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Canada to Look at Other Aircraft for F-35 Mission

After considering the independent auditor’s report submitted to the Ministry of Public Works earlier this year the Conservative government of Canada announced yesterday that they would now look at other aircraft rather then the F-35 to meet the CF-18 replacement requirement. The major reason cited was the much higher estimate of the lifetime cost to procure and operate the advanced aircraft.

The new estimate is almost $46 billion over a projected 42 years. The estimate used to justify the sole source contract for the F-35 was $25 billion for 20 years of operations. The auditor also estimated that due to the cost increases in the F-35 that with the current available funding only 55 aircraft could be bought and not 65.

Canada will now establish a new group to look at aircraft. These could include Boeing (BA) F/A-18 fighters, Eurofighter Typhoons and Dassault Rafale aircraft. The loss of the Canadian buy while a small part of the total planned quantity of over 2,000 F-35 would be a blow to the program and Lockheed Martin (LMT).

The increases in unit cost of the aircraft along with the delays in schedule have caused other partners to reconsider. The Netherlands has also looked at the program’s cost growth over the years as a reason to reconsider. It would allow less aircraft to be purchased to replace their aging F-16 fighters. There is also a requirement to continue using the older aircraft longer then originally planned with associated costs.

Canada could in the end still choose the F-35 but the fact that they are conducting the review is a negative for the overall program.

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KC-46A Costs Reportedly Increase

A few weeks ago it was reported that Boeing (BA) had already informed the U.S. Air Force of at least a $300 million increase in the costs of the first phase of the KC-46A aerial tanker program. This led to Reuters asking the Air Force some follow up questions on the situation.

They are now reporting that the way the current contract is structured the Government and Boeing would share in the first $1 billion increase beyond the target price of $3.9 billion for the EMD contract which will also deliver 18 tankers. The original contract value was about $3.6 billion.

Once the price gets beyond $4.9 billion Boeing would be responsible for all costs. Up to that they would pay 40% and the government 60 or $600 million. The reports last month had Boeing predicting that they would spend at least $4.2 billion.

This was the third attempt by the Air Force to award the new tanker contract since 2001. An attempt to award a sole source lease to Boeing was derailed by fraudulent activity by Air Force acquisition chief Darleen Druyun and Boeing’s CFO. In 2008 EADS teamed with Northrop Grumman (NOC) won a contest that was overturned on protest by Boeing. This latest contract is the result of the new competition held due to Boeing’s successful protest. EADS was not able to match the price that Boeing offered which is now seemingly controversial due to the reported cost increases.

HP Scores Big with Navy Network Transfer and Management Contract

The United States Defense Department is a large, complex organization that employs a lot of people and spends a great deal of money. It has two primary functions: to prepare the Armed Services for fighting and to fight. This means that it buys a lot of things that a traditional company would although this sometimes surprises people.

Hewlett Packard (HP) recently was awarded a “Continuity of Services Contract (CoSC) by the U.S. Navy to provide IT enterprise services. This means that rather then conduct a new competition to find a supplier the Navy was able to sole source the deal by just continuing the existing contract with HP. The Navy must be happy with the level of support that HP is providing and felt justified in not going through a competitive round to maintain these services. One major argument for this move is that the Navy is in the process of transferring to a new network, the Next Generation Enterprise Network (NGEN), and this contract action allows that work continue without any delay due to transferring the work to another contract.

Like any large organization the Navy and other parts of DoD need good networks that allow reliable transfer of data and communications. They may have a few more security requirements that include both physical and network but the general work is no different then others.

One difference is the size of the deal. The initial piece of this new contract is only for about $30 million the total contract could be worth up to $3 billion. Any deal like that is nothing for a company to sneeze at and the work is certainly welcome in this time of struggling economy.

Photo from skuds flickr photostream.

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Federal Government Continues Moves to Restrict Native American Contracts and Companies

The Federal Government has a program called “Section 8(a)” that is used to favor small businesses. This rule allows the award of sole source contracts to companies meeting certain requirements. The idea is to grow small businesses through this simpler award process and also aid disadvantage groups. The 8(a) rules favor those contractors owned by women, minorities and service disabled veterans. The restriction on the program is that the size of the contract is limited to under $20 million since the goal is jump start small companies into larger ones.

One of the legacies of Senator Ted Stevens (R-AK) was a rule that Alaskan Native American companies could win a contract of any size. He had this change made in the defense bills. This has allowed those corporations to grow and win contracts over not only other 8a companies but also traditional contractors as well. This rule had raised the hackles of other Senators and in the last few years there has been movement to eliminate the rule favoring Alaskan companies.

Not only that but one of the reforms that the Obama Administration is trying to accomplish is the reduction in the number of sole source contracts awarded. The goal with that reform is to gain more competition, better pricing and ultimately save money. The use of sole source contracts makes an award process simpler and easier for the contracting command involved as it shortens the time line since there needs to be no competition. There use is often justified to gain speedy awards. These changes are putting pressure on all Native American owned companies but especially Alaskan ones who may see a significant decline in their work if the government does limit awards and increase competition.

The most recent Defense Authorization Bill included a limit of sole source contracts to $20 million dollars without requiring extended approval and justification. This change will make it harder to award these contracts quickly which may lead to more competitions among non-8(a) companies. The Defense Department is meeting with Native American groups to discuss these changes and their affects.

The government is also facing problems because of a recent court case that ruled that HUBZone companies take precedence over other small businesses. Since few Native American corporations are in Historically Underutilized Business Zones which are normally in large urban areas this ruing will also limit their chances of getting sole source awards. This means that Native American companies may have to compete for these contracts as if a HUBZone company wants the business and it is decided to sole source it they must get it.

The government has in the past justified these contracts as a way to help disadvantaged groups at the cost of a small amount of inefficiency and the chance of slightly higher prices. The current deficit situation and the desire to increase efficiency as well as Steven’s exemption of his home state businesses have led to a reevaluation of these processes. The end result may be a significant decrease in the amount of work these companies now get from the government or increased costs for them as they must bid on contracts. Either result limits the effect of the Federal spending on their communities which was the whole point of the program in the first place.

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Alabama Senator Sessions Responds To Congressman Dicks

Senator Jeff Sessions (R-AL) issued a press release today criticizing Washington Congressman Norm Dicks (D-WA) for his comments basically telling EADS (EADS:P) not to attempt to bid on the KC-X contract.

In the release Sessions makes clear his desire for competition in the tanker contract while continuing to support EADS who have proposed assembling the Airbus 330 aircraft in Mobile, AL. Sessions writes: “Defense companies should understand that, contrary to Representative Dick’s comments, the majority of members in the House and Senate want a robust competition engineered not to benefit a single company, but to produce the best airplane for the war fighter.”

In Sessions view having EADS submit a bid along with Boeing (BA) will only strengthen the program. The award of what will amount to a sole-source contract to Boeing if EADS or another company does not bid will be a difficult process for the Air Force leaving many different avenues for criticism. This is especially true if Boeing has their struggles down the road.

No-bid Contract Delivers Bad News to Postal Service

March 24, 2010 by · Comment
Filed under: BNET 

The U.S. Postal Service decision to award a sole source contract to a company for website development is raising eyebrows. The official making the…

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Reports of Other Bidders for KC-X Emerge?

Over the weekend it was reported that the Russian state owned aircraft company, United Aircraft, might be interested in bidding on the KC-X proposal. With Northrop now planning on not participating with EADS only Boeing was left as a confirmed bidder. Russia was about the only other country that had the capability to submit a proposal as they have already made tankers for themselves, India and other users. The thought though of Il-76 based tankers fueling F-22 is sort of hard to imagine. Documents provided to the Seattle Times show that United Aircraft would team with a World Aviation Maintenance to form a new company to bid. The proposal would be based on the Il-96 airliner rather then the older transport tanker already in service.

At the same time there are reports that EADS may submit a bid with themselves as the prime. Earlier this month the company said that it was not confident of being able to do this. EADS-North America could certainly be used as a prime contractor. The time needed for the company to prepare a proposal of this magnitude is why there is talk of extending the deadline three months.

It would be good for the U.S. Defense Department and Air Force to have some form of competition in the latest attempt to award this contract. Whether the Russian or EADS based bids would be viable is another matter. It is going to be difficult though to award what amounts to a sole-source contract with the mood in Congress of many Northrop and EADS supporters.

Now Reports That EADS May Bid After All

There is a rumor that the Pentagon may delay the deadline for submission of a proposal for the KC-X to accommodate either a solo bid or another partnership. This contradicts what was reported yesterday that EADS-NA CEO Sean O’Keefe said the company wouldn’t bid without Northrop Grumman (NOC). It will be seriously difficult for the company to bid by itself. It would need to find another U.S. company to work with.

This might be second thoughts by DoD as they realize how difficult doing a single bid contract award will be. This is not a sole source contract but right now it would only receive one qualified offer.

Split Buy Again?

One of the solutions that has been mooted to solve the KC-X issue is to buy aircraft from both Boeing (BA) and EADS (EADS.P). This would certainly eliminate many of the issues around the source selection. The Defense Department and Air Force have not supported this idea in the past due to the logistical costs related to operating two dissimilar aircraft. Of course the problem the Air Force faces is that the KC-30 and KC-767 are too dissimilar.

Some in Congress and in the industry suggested the split buy last Summer and now it has been raised again. If Northrop Grumman (NOC) does refuse to submit a bid then the contest is on hold unless there is the will to do a sole source contract again. The split buy would solve that issue and keep Northrop playing.

We will have to see how this plays out.

Northrop Congressional Supporters Continue Harsh Words

Last week Northrop Grumman (NOC) and its partner EADS (EADS.P) wrote a letter to the Defense Department stating that they are not interested in bidding on the KC-X contract if the current RFP language stands. Their argument is that it is currently biased towards a smaller aircraft which means that it is set up to give Boeing the contract. In their eyes there is no reason to go through the motion of bidding just not to win.

This of course caused all sorts of critics to rise up and claim that Northrop was trying to force the Government to bias the RFP and contract towards Northrop. Basically this is an attempt to blackmail the Government. The problem the Air Force has faced is that they need to write a RFP that gets them the best value bid meeting all of its requirements and is done in such a way that no protest occurs. This is proving difficult to do. The two aircraft, KC-767 or A330, are dissimilar enough that the requirements have to be carefully chosen. At the same time there is a great deal of pressure in Congress to support American companies and products. This is the state that the U.S. has gotten itself into by allowing only one major source of aircraft of this size to remain — Boeing (BA).

Now Northrop’s supporters in Congress are striking back. In a recent editorial the Congressman for Mobile, AL where EADS will assemble the aircraft, Jo Bonner (R-AL), writes that it is unfair to tar Northrop. In his eyes the Government is going out of their way to award a sole source contract to Boeing. This violates the spirit if not the law on contracting. He writes “And the reason Northrop Grumman, and its partner EADS, was not playing a game of chicken is because the draft RFP, released by the Air Force in September, has been all but written to guarantee the pre-selection of the smaller, older and much less capable Boeing 767″.

That is the crux of the problem. The Government lost the last attempt to award the contract competitively. Their attempt to let a sole source lease to Boeing before that was overturned by Congress. This next round doesn’t look good either. There is a crying need for this capability and it lags because of politics, industrial policy and poor management.

AFL-CIO Endorses Awarding KC-X Contract To Boeing

October 13, 2009 by · Comment
Filed under: Syndicated Industry News 

At the AFL-CIO Now Blog there is a story about the ten presidents of the AFL-CIO state federations sending a letter to Defense Secretary Robert Gates endorsing giving the tanker contract to Boeing. The union heads state that this is not only in the best interests of U.S. national security but also as an industrial base issue.

One of the reasons the U.S. is where it is at with this contract is that there is only one domestic source for the aircraft, Boeing. The only other manufacturer that can be really considered is EADS. To achieve any level of competition they have to be included otherwise the U.S. should just go back to the sole source lease idea shot down in 2001 – 2003.

Navy Reorients LCS Acquistition Strategy

September 18, 2009 by · Comment
Filed under: BNET 

The U.S. Navy has decided to restructure the Littoral Combat Ship (LCS) program to use sole source production only after a contest next year….

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Army Selects L-3 to Supply Laser Marksmanship Training Systems

NEW YORK--(BUSINESS WIRE)--L-3 Communications (NYSE:LLL) announced today that the U.S. Army’s Program Executive Office for Simulation, Training and Instrumentation has awarded L-3 MPRI a sole-source, follow-on contract for its Laser Marksmanship Training System (LMTS). This ID/IQ contract has an estimated value of $48.7 million over the initial base year and four option years. L-3 has received the program’s first delivery order, valued at $15.5 million. LMTS is a home station or depl

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Universal Detection Technology Becomes Bio-detection Equipment Supplier to Emergency 911 Security, Inc., Certified by the Government for Sole Source and Limited Competition Contracts of up to 35.5 million Dollars Per Year

LOS ANGELES--(BUSINESS WIRE)--Universal Detection Technology Becomes Bio-detection Equipment Supplier to Emergency 911 Security, Inc., Certified by Govt for Sole Source and Limited Competition Contracts of up to $35.5 million/year

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