many observers thought that when Northrop Grumman dropped out of the tanker competition and EADS had to go it along, the European company would be hobbled in competing against Boeing. So what went wrong for Boeing?

The biggest thing that went wrong was that the Air Force chose to ignore a ruling by the world's preeminent trade body that Airbus has engaged in a 40-year pattern of predatory business practices to expand its share of the commercial transport market. The reason this matters is that the two rivals are both offering modified airliners in their tanker proposals, and the Airbus entry was built using $5.7 billion in illegal subsidies. By failing to take that finding into account, the Air Force has enabled Airbus to price its plane more aggressively than any purely commercial company could, leveling what otherwise would have been a huge disparity in the acquisition cost of the two planes.

A second and related factor is that the Air Force has calculated the post-production life-cycle cost of the Airbus plane using assumptions that tend to minimize the higher cost of operating a bigger plane. Because the EADS entry has 40 more feet of wingspan than the Boeing plane and corresponding greater weight, it burns over a ton more fuel per flight hour. Its dimensions are so much bigger than those of the Eisenhower-era tankers being replaced that the Air Force will need to modify hangars and other ground infrastructure to accommodate the EADS plane. But Boeing's team is convinced the Air Force has failed to capture the full life-cycle burden of fuel and construction for the bigger plane, and thus made the Airbus transport look more affordable than it really is.

A third factor is the calculation of warfighting effectiveness ratings -- the metrics which the Air Force inadvertently released to the wrong teams last month. As in the first round of competition, the complex warfighting model used to calculate effectiveness in stressing wartime scenarios continues to favor the larger Airbus plane due to its greater fuel-carrying capacity. But what many outside observers have failed to note is that the success of the EADS entry in that comparison is tied directly to the fact that its planes were allowed to access bases denied to the Boeing planes. The Airbus tanker literally cannot complete the specified missions without access to those bases, and yet Boeing was not allowed access in the modeling of comparative wartime performance.

A fourth factor weighing against Boeing in the comparisons is a pattern of allowances made for the EADS entry that amounted to bending the rules to keep its proposal viable. First, the Air Force delayed the deadline for the EADS proposal. Second, it allowed EADS to respond late to engineering inquiries from evaluators. Third, it deleted a performance requirement concerning secure communications from the solicitation because EADS could not meet it. Fourth, it waived duties on the importation of certain key parts required in the EADS plane. Finally, it sought to minimize EADS wrongdoing in viewing competition-sensitive information that Boeing did not view. Cumulatively, these various instances can be construed as a pattern of bias favoring the European team.

Boeing has not concluded from all this that the tanker competition is irretrievably lost, but I have. When the customer allows a team to bid below cost by leveraging illegal subsidies, understates operational cost differences, permits only one team to access key bases in warfighting models, and repeatedly bends rules in favor a particular side, the outcome is obvious. The question is what Boeing intends to do about it.

House passes defense budget without tanker subsidy provision

The U.S. House of Representatives Friday passed a defense budget that did not include Boeing backers' desired provision requiring the Pentagon to consider illegal [Vous devez être inscrit et connecté pour voir ce lien] in the Air Force's aerial refueling [Vous devez être inscrit et connecté pour voir ce lien] competition.
A World Trade Organization panel [Vous devez être inscrit et connecté pour voir ce lien] earlier this year that European nations illegally subsidized Airbus programs, including the A330, which is the basis for EADS North America's proposed [Vous devez être inscrit et connecté pour voir ce lien] tanker. A separate WTO panel [Vous devez être inscrit et connecté pour voir ce lien] in a confidential interim ruling that Boeing also received illegal subsidies, although those were reportedly much less than those that Airbus got.
Boeing backers say the illegal subsidies allow EADS to provide a cut-rate tanker bid. But Air Force and Pentagon officials have steadfastly refused to consider subsidies, noting the WTO process is ongoing and has its own penalty provisions, and that there are cases involving both plane makers.
"I am disappointed that the defense bill does not include language forcing the Department of Defense to adjust the tanker competition to account for the fact that Airbus has received billions of dollars in illegal subsidies from European governments," U.S. Rep. Rick Larsen, D-Wash., said in a statement. "I will keep fighting to level the playing field for Boeing by forcing the Department of Defense to take into account the unfair competitive advantage these illegal subsidies give to Airbus."
Larsen said he voted for the bill because "it includes critical priorities for our military."

Senate to investigate sharing of tanker data

.S. Sen. Maria Cantwell, D-Wash., says the Senate Armed Services Committee will investigate the Air Force's sharing of data that two companies submitted to win the $35 billion project.
The Air Force [Vous devez être inscrit et connecté pour voir ce lien] last month that it had sent Boeing and EADS information about each other's bids.
Cantwell said she had the commitment of the committee's chairman, Sen. Carl Levin, D-Mich., to investigate the matter. The agreement came as the Senate passed the defense spending bill.
Levin will likely hold hearings in January.
"In the last competition, the GAO (Government Accountability Office) found multiple instances of uneven treatment that when compiled showed a pervasive bias in support of EADS/Airbus," Cantwell said in a written exchange with Senator Levin that was entered into the Congressional Record this morning.
Cantwell said, "I am respectfully requesting that the chairman of the Armed Services Committee initiate an investigation into the particular release of proprietary data to determine whether or not laws and fair competition regulations have been appropriately followed."
Added U.S. Sen. Patty Murray, D-Wash.: "I am deeply concerned by the Air Force's mishandling of proprietary information and we deserve answers on what impact it has had on this competition and American jobs. The Pentagon has already allowed an illegally subsidized foreign company to compete, has refused to take the WTO's ruling on those illegal subsidies into account, and has repeatedly delayed this competition to accommodate Airbus."

TuK a écrit:Chute de pression d'huile sur un moteur de Boeing 767-300 Transaero

[Vous devez être inscrit et connecté pour voir ce lien]

A Transaero Airlines Boeing 767-300, flight UN-559 from Moscow Domodedovo (Russia) to Hurghada (Egypt) with 214 passengers, was enroute near Rostov (Russia), when the crew needed to shut the left hand engine down because of low oil pressure.
The airplane diverted to Rostov for a safe landing.

Il s'agit du CN 25077; LN 385; à moteurs P&W 4060

Mais, au sujet de l'Appel d'Offres des avions ravitailleurs pour l'USAF, quand on pense à l'offre Boeing articulé autour d'un airframe B767 et des moteurs de la famille / série PW2060 de P&W, et à l'offre de la plate-forme A330-200 d'EADS, avec des moteurs GE CF-6, on se gratte plus que la tête !

Looking ahead for the tanker award

Will it ever end?
This is the question about the interminable KC-X tanker competition.
Unofficial word is now that the USAF is to announce its award in February, after slipping from January, December, November, October and August.
US Sen. Carl Levin announced that [Vous devez être inscrit et connecté pour voir ce lien] by February. 1 into the snafu by the USAF over sending Boeing and EADS information about the performance of each other’s tanker. Levin, holding the hearing at the request of Sen. Maria Cantwell (D-Boeing/WA), will try and determine if this is a harmless or fatal error to the procurement process.[Vous devez être inscrit et connecté pour voir ce lien] that mistakes like this happen and the government has set procedures for handling such errors, but in the highly charged competition, Boeing is taking advantage of the mistake to lay the groundwork for a protest should it lose.
Politico has [Vous devez être inscrit et connecté pour voir ce lien] discussing the unexpected split buy for littoral combat ship and how this relates to the KC-X tanker competition. The article is mostly about the Navy’s decision to split the buy for the LCS, but it is worth reading.
Meantime, Airbus and Boeing missed deadlines once again to deliver their tankers to customers. Both said they would deliver their airplanes to the Royal Australian Air Force (RAAF) and Italian Air Force respectively and once again the time came and went.
Airbus missed delivering its KC-30 MRTT—which it boosts as 90% similar to what the USAF wants in the KC-X—because, [Vous devez être inscrit et connecté pour voir ce lien], it is writing manuals to meet Australian airworthiness requirements for the refueling boom. The boom, of course, is the first Airbus has ever designed and built.
The KC-30 is now two years late to RAAF.
Boeing, meantime, announced last summer it would deliver the KC-767 to Italy, but there has been no announcement that it has. This airplane is now five years late.
Defense News [Vous devez être inscrit et connecté pour voir ce lien]s of dollars from the budget over the next five years. Wouldn’t that be a kick in the tailpipe if KC-X gets the ax? This is considered unlikely, but we raised our eyebrows over this one when we saw the story.
Given the high-profile reports last month that Boeing is now likely to lose the tanker competition (we have no insight on this one), we’ve been asked by several media what will the impact to Boeing, and more specifically, to Washington State be if EADS wins the KC-X aerial tanker contract. The award is widely expected to be made next month, but the USAF being the USAF, who knows if this timeline will happen?
Our answer has been, there won’t be much of an impact to Boeing or the State.
To be sure, Boeing and the State want to win this contract. Boeing claims there will be an annual benefit to the State of 11,000 direct and indirect jobs and $650m in employment and supplier benefits. ($650m, at 15 airplanes a year, equals about $43m per airplane in supplies and payroll.) Full production wouldn’t kick in until 2015, according to the USAF timetime; aircraft built before then are test airplanes and at a lower rate.
The initial contract for 179 airplanes takes production out to about 2027 at the rate of 15 airplanes a year. Boeing, in a press briefing in advance of the Farnborough Air Show, said it had indications that the USAF would at some stage want to take production to three a month, but a timeline was not revealed to the press if Boeing received one from the Air Force.
With all this as background, why do we feel the impact to Boeing and the State would not be much? Here’s why:

1. Boeing has bigger opportunities in Commercial and, frankly, given the current program problems and continuing challenges, the tanker will be a distraction. See #8 and #9 below.
   
2. At 179 airplanes for a $35bn program, this is $195m per airplane or about $2.9bn a year in revenue to Boeing, minus the payouts to contractors, suppliers, payroll, etc. If one assumes a 10% profit margin to Boeing, which on this fixed-price contract may or may not be reasonable, this is $290m in profits to Boeing annually. These numbers are nothing to sneeze at, but neither are they make-or-break numbers for Boeing, either.
   
3. Production ramp up for the 787 is likely to be slower than Boeing hopes. Some Wall Street analysts are already forecasting Boeing won’t be at the 10/rate until 2015 instead of the year-end 2013 Boeing has announced. Whether it is this slow remains to be seen but we agree 2013 is increasingly challenging.
   
4. Jim Albaugh, CEO of Boeing Commercial, told us earlier this year that Everett and Charleston theoretically will have the ability to take 787 production to a whopping 17/mo, but he needs to be sure Boeing can deliver on its promise of 10/mo before taking production higher. And a higher rate is needed to catch up on delays and to offer new delivery slots to customers. The 787 line is sold out to 2020.
   
5. Boeing is considering taking the 737 production rate to 42/mo from the announced 38/mo and the 777 line to 8/mo from the announced 7/mo.
   
6. Engineering resources remain stretched among 737, 777 and 787 programs. Boeing has to decide what to do about the 737 and suggests it may proceed with a new plane sooner than later. A decision is necessary for the future of the 777 to meet A350 competition. The 787-9 remains in development. The tanker would compete for these resources in the early years–2011-2014–which is a critical time for the commercial programs. Parenthetically, our sourcing tells us the USAF is actually quite concerned about this and the ability of Boeing to successfully manage all this at once.
   
7. At the production rates being talked about by Boeing, by 2015 the company would be delivering about 740 airliners a year; 15 tankers are about 2%–a gnat on the proverbial elephant’s rear end.
   
8. Expanding the 787 line from 10 to 14 or even 17/mo, replacing the 737 with a new airplane and eventually replacing the 777 with a new airplane provide a lot more opportunity, jobs and economic benefit to Washington State than 15 airplanes a year of a 1970s-design (which is where the 767 has its roots).
   
9. Designing a tanker for the KC-Y competition to replace the KC-10 is a good opportunity for which Boeing is keenly positioned. The 777 fits this bill nicely. However, by then the A350 will be operational (one presumes) and this will be stiff competition to the 777; the A350 could also be built at the Mobile (AL) plant Airbus plans for the KC-45. The KC-Y competition could be a re-run of new vs old technology (A350 vs 777) that exists for the KC-X (A330 vs 767). But if Boeing perfects the Blended Wing Body that’s been under development, the BWB will blow away anything Airbus has to offer.
   

In short, if Boeing loses, it will be a disappointment to the company and the State, but as the cliche goes, when one door closes another opens. Losing the tanker won’t hurt Boeing because there are so many opportunities on the horizon that will require the resources that would be assigned to the tanker, plus a lot more.
Unrelated to the thesis above, but related to the tanker topic in general, Richard Aboulafia and Addison Schonland [Vous devez être inscrit et connecté pour voir ce lien] on the tanker recently. Aboulafia suggests a dual award to resolve this; he says the WTO has no role in this procurement; and the USAF mistake.

Spawn2 a écrit:Bonjour, merci

Oui, record battu, dans tous les domaines, des problèmes moteurs.

Mais la base installée est très importante. Ce qui ne constitue pas un ragument valable.

Le -80E1A a été l'objet de pas mal d'attentions et a tout de même moins de soucis que le 80C2B. ( source Snecma / Safran )

On peut regretter la présence sous l'aile du KC-45 proposé par EADS en réponse au TDR de l'USAF, comme vous l'avez déjà fait remarquer.