Filed under: Boeing, Business Line, Companies, Department of Defense, development program, Events, Federal Budget Process, General Dynamics, McDonnell Douglas, Military Aviation, S&T, Services, U.S. Navy
In the late 1980’s the U.S. Navy’s aircraft carriers were equipped with A-6 Intruder and A-7 Corsair II attack aircraft. The Navy wanted to design and build an advanced, stealth aircraft to replace these Vietnam era systems. This led to the A-12 Avenger program that would design and produce a similar aircraft to the U.S. Air Force’s F-117 stealth fighter. The Navy signed a contract with McDonnell Douglas, now part of Boeing (BA), and General Dynamics (GD).
The program though ran into cost and schedule issues and ultimately was cancelled in 1991 by then Defense Secretary Dick Cheney. When the Government terminates a contract it may end up owing the contractors money or be paid back for some of the cost. In this case the Government claimed that the two contractors owed due to non-performance while GD and McDonnell-Douglas claimed that they were owed for work done but not paid for yet because the contract was ended illegally.
Normally contracts are terminated for convenience which means the books are closed and settled and the contractors received some payment or they are terminated for cause in which case some money may be returned to the Treasury. The two companies claimed that because the contract was cancelled by the Defense Secretary rather then the Contracting Officer proper procedures were not followed. Both they and the Government sued each other. The case has been winding its way through the Federal Court system for almost twenty years.
Almost two years ago a Federal appeals court agreed with the Government that they were owed about $3 billion. The contractors then appealed to the Supreme Court and their case was heard. They claimed that the Government was hindering the case by using the “state secrets” privilege to keep key information from being heard by the courts in their defense. The Justice Department said that due to the stealth technology involved in the aircraft’s design and manufacture that it needed to be protected.
The Supreme Court ruled Monday that the contractors were right. They did not, though, rule in their favor but threw the case back to the appeals court for a re-hearing. The high court said clearly that the Navy could not receive the money while they used the “state secrets” rule to prevent the release of information.
This means that further hearings and trials may be ahead in this case. It is one of the longest running and largest contract disputes between contractors and the Defense Department and does not seem to be ending any time soon.
Photo from DaveReichert’s Flickr photostream.
Filed under: Boeing, Business Line, California, Companies, Congress, Department of Defense, Events, Federal Budget Process, Kansas, logistics, McDonnell Douglas, Military Aviation, Missouri, production program, Services, States, U.S. Air Force
The C-17 transport has been in production now for almost twenty years and forms the backbone of the U.S. Air Force’s strategic lift. It replaced the Cold War era C-141 aircraft and has been built by Boeing (CA) at their plants in Long Beach, CA and St. Louis, MO. The Air Force actually possesses more C-17’s then originally planned because Congress has been adding them to the budget for the last few years. In 2010 the new Obama Administration did not request any further production of the system but Congress added them and the President did not follow through with a veto.
The 2011 defense budget also contained no C-17 procurement and this has been met with a better reception by Congress in general. There are still those Senators and Representatives from California, Missouri and Kansas who would like to see more aircraft built. They are certainly being used, but the Air Force and DoD argue that the money could be spent on more important parts of the defense budget. There are also concerns that when the Congress adds aircraft they do not necessarily fund the support which takes money out of the budget as well.
The Long Beach plant will close when production of the aircraft ends which would be a big blow to the local economy.
Despite Congress’ better attitude this year the Department must have some concerns as they released a strongly worded article yesterday detailing the reasons why no more aircraft are needed. This reads in part “..defense officials agreed with the subcommittee’s leaders, Sens. Thomas Carper and John McCain, that the C-17, in addition to the C-5, has been critical to airlift in and out of Iraq and Afghanistan. However, they said, the military’s current fleet of 223 C-17s and 111 C-5s is more than enough airlift capability for years to come.” It also contains a threat as last year that the President “.. has promised to veto any legislation that provides for more C-17s.”.
Does that mean there will be no more U.S. orders for the C-17? It might, and it might not. Congress is loathe to end programs like this that are not only successful, used and provide several hundred jobs across the U.S. Boeing certainly would like to keep the line going. The defense budget looks like it may make it to the floor of the Senate and House without C-17. That allows floor amendments and the conference committee to add the transports. If the Congressional leadership is disciplined it may end up without additions.
The other concern is how well Congress believes Obama will veto the bill over a few billion spent on the C-17. If they don’t think he will in the end as happened last year then the aircraft quantity may increase.
Photo from TMWolf Flickr photostream.
Filed under: Airbus, Boeing, Business Line, Companies, Congress, Countries, Department of Defense, development program, EADS, Events, Federal Budget Process, France, Germany, logistics, McDonnell Douglas, Military Aviation, production program, Proposal, Protest, Services, U.S. Air Force
Yesterday the formal report by the World Trade Organization (WTO) on their investigation of complaints by the U.S. Government and Boeing (BA) that EADS (EADS:P) and its subsidiary, Airbus, received illegal subsidies was released. The WTO did not support all aspects of the complaint but did say that launch aid provided by European governments to the airliner company was wrong. This launch aid was normally in the provision of low interest loans that were only paid back once the sale of the aircraft became profitable. The aid was considered illegal export subsidies.
U.S. politicians supportive of Boeing’s bid for the new KC-X aerial tanker for the Air Force seized on the report to aid their quest to have EADS bid either rejected or adjusted to reflect the addition of the illegal subsidies. The Pentagon has clearly stated several times in the past that as part of their source selection process they cannot and will not take into account the loans and other aid.
Congress recently passed legislation in the House that is an attempt to force the Defense Department to do that. The Senate needs to also vote on it and it will then move to a discussion of whether the DoD will follow that requirement.
The WTO said that without this aid the company would not have been in as good financial shape as it has been and could not afforded to develop some products — including the superjumbo airliner A380. The WTO may force the company to pay back some of the money, or allow the U.S. to impose tariffs on European goods.
The WTO did rule though that other aid the company received such as tax breaks or infrastructure support rose to the level of illegal subsidies. EADS and the European governments will appeal the case back to the WTO and are waiting to hear about their counter complaint. In this they are claiming that the money Boeing received from the U.S. military for Research & Development (R&D) amounts to illegal subsidies as well as it helped develop their commercial aircraft. That ruling may be announced before the end of the month.
The KC-X program is now on its third attempt to buy a new tanker to replace the aging KC-135 aircraft. The WTO ruling will make it easier for Boeing’s supporters to claim EADS is undercutting prices and causing the source selection process to be even more difficult. It also allows for a protest by either company if they lose and will motivate Congress to interfere even more.
The situation has been caused by the lack of aircraft manufacturers in the world. Really only Boeing and EADS may bid on the contract. With the demise of McDonnell Douglas in the Nineties there exists only one U.S. source. Awarding a sole source contract to Boeing will be difficult and the Air Force wants at least a modicum of competition.
Further delays seem inevitable.
Photo from Monica’s Dad’s flickr photostream.
Filed under: BAE Systems, Boeing, Business Line, Companies, Contract Awards, Department of Defense, Events, logistics, McDonnell Douglas, Military Aviation, production program, Rolls-Royce, Services, training, U.S. Navy
The U.S. Defense Department awarded a contract to Rolls-Royce to deliver F405-RR-401 jet engines. The $90 million contract will be to build the engines for the T-45 jet trainer as well as perform maintenance and logistics support for them. The bulk of the production will occur at Rolls-Royce’s Indiana facilities with support occurring wherever the Navy needs it.
The T-45 Goshawk is a modern, singled engine two seat trainer. Based on a BAE design it was originally manufactured by McDonnell Douglas in the United States before that company was acquired by Boeing. Over two hundred of the aircraft have been delivered to the Navy and they are able to conduct carrier landings and training.
Filed under: Boeing, Business Line, Companies, Countries, D'Assault, EADS, Events, FMS, India, Lockheed Martin, McDonnell Douglas, MiG, Military Aviation, production program, Proposal, SAAB, Trade Shows and Events
The six companies that submitted proposals for India’s new Medium Multi-role Combat Aircraft (MMRCA) contract will all be in attendance at the Aero India International Show. The Economic Times reports that the competitors for the potential $10 billion contract will be at the show along with a host of other U.S. and European companies. Boeing, Lockheed, EADS, SAAB, Dassault and MiG all submitted proposals for the program. The theme of the show will be business activity between Indian and foreign companies. This contract is now one of the largest for tactical aircraft out for bid, and the companies will be touting their wares at the show.
Filed under: Boeing, Business Line, Companies, Congress, Contract Awards, Events, logistics, McDonnell Douglas, Military Aviation, production program, U.S. Air Force
The BBC News reports that the U.S. Air Force awarded Boeing a contract to build 15 C-17 transport aircraft. The contract is worth almost $3 billion. The Air Force had been debating whether to buy any more C-17 but Congress provided the funds for these aircraft. The C-17 and C-5 fleet has been used a great deal supporting operations in Iraq and Afghanistan. The C-17 line was building some FMS aircraft for Qatar, UK and Canada but could see an end to production in the near future. This lot will continue the production for several more months.
Filed under: Australia, Boeing, development program, Lockheed Martin, McDonnell Douglas, Military Aviation
Australia had being going back and forth on wanting the F-22 instead of the JSF. China, I am sure, has a lot to do with this. According to this story, the decision has been made to go with the F-35. America has a law preventing the export of the F-22, but Australia had asked for it anyway. There was some desire from the USAF to sell it, as every FMS sale lowers the price and the Air Force would like some more. The only way that is going to happen is to get it cheaper. So it will have to be seen if any sales overseas are made. Certainly Australia and the UK would be the prime customers for the F-22.
Filed under: Australia, Boeing, Contract Awards, McDonnell Douglas, Military Aviation, production program
The Australian government decided after all to go ahead with the purchase of the F/A-18 to gap fill until the JSF is available. An article is here. The new more liberal government had discussed canceling the contract to save money. Now they claim they have been able to reduce the total cost, so it is worthwhile. See a previous article here. Read more
Filed under: Boeing, Contract Awards, EADS, logistics, McDonnell Douglas, U.S. Air Force
The US Air Force gave Boeing a $307 m contract to continue logistics support for the most modern tankers in their fleet, the KC-10. See the St. Louis Business Journal here for more. Boeing and EADS continue to wait for the US Air Force to come to some decision on the KC-X program. If the Air Force had invested in more KC-10 aircraft in the 80’s, when there certainly was an ability to buy them, there would not be the issues today. The KC-X arose out of the ill-fated plan to lease KC-767 aircraft from Boeing in 2001-2002. This collapsed under ethical issues. Now six years later there is still not a replacement aircraft.
Filed under: Boeing, Contract Awards, development program, McDonnell Douglas, U.S. Navy
The US Navy awarded Boeing component McDonnell Douglas a $74 M contract for anti-ship missile Harpoon III development. See Forbes here for more information. The Harpoon is one of only two successful anti-ship systems developed in the west. The other being the French designed and produced Exocet. For more on the Harpoon system see this at Wikipedia.