EADS-NA Says Not Comfortable Priming KC-X Contract

Aviation Week is reporting that EADS-North America felt it needed an partner on the KC-X contract as it was not comfortable being the prime for such a large effort. While EADS has experienced some decent growth in the U.S. it still has a fairly lean organization.

The company was confident that they could provide to Northrop the basic airframes on cost and schedule. Northrop would have then been responsible for the necessary military modifications. EADS would have had to find a partner in General Dynamics, Raytheon or Lockheed Martin. There would be few large contractors available in the U.S. with the past experience to support a contract of this size.

Press Release — Statement on US Refueling Tanker Program Announcement

Statement on US Refueling Tanker Program Announcement

WASHINGTON, March 9 /PRNewswire-USNewswire/ — The European Commission notes yesterday’s decision by Northrop Grumman / EADS not to submit a bid to the US Department of Defense for the US Air Force’s aerial refueling tanker contract.

“It is highly regrettable that a major potential supplier would feel unable to bid for a contract of this type. Open procurement markets guarantee better competition and better value for money for the taxpayer,” stated EU Trade Commissioner Karel De Gucht.

In February 2008, Northrop Grumman / EADS was selected and awarded the contract to provide aerial refueling tankers for the US Air Force in a fair and transparent competition. This was a positive sign for free and open competition across the Atlantic. This also seemed to indicate that successful bids are possible when European industry teams up with US industry and they are allowed to compete fairly. This award was subsequently cancelled at the end of 2008.

In December 2009, Northrop Grumman / EADS expressed serious concerns to the Department of Defense and the US Air Force on the proposed acquisition criteria for the contract.

The European Commission would be extremely concerned if it were to emerge that the terms of tender were such as to inhibit open competition for the contract.

The US defense trade balance with the EU has traditionally been significantly in the US’ favor. In 2008 the US exported $5 billion and imported only $2.2 billion worth of defense material, in line with a historic ratio of double exports to imports.

The Commission will be following further developments in this case very closely.

Source: Delegation of the European Union to the United States

Statement From Northrop Grumman on U.S. Air Force Aerial Refueling Tanker Program — Press Release

Statement From Northrop Grumman on U.S. Air Force Aerial Refueling Tanker Program

WASHINGTON, March 8 /PRNewswire-FirstCall/ — The following is a statement from Wes Bush, Chief Executive Officer and President of Northrop Grumman Corporation (NYSE:NOC) , concerning the U.S. Air Force aerial refueling tanker program.

“After a comprehensive analysis of the final RFP, Northrop Grumman has determined that it will not submit a bid to the Department of Defense for the KC-X program. We reached this conclusion based on the structure of the source selection methodology defined in the RFP, which clearly favors Boeing’s smaller refueling tanker and does not provide adequate value recognition of the added capability of a larger tanker, precluding us from any competitive opportunity.

“Northrop Grumman fully respects the Department’s responsibility to determine the military requirements for the new tanker. In the previous competition, Northrop Grumman was selected by the Air Force as offering the most capable tanker for the warfighter at the best value for the taxpayer. However, the Northrop Grumman and EADS team is very disappointed that the revised source selection methodology now dramatically favors Boeing’s smaller refueling tanker. We agree that the fundamental military requirements for the new tanker have not changed since the last competition, but the Department’s new evaluation methodology now clearly favors the smaller tanker.

“We continue to believe that Northrop Grumman’s tanker represents the best value for the military and taxpayer – a belief supported by the selection of the A330 tanker design over the Boeing design in the last five consecutive tanker competitions around the globe. Regrettably, this means that the U.S. Air Force will be operating a less capable tanker than many of our Allies in this vital mission area.

“Our prior selection by the Air Force, our firm belief that we provide the best value offering, and the hard work and commitment of the many individuals and communities on our team over many years made this a difficult decision for our company. But we have a fiduciary responsibility to our shareholders to prudently invest our corporate resources, as do our more than 200 tanker team suppliers across the United States. Investing further resources to submit a bid would not be acting responsibly.

“We have decided that Northrop Grumman will not protest. While we feel we have substantial grounds to support a GAO or court ruling to overturn this revised source selection process, America’s service men and women have been forced to wait too long for new tankers. We feel a deep responsibility to their safety and to their ability to fulfill the missions our nation calls upon them to perform. Taking actions that would further delay the introduction of this urgent capability would also not be acting responsibly.

“We recognize that our decision likely creates a sole-source outcome for Boeing. We call on the Department to keep in mind the economic conclusions of the prior round of bidding as it takes actions to protect the taxpayer when defining the sole-source procurement contract. In the previous round, the Air Force, through a rigorous assessment of our proposal, determined that it would pay a unit flyaway cost of approximately $184 million per tanker for the first 68 tankers, including the non-recurring development costs. With the Department’s decision to procure a much smaller, less capable design, the taxpayer should certainly expect the bill to be much less.”

Northrop Grumman Corporation is a leading global security company whose 120,000 employees provide innovative systems, products, and solutions in aerospace, electronics, information systems, shipbuilding and technical services to government and commercial customers worldwide.

Source: Northrop Grumman Corporation

EADS Supports Bid For KC-X

It is being reported by various sources that EADS is pressuring Northrop Grumman to go ahead and submit a bid for the new KC-X RFP. Northrop had informed the Government that they planned not to if the terms were not significantly changed. They felt the RFP was favoring Boeing’s cheaper, smaller KC-767 aircraft.

The final RFP came out two weeks ago and still no word from Northrop that they will go ahead and submit something in May. EADS obviously would like another chance to win the contest after they lost the last one to Boeing’s protest in 2008. The $35 billion would go a long way to make up for the lost A400M revenue.

Boeing Unions Support Single Source Contract

According to The Seattle Pilot-Intelligencer the International Association of Machinists District 751 wrote to the new Build Them Both Coalition that they support Boeing’s bid for the KC-X. They were responding to a letter sent to them by Build Them Both. The IAM argued that a split buy would not meet their goals of maximizing Washington jobs.

As Expected Alabama Press Critical Of Air Force RFP

Writing in support of Northrop Grumman and the “Mobile region” the Mobile Press-Register has and editorial summing up the situation on the new RFP from their view. They do not demand that the RFP be changed or the contract be given to Northrop and EADS but they do point out that:

“If Northrop pulls out of the contest, Boeing may get the tanker contract, but the entire deal will be tainted — first by Boeing’s own corruption and collusion with some Pentagon officials several years ago over an earlier version of the tanker deal, and second by a decision-making process that puts politics above defense needs.”

It is true that a single bid competition is not much of a competition.

New Group Advocating For Split Tanker Buy

The Washington Post writes today about a new group buying advertisements to support the concept of buying KC-X tankers from both Boeing (BA) and Northrop Grumman (NOC). The group is called “Build Them Both” and its financiers have so far remained private. The idea of a split buy was floated last year but despite the ability to produce aircraft faster the related logistical costs are so high that the Air Force and DoD won’t consider it.

The article may be found here as the second part of the post.

Hopes High That This Try Is The End Of The KC-X Contest

Over at BNET: Government where I also publish I have a piece on how this third try will be the winning one for the Air Force and Defense Department to get a new aircraft to replace the aging KC-135 fleet. There still remain many challenges with the contest as Northrop may not bid and Boeing has expressed concerns with the fixed price portion of the contract.

It will be an interesting next few months as this is all worked out. Next deadline is May 10th when proposals are due.

In Comparison To Those In Alabama Boeing Supporters Confident

The Herald a newspaper in Everett, WA has an article discussing how happy and confident Boeing’s legislator supporters are with the new RFP released yesterday by the Air Force. This is the opposite as to how those from Alabama feel. Senator Patty Murray (D-WA) is quoted as saying, “Given a fair shot, Washington state’s workers will bring home this contract,” Murray said. “We have the skills, the technology, and the experience of having built the only combat-ready tanker to prove it.”

If Northrop Grumman (NOC) and its partner Airbus don’t submit a bid it will be hard for Boeing (BA) to not win the contract. Hence the happiness of their supporters.

Alabama Senators Not Happy With New RFP

In an article in The Mobile Press Register Senators Shelby (R-AL) and Sessions (R-AL) make it clear that they are not happy with the new RFP. Shelby says “The final RFP discredits the integrity of the entire process,” and Sessions seems to feel that Northrop Grumman (NOC) won’t bid. He laments the lack of competition in the process.

This of course is not a surprising reaction as Northrop and EADS planned to assemble the basic A330 aircraft in Mobile, AL and then integrate the military systems at a Northrop facility.

CONG. John Murtha (D-PA) Dies, Backed Split Tanker Buy

Congressman John Murtha (D-PA) a senior Democratic Representative and the Chair of the Defense Appropriations Subcommittee died yesterday from surgery complications. Murtha had at one time pushed the idea of awarding KC-X contracts to both Boeing (BA) and the Northrop Grumman (NOC) and EADS (EADS:P) teams as a way to rapidly replace the aging KC-135 aircraft. He eventually gave up on the idea.

The rationale for the split buy is that it builds the aircraft quicker while also removing the uncertainty of a protest over a single award. The U.S. Air Force and Department of Defense have made it clear that they do not want to do this due to the increased logistical cost associated with operating two different aircraft. The systems might complement each other with the bigger, longer range KC-30 being based further back in the U.S. and its more permanent bases overseas with the KC-767 flying forward and supporting operations in-and-around South West Asia.

The dual award would also mean that Northrop and EADS will be guaranteed work so their threat not to participate in the latest round would not need to be carried out. That is why organizations like the Aerospace Alliance representing Mississippi, Alabama and Florida support they idea. Some work in Mobile, AL is better then none.

The chances of a split buy are fairly remote but there are still those who want it.

Senator Shelby Freezes Obama Nominees Over KC-X

It has been reported that Senator Shelby (R-AL) has placed a hold on every nomination made by President Obama that must be confirmed by the Senate. This means that without a vote of over 60 Senators the nominations cannot be considered. Putting a hold on specific individuals is not uncommon but the use of the “blanket hold” is. Reportedly Shelby is upset about progress on the KC-X RFP as well as plans to build a new national Explosive Ordnance Disposal (EOD) school at Redstone Arsenal in Huntsville, AL.

Shelby had been a Democrat until the election of Bill Clinton when he switched parties. It would be hard to believe that this broad attack will force any changes to the RFP to make it more attractive to Northrop Grumman (NOC) and EADS (EADS:P). It will also be hard for Shelby to sustain this kind of action for long.

Support For Northrop Not Bidding On KC-X

Northrop Grumman and its partner EADS threatened a few weeks ago not to participate in the next attempt at buying a new tanker for U.S.A.F. Many feel that this is just a negotiating ploy to have the terms of the RFP changed to make it easier for Northrop to win. The company has expressed concern that the way the RFP is written now it will favor Boeing to the point that Northrop sees no reason to bid.

The U.S.A.F. and DoD need to attract multiple bids. They cannot go through with the program without some sort of competition. Now it has been made clear that both the Board of Directors of Northrop, stock analysts are shareholders are supportive of the plan not to propose. One would think that there should be an attempt to win $35 billion of work but the goal of Mr. Bush, the new CEO, and his supporters is to increase the margin and profitability of the company. This means he and his supporters want to concentrate on getting work and getting it done.

The KC-X program in its third iteration faces some problems. The chance of a protest by either losing side is high. Both teams have supporter in Congress. The program may be hard to get up-and-running with so much politics involved. If Northrop feels there is little chance of them winning this contract again or quickly making money off of it then they should not proceed.

Two Tanker Buy Pushed Again

The Mayor of Mobile, AL was recently on Capitol Hill raising the issue of buying the new KC-X tanker from both Boeing (BA) and Northrop Grumman (NOC). Northrop and its partner EADS (EADS:P) plan to assemble the A330 aircraft in Mobile and then fit them out with the necessary equipment at a Northrop plant. The idea of awarding contracts to both companies has been discussed before. The primary benefit besides avoiding a protest and delaying the program again would be to more quickly replace the KC-135 aircraft.

The U.S.A.F. and Defense Department have not been positive about this idea in the past due to the larger, more expensive logistics tail required to support two dissimilar systems. During World War II and the Cold War the U.S. often did invest in multiple systems for a mission often operated by separate services. The U.S. military has not had the resources to afford this kind of commitment.

The new RFP is expected to be released within a matter of weeks. For the Air Force to do a dual award it would require development and approval of a whole new acquisition strategy. This would lead to even further delays in this contract. The chances of buying the two aircraft in the next year or so are very slight.

Alabama Keeps Pushing The Air Force

Supposedly in a meeting between DoD and Air Force officials with members of the Alabama Congressional delegation it came out that the U.S.A.F. will adjust the KC-X RFP to keep Northrop Grumman (NOC) and EADS (EADS.P) in the competition. This of course is a report by Senator Sessions (R-AL) from the meeting. There is no official response as to how the U.S. officials will react to Northrop’s threatened non-participation.

It is in the best interest of the U.S. Government to have two bidders for this program and this may be a necessary step to assure that.

Senator Murray (D-WA) Illustrates She Knows Nothing About U.S. Economy

The competition between Boeing (BA) and Northrop Grumman (NOC) for the KC-X contract is pretty hot. As with many of these contracts the states that stand to benefit the most legislators are supportive. The states being Washington and Kansas for Boeing and primarily Alabama for Northrop. At the same time it doesn’t help anybody to throw insults around and play loose with facts.

Recently Senator Patty Murray of Washington was on National Public Radio (NPR) and supposedly said that “I would challenge anybody to tell me that they’ve stood on a line in Alabama and seen anybody building anything.” Ms. Murray demonstrates taht she knows little or nothing about the U.S. economy and Alabama’s contribution.

Mercedes Benz and Honda make thousands of cars a year in Alabama one assumes on a production line. Hyundai has a 500,000 car a year plant as well. Boeing employs thousands of people in the state as well working for NASA and the Defense Department. So she insulted those people while supporting them at the same time.

The contest should be above such petty insults.

Senator Murray (D-WA) Illustrates She Knows Nothing About U.S. Economy

The competition between Boeing (BA) and Northrop Grumman (NOC) for the KC-X contract is pretty hot. As with many of these contracts the states that stand to benefit the most legislators are supportive. The states being Washington and Kansas for Boeing and primarily Alabama for Northrop. At the same time it doesn’t help anybody to throw insults around and play loose with facts.

Recently Senator Patty Murray of Washington was on National Public Radio (NPR) and supposedly said that “I would challenge anybody to tell me that they’ve stood on a line in Alabama and seen anybody building anything.” Ms. Murray demonstrates taht she knows little or nothing about the U.S. economy and Alabama’s contribution.

Mercedes Benz and Honda make thousands of cars a year in Alabama one assumes on a production line. Hyundai has a 500,000 car a year plant as well. Boeing employs thousands of people in the state as well working for NASA and the Defense Department. So she insulted those people while supporting them at the same time.

The contest should be above such petty insults.

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.

EADS Continues Efforts To Gain Support Of Tanker

It has been reported that EADS spent almost $200,000.00 last quarter on just tanker related lobbying. It is not uncommon for larger companies of all sorts to spend time in Congress working to support their programs and proposals.

The KC-X contract being so important this effort will be even more concentrated. EADS work with its supportive Congressional members has already worked out well especially with the delegation from Alabama. Support like this will be key as the RFP goes final, proposals are submitted and the source selection works its course. The next quarter reports should show similar numbers.

Northrop Threatening No Participation Over Cost Data

Yesterday Northrop announced that it is considering not participating in thew new KC-X competition. They are concerned that the the way the price requirement is structured may not be fair to them. They are also pursuing the complaint that their cost data was provided to Boeing during the protest of the last award and want access to the same information.

If Northrop and EADS don’t submit a bid it will be hard to get actual competition on the contract. That would leave just one submission, Boeing, or perhaps two from them if they go the route of having a 777 as well as a 767 proposal. This situation would make it hard for the Air Force to proceed.

The chances of Northrop doing this is low and the Department of Defense realizes it. This is the largest procurement coming down the road and both EADS and Boeing need the work. Of course if there is really a belief that their bid cannot win no matter what then Northrop should just save the money and not prepare one. This is only the draft RFP so the next year or so should be interesting.

Alabama Congressional Delegation Pressing For Northrop And EADS

The Alabama Congressional Delegation will hold a press conference tomorrow to discuss the newly re-started KC-X contest. Based on comments today made by Senator Shelby (R-AL) there is concern among them that the cost focused draft RFP is not the best solution and my be biased against the Northrop Grumman/EADS proposal. The war of words over this has just begun and will drag on until the contract is awarded and the protests end.

Alabama And Mississippi To Unite For Aerospace Lobbying, KC-X

The Governors of Alabama and Mississippi, Bob Riley and Haley Barbour, have launched an effort to establish a non-profit organization to lobby for aerospace in the Gulf Coast area. The two Republicans hope that Florida and Louisiana will join their efforts to “create a world-class aerospace, space and aviation corridor from Panama City, Fla., to Louisiana.” Those four state already have a great deal invested in support to NASA. The hope is that the organization will help gain more contracts and investment in the area for aerospace. Their first target is the KC-X tanker contract which will be assembled in Mobile, AL if Northrop-Grumman and EADS win.

GLOBAL LOGISTICS LEADER SELECTS HUNTSVILLE AS HEADQUARTERS FOR U.S. OPERATIONS — Press Release

GLOBAL LOGISTICS LEADER SELECTS HUNTSVILLE AS HEADQUARTERS FOR U.S. OPERATIONS

Taos Industries’ parent Agility Defense & Government Services, Inc., attracted by growing defense presence, quality of life

HUNTSVILLE, Ala. – October 14, 2009 – Agility Defense & Government Services, Inc. (DGS), the U.S. defense arm of leading logistics provider Agility, announced today that it will make Huntsville its home.

Agility DGS owns Taos Industries, the logistics and military procurement company that was founded in Huntsville in 1991.

Joseph M. Cosumano Jr., president and CEO of Taos Industries, has been named president of Agility DGS Inc. Cosumano, a retired Army lieutenant general, served as commander of the U.S. Space and Missile Defense Command in Huntsville from 2001 to 2003. Before joining Taos Industries, he was senior vice president of Kellogg, Brown & Root and, before that, vice president of ATK Thiokol.

Agility’s decision to consolidate U.S. operations in Huntsville reflects the community’s emergence as a leading center for aviation, missile, space and procurement activity, Cosumano said.

“Huntsville has become a critical hub for the U.S. military and defense industries. It’s important for us to deepen our existing roots here so we can be close to our partners and to key customers such as the Army Materiel Command, Redstone Arsenal and the Army Security Assistance Command,” he said.

Agility DGS Inc. is comprised of four primary business lines, focusing on logistics solutions:

* Taos Industries. Taos specializes in procurement of non-standard military material for the U.S. Defense Department.
* Agility International Inc. Agility International Inc. is a world-class freight handler and worldwide leader in household relocation services for government and corporate customers.
* Commodity Services. Commodity Services specializes in procurement support for arsenals and depots, as well as general commodity procurement solutions in fuels, food, lumber, repair parts, and other goods.
* Logistics Services. Logistics Services provides innovative supply chain solutions and integrated logistics, such as base operations, inventory and facilities management, material disposal, and reutilization services to DoD, NATO, the U.S. Department of Homeland Security and other government agencies.

“Huntsville and Madison County offer us an ideal combination of business opportunities and quality of life,” Cosumano said. “They’ve got critical mass in the defense industry, along with a highly educated labor pool. This is an attractive, affordable place to live. Our plan is to grow here and contribute to the economy and the community.”

About Agility

Agility is one of the world’s leading providers of integrated logistics to businesses and governments. It is a publicly traded company with $6.8 billion in annual revenue and more than 37,000 employees in over 550 offices and 120 countries. Agility brings efficiency to supply chains in some of the globe’s most challenging environments, offering unmatched personal service, a global footprint, and customized capabilities in developed and emerging economies alike.

Agility Defense & Government Services (DGS) is the public sector arm of Agility and the parent of DGS Inc. It offers logistics services, commodities services and supply chain solutions to governments, relief agencies and international institutions worldwide.

For more information, please call S. Hobie Frady at Taos Industries, Inc., at (256) 772-7743 or visit our website: www.agilitylogistics.com.

GATR Technologies Sells Innovative Satellite Antenna To U.S. Military

The Alabama company GATR Technologies was awarded a contract by the U.S. Navy to provide inflatable satellite communication terminals. The contract is an Indefinite Delivery/Indefinite Quantity (ID/IQ) contract which means that under it the Navy may buy as many as they want but doesn’t necessarily have to buy any. The one year contract could be worth up to $26 million to the company.

GATR Technologies makes a rather innovative system where the antenna and terminal are part of a big inflatable ball. This means that it is easy to transport and may be set up in rough terrain or remote locations just be inflating it. It weights very little and is quite portable. The system require two cases as well as requiring an external power source. This concept just demonstrates the ingenuity that is out there when it comes to making systems more effective.

Israel Buying Armored Trucks In The U.S.

Arotech Corporation of Michigan reported their recent quarterly earnings. The company still performed at a loss but compared to the same quarter last year saw strong improvement. The company almost halved its loss from $1.9 million to $1 million on revenues that were up almost $3.5 million.

One of the prime reasons for this growth in revenues was the sale of armored trucks, the David, to Israel. The company also makes simulators and armored plate for the military market as well as some commercial products. It’s subsidiary, MDT Armor Corp, makes the David in Alabama.

Israel like the U.S. and its allies in Afghanistan and Iraq faces a significant mine and Improvised Explosive Device (IED) threat. The provision of a armored truck makes sense as they must move supplies and troops by road along dangerous borders with the Gaza Strip or West Bank. The David is considered an “ultra light armored personnel carrier” that can defeat small arms and grenades as well as lighter IED attacks. The market for these kinds of vehicles is fairly significant as they can be used for internal security missions as well as light combat duty.

Unfortunately there are many parts of the world where military and police face these kind of threats from terrorist and insurgent groups. The David is one of several kinds of vehicles that would be useful in these kind of situations to move small groups of troops or supplies.

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