Northrop drops out of tanker competition

[David]

AP


WASHINGTON – Northrop Grumman Corp. announced Monday that it won't compete against Boeing Co. for a $35 billion contract to build refueling tankers for the Air Force because Northrop doesn't think it can win.

The decision puts the Pentagon on a path to doing something President Barack Obama said shouldn't happen any more: paying large amounts of money to a major defense contractor without undergoing any competition.

The decision also will probably knock out a major international competitor from gaining a foothold in the U.S. market. EADS, the European Aeronautic Defence and Space Co., had partnered with Northrop Grumman to vie for the tanker but was not expected to be able to compete against Boeing on its own.

Northrop Chief Executive Officer and President Wes Bush said in a statement that the Pentagon's guidelines for the program "clearly favors Boeing's smaller refueling tanker" but that the company would not file a formal protest.

"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," Bush said. "Investing further resources to submit a bid would not be acting responsibly."

The political fallout was swift. Alabama Gov. Bob Riley, where Northrop would have assembled the planes and created thousands of new jobs, called the program a "charade" and said the Pentagon made it "impossible" for Northrop to compete.

"It's disgraceful," Riley said.

Sen. Jeff Sessions, R-Ala., called the development "tragic" and a "dark day for the American warfighter." Added fellow Alabama Republican Sen. Richard Shelby, "The Air Force's refusal to make substantive changes to level the playing field shows that once again politics trumps the needs of our military."

A year ago, Obama said these kinds of no-bid contracts aren't a good deal for the taxpayer and vowed to change the way government agencies do business. With the support of Sen. John McCain, R-Ariz., his campaign rival in 2008, Obama ordered his senior advisers to come up with ways to encourage competition.

"The days of giving defense contractors a blank check are over," Obama declared.

On Monday, McCain spokeswoman Brooke Buchanan said that the senator regrets Northrop's decision and would continue to call for an "open and fair process to ensure the best deal for the American taxpayer."

Industry insiders say that the decision by Northrop wasn't surprising.

"When all was said and done, Northrop saw a lot of risk and not a lot of profit," whereas EADS was focused primarily on gaining entry into the U.S. market, said Loren Thompson, head of the Lexington Institute. "At the end of the day, the interest of the two teams diverged."

Boeing's supporters shrugged off concerns that Northrop's decision would mean higher program costs because Boeing would still have to meet requirements laid out by the Pentagon. Ultimately, they said it was good news that some of the work wouldn't go overseas to EADS.

"This will be an American company with American workers," said Democratic Rep. Norm Dicks of Washington state, where Boeing plans to build its tankers.

Boeing announced last week that it would offer a military version of its 767 passenger jet for a fleet of 179 new planes. The contract is expected to be the first of several to replace many Air Force planes that date back to the 1950s. Boeing said it will submit its formal bid by May 10.

A final contract is to be awarded in September.

[darrels joy]

http://www.patriotfiles.com/forum/sh...light=Northrop

[SuperScout]

As a part-time employee of NG, I'm a bit saddened by this decision. NG already has a fueler that has flown dozens of inflight refuelings, while Boeing has its refueler still on paper. The only problem I had with the NG design was that they were using Airbus components, and I think Airbus is an aeronautical POS. But Boeing will undoubtedly subcontract out many components, so quality there is also a problem.

[BLUEHAWK]

At this late hour, we need that tanker so much... I hope they build the best one quickly, whoever may be involved.

The back and forths have been at great risk.

[darrels joy]

Sarkozy scolds Obama on protectionism

posted at 2:55 pm on March 12, 2010 by Ed Morrissey

While Barack Obama attempts to reset trade relations back on normal footing, Nicolas Sarkozy blasts him for protectionism in relation to a defense contract gone awry. This issue predates Obama’s term in office, but the new rules for a refueling tanker aircraft bid forced Northrup Grumman to pull out of the bidding contest last Monday. Sarkozy accused Obama of stealth protectionism through these rule changes:

President Nicolas Sarkozy of France accused Washington on Friday of setting the wrong example on protectionism, suggesting there had not been a level playing field in the race for a $50 billion refuelling plane contract.

U.S. defence contractor Northrop Grumman and its European partner EADS withdrew on Monday from a renewed competition to supply tankers to the U.S. Air Force, saying the rules favoured rival bidder Boeing, the top U.S. exporter. …

Asked what he thought of the issue during a joint press conference with British Prime Minister Gordon Brown, Sarkozy delivered a scathing attack on how the United States had handled the tender.

“I did not appreciate this decision … This is not the right way to behave,” Sarkozy said.

“Such methods by the United States are not good for its European allies, and such methods are not good for the United States, a great, leading nation with which we are on close and friendly terms,” he said.

The prior contract award went to Northrop Grumman and EADS, but an appeal to the GAO effectively stripped them of it in June 2008 when questions arose about the contract process. That was after questions arose about the original contract process, in which its competitor Boeing was accused of corrupt practices. This third round intended to get a clean contract award, but the specs changed for the plane as well.

Northrop and EADS accuse the Pentagon of changing them to favor the American-made Boeing, and pulled out after claiming that they couldn’t fairly compete for the project.

So, justification for blaming the problem on Obama seems rather thin. Besides, as Dan Spencer wrote at the Washington Examiner,
Northrop/EADS didn’t drop out because of political pressure, but because they offered a bad deal. A pending WTO ruling may also have scared them off:

Northrop had been hinting for months before last week’s announcement that it might not bid on the tanker deal. One of the key reasons Northrop mentioned was that they felt the specifications for the tanker in the RFP were biased in favor of Boeing. Northrop was planning to offer an Airbus plane that was simply too big and ill equipped for what the Air Force needs. Northrop’s French partner actually began a campaign to criticize the U.S. Military for those specs — something reminiscent (and not in a good way) of the long history of French criticism of U.S. defense policies.

What’s more, the Northrop/Airbus partnership was beginning to unravel under the weight of a preliminary finding by the World Trade Organization that the Airbus plane offer had benefited from illegal EU subsidies, something that would in all likelihood have disqualified the plane from the bidding process when the finding is made permanent in a coming final WTO report.

Regardless of whether this was intentional protectionism, favoritism for an American bidder, or a clean process in the final round, there is plenty of embarrassment for all concerned. Considering the lengthy and extended process involved in this debacle, placing the blame on Obama seems to be a big stretch. While conservatives might be tempted to climb onto Sarkozy’s bandwagon, in this case the US appears to have acted to enforce free and fair trade rather than curtail it, and Sarkozy may be engaging in a little pre-emptive blame-throwing to cover his political bases at home. Take it with a very large grain of salt.

http://hotair.com/archives/2010/03/1...protectionism/