KC-45 fallout continues

With the decision to not go ahead with the KC-45 recompete and the cancellation of the planned source selection, the Pentagon has decided that due to the decision to cancel the original contract Northrop Grumman, and EADS, will receive some termination fee. This will pay the company for any work that the did while the contract was active prior to the protest and GAO recommendation to recompete the proposal. Termination fees are common for when the Government cancels the contract for administrative reasons. If ti is canceled due to non-performance then it gets a little more difficult. Due to the high visibility of this decision, I am sure the Congress will take a look at any money payed to Northrop Grumman.

See the Los Angeles Times for more on this.

KC-X haunts CSAR-X

With the decision to punt on the KC-45 recompete by the current administration there are some worries that this might affect the CSAR-X contract as well. Last word was that the announcement of who won the new GAO ordered competition would come sometime this Fall. Now some of the competitors; Sikorsky, Augusta Westland and Boeing; are concerned that perhaps this decision will delay the announcement of the winner. Boeing had won a contract only to have a protest upheld by GAO for the USAF not applying their criteria correctly.

See this short AP article for more.

We’re still in, says EADS

Denying a report in a German magazine, reported here, EADS restates that they will remain competitors for the KC-45 contract. Secretary of Defense Gates recommended postponing the reopening of the KC-45 bid process until next year when a new administration will be in power. EADS was reported as not wanting to participate in future contract proposals if the current one was delayed. The company is now saying that that is not the case.

See CNNMoney.com for that story.

Tanker decision fallout

A fallout from Secretary Gates’ decision to postpone the KC-45 RFP is that EADS now is discussing whether they will bid on the contract next year. Boeing had threatened to not compete, feeling the terms where not in their favor and now EADS is upset that the recompete cannot go forward. Without two competitors it will be hard to have a competition. Unfortunately unless you want a Russian aircraft proposed their are only two companies capable of bidding - Boeing and EADS. McDonnel Douglas, who actually won the last tanker contract with the KC-10, is now part of Boeing.

See the press release at TheEarthTimes.

Gates gives up

The Secretary of Defense today canceled the KC-45 re-proposal. He decided that there was not enough time to do this before the end of President Bush’s second term. The announcement was made via a press release this afternoon. Secretary Gates stated that ““It has now become clear that the solicitation and award process cannot be accomplished by January,” he said. “Thus, I believe that rather than hand the next administration an incomplete and possibly contested process, we should cleanly defer this procurement to the next team.”

This decision ends temporarily a seven year saga that started with Boeing being given a lease for 767 tankers, through a proper competition that was thrown out by the GAO, and what was expected to be a quick recompete starting this month.

See the actual release at DefenseLink.mil.

Boeing workers want strike, union postpones

Update - The machinists started their strike last night. While some work could be done, no aircraft assembly is possible. This will delay the 787 further, and have a negative impact on their bid for the KC-45.

See a The New York Times story here.

The Boeing machinists voted to strike effective Wednesday night, but the leaders of the Union have given Boeing 48 more hours to come to an agreement. The strike will start tonight if no deal is reached. The leadership decision was controversial and not well received by the members who had voted overwhelmingly to strike. Any extended strike, as Sikorsky illustrated in 2006, will be very disruptive to the delivery schedules for all Boeing problems. It is especially key now as Boeing is expected to turn in their new proposal for the KC-45 soon.

See the St Louis Business Journal for some more information.

Air Mobility Command General pessimistic on tanker

Gen Lichte, the commander of AMC, expressed concern with the pace of the KC-45 recompete. He is concerned that not only will there be further delays in the award, but that the loser will then protest the recompete. DoD, taking over the competition from the Air Force, had originally planned for proposal submission in August. At Boeing’s request they have delayed this until 1 October, with a goal of awarding the contract by the end of Calendar Year 2008. Boeing is asking for more time, claiming that the requirements may drive them to bid a different aircraft then the B767 previously proposed. EADS and Northrop Grumman will most likely use a proposal that is mostly like the one that won last time. They even had the first KC-45 under construction.

Business Week has an article here.

Union and Boeing try to agree

Boeing is negotiating with the machinists union who make up the core of its workforce on both military and commercial aircraft. Today they sent their best and last offer. This includes the employees who will build the tanker for the US Air Force. So in the middle of trying to write and cost a proposal to the Air Force for a program that is seen as key to the company holding onto a market they are trying to prevent work stoppages. Strikes are the kind of thing that can kill a program’s schedule.

See Excite News for more.

Update: The union leaders have recommended rejection of the Boeing proposal and striking on 4 September. While this will have a large effect on civil aircraft production it won’t help Boeing get ready for the KC-45 if they win again.

See Bloomberg.com for a story on this mess.

Former Undersecretary of Acquisition criticizes Boeing

The former Undersecretary of Defense for Acquisition, Technology and Logistics was quoted in a newspaper article criticizing Boeing for wanting a delay in submitting their proposal for the KC-45 recompete. Jacques Gansler who worked in the second Clinton administration said that because of the critical need for the new aircraft if Boeing cannot support the schedule, perhaps they should just not bid. He feels that it would not be proper for the government to give the delay in this situation.

For more see The Guardian.

Boeing and KC-45 in turmoil

After meeting with DoD and the US Air Force to discuss the new tanker RFP due to the GAO upholding their protest, Boeing is now saying that without significantly more time to prepare a proposal they may have to drop out. The new schedule is for the Boeing and Northrop Grumman teams to submit by the end of October with a decision before the new calendar year. Boeing is saying that they may need to bid a larger aircraft then the KC-767 proposed last time due to the fuel capacity and range requirements. A variant of the 777 would have to be used. Boeing supposedly is asking for a more then 180 day delay in the submissions. EADS and Northrop Grumman will most likely submit a tweaked version of their original winning proposal.

For more see The Wichita Business Journal and WashingtonPost.com.

US Air Force to award CSAR-X recompete soon

In a contract that has fallen to the back burner recently due to KC-45 events, the Air Force announced that they would complete the recompete for the CSAR-X by September. Contract award would be soon after. The CSAR-X contract to replace the HH-60 PaveHawk aircraft was originally awarded to Boeing with a variant of the CH-47. Sikorsky and Lockheed Martin protested and won with the GAO ruling that the Air Force did not apply the selection criteria properly. The whole contract was recompeted with Boeing, Sikorsky and Lockheed resubmitting bids.

For more see this article at www.pressconnects.com for the Binghamton area.

Europeon view of KC-45

This article in the Deutsche Welle provides a good round up of the current on goings of the KC-45 recompete. It reiterates that despite rumors on not participating in this round Boeing went ahead and had their meeting with OSD and the Air Force to discuss the RFP. Obviously there is a great deal of interest in Germany, and Europe as a whole, for EADS to win the contract. It would be the largest to date for a primarily European based company.

Boeing moves forward with KC-45

Despite reports earlier in the week, it seems that Boeing will pursue the KC-45 re-proposal. See a story here. The two possible contenders met with US Air Force and DoD representatives to talk through the new RFP. The goal of OSD is to award a contract by the end of the year. The tanker replacement process started 7 years ago with the new delays a KC-145 replacement may not be available until 2012-2014.

Boeing may refuse to bid on KC-45 recompete

Rumors are swirling that Boeing may not bid on the new contract for the KC-45. See an article here. Supposedly Boeing is piqued that the new requirements supposedly favor Northrop Grumman and EADS and will not submit a bid. If there is only one bid it may require the whole process to start over again, of course if DoD and the Air Force change the requirements EADS could claim the same thing and the whole program will get stuck. Unfortunately DoD and the Air Force have to do the new process as GAO upheld the Boeing protest. More to come on this very complicated story.

DoD and USAF agree to recompete KC-45 contract

In light of the GAO report the USAF and DoD decided to recompete the new tanker contract. See an article here. This, like the CSAR-X, means that a whole new competition will be held. The Air Force will rewrite the RFP and Boeing and Northrop Grumman will resubmit proposals. Much of the work preparing these will be already done which will speed up the process for the bidders.

KC-45 protest summary report released

The GAO released a summary of why they upheld the protest by Boeing over the KC-45 award. See an article here. The chief reason was due to the Air Force’s failure to properly apply the criteria for source selection. Of the several reasons listed two ones that stand out is that they gave EADS credit for exceeding a requirement when they should not have, and rather than just noting the risk associated with the Boeing bid the Air Force calculated a dollar figure to overcome that risk. This alone drove up the cost proposal of the Boeing K-767 aircraft. The Air Force technically still does not have to withdraw the award to Northrop Grumman and EADS, but they would be best off reopening the competition.

Market bets on new tanker competition

EADS shares are down in Europe, and I am sure Northrop Grumman’s will also drop today. See this article. The market is assuming that the Air Force will follow the GAO’s recommendation and reopen the competition. EADS performance has been heavily affected by the delays to the A380 and the scandals with their management. Also they have labor issues as they try to sort out the French-German split and make themselves more efficient. There is still a good chance that EADS will win the new competition.

Seattle Times’ Analysis of Boeing Contract Win

In this article entitled Boeing Wins Tanker Protest, But Drama Is Far From Over, the Seattle Times states:

The saga of the Air Force refueling tanker contract is not over by a long shot, though Boeing won a huge victory Wednesday when the Government Accountability Office (GAO) comprehensively backed the company’s protest of the initial contract award.

Read the original article here.

Boeing’s protest sustained by the GAO

The GAO ruled today in Boeing’s favor on the KC-45 protest.  They decided that the Air Force failed to properly apply its source selection criteria and did not calculate some of Boeing’s costs correctly.  See a story here.  The GAO recommended that the competition be reopened.  This is what happened with the CSAR-X contract, ironically enough won by Boeing but now back in source selection.  The Air Force is not required to follow the GAO’s recommendation, but if it does not Boeing is sure to go to the Court of Appeals and Congress could make it very difficult for the Air Force to execute the contract.

Boeing may continue the fight

This article describes a belief that Boeing will move to the next protest step, the Federal Court of Appeals, if the GAO doesn’t rule in its favor. This is not unprecedented, many protests have moved on to this final step. The idea that the Court would continue to put a hold on the contract may not be so true. The Court of Appeals still will most likely rule the way the GAO did, it is very rare that they overturn such a decision. Anyway it seems that this contract fight will continue, the loser being the US Air Force as they wait for a new tanker.

GAO to decide KC-45 protest soon

This article is a good summary of the KC-45 contract. The GAO is supposed to rule on Boeing’s protest within the next two weeks. One would have to bet that they will disallow the protest. There is a chance though, that somehow the Air Force screwed up in how they applied the criteria. Then the process would be reopened again, like the CSAR-X. The article also raises the issue of the US Presidential election. John McCain was the key person that got Boeing in trouble over the attempted lease deal five years ago, and Senator Obama represents the state where Boeing now has its headquarters. Congress has also held off weighing in while the protest wound its course. It is best to think that this is not over yet.

Congress continues to make contracting difficult

The EU Ambassador to the United States (Who knew?) criticizes Congress for including a provision in the FY09 House Defense Authorization Bill that bars US contracts being awarded to companies accused of receiving illegal subsidies at the World Trade Organization (WTO). Of course they mean EADS who have just won the KC-45 contract. The Ambassador points out that if it is mearly the accusation then there is nothing stopping a US company from accusing its foreign competitor of having received these subsidies, even if they have not. It would make more sense to bar those convicted of this. EADS did receive these subsidies for a variety of programs. They claim they paid them back with interest. The WTO will rule later on this. As we have said many times before the Congress was the one who overturned a sole-source contract with Boeing for the new tanker and forced a competition.

Global Warming favors Boeing

According to this article a Washington Democratic Congressman wants to introduce legislation that requires the DoD to evaluate the “green house gas” emissions when awarding defense contracts. If this had been done as part of the KC-45 award, then Boeing would have won as nominally the KC-767 emits less harmful gases then the larger A330. Read more

AP on protests

This article nicely summarizes the situation with protests. In a follow-up to the earlier discussion by Secretary of Defense Gates this makes it seem that DoD is getting tired of companies protesting losses. Unfortunately as we have discussed previously there is nothing to lose for these companies. Business opportunities are limited and the only way to get around a loss is to protest. Of course it creates issues for the winner and DoD in executing what could be very critical programs for the US military. There will be more to come on this.

USAF Secretary comments on protests

Secretary Wynne of the US Air Force discusses protests in this article. The gist is that the Air Force is accepting protests as a matter of course and is working to make the selection process more transparent in an attempt to limit them. The key quote is “”We’ve got so few suppliers that I’m not going to treat them badly because they protest. It’s their right,” Wynne told an aerospace industry group.” Read more

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