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The Spectacle Blog
At the Daily Caller, Alex Pappas reports on the fallout of yesterday’s announcement that Northrop-Grumman has pulled out of the competition to build the next-generation air tanker, which is the single most pressing military need for the Air Force and the most-watched procurement contract in history. U.S. Rep. Jo Bonner of Mobile has the most telling response, noting that President Obama has often promised to get rid of sole-source contracts, but that without Northrop competing, the tanker procurement now becomes a sole-source contract. Back on Feb. 5, in fact, Rep. Bonner wrote the president to warn about just such an occurrence. “History shows,” wrote Bonner, “that sole-source contracts simply do not work very well — they cost significantly more than they should and very often produce mediocre results.” Also: “The Department of Defense, in structuring the new [bid requirements], significantly altered the competitive balance to the point that one company no longer believes it can fairly compete. To be clear, this lack of competition… would not be the result of a change in military requirements, but, instead, because of a change by the acquisition team in the way the competitors are evaluated. Mr. President, the bottom line is this… if the [tanker] — projected to be one of the largest programs in our nation’s history by replacing some 550 tankers, many of which are older than you or me — ultimately becomes a sole-source, no-bid contract, this would be anathma to your administration and would be a wound that is self-inflicted.”
After a lengthy discussion of relevant details, Rep. Bonner wrote: “I hope to hear from you soon.”
Yeah, right.
This rude, arrogant president never responded to Bonner’s letter. And now his toadying secretary of defense, Mr. Gates, is set to award a sole-source contract which by its very nature will be bad news for taxpayers and airmen alike.
But that’s okay: Boeing, which will build the plane, is headquartered in Chicago, in the district of White House chief of staff/nude chest poker Rahm Emanuel and the political base of one Barack Hussein Obama. This is the Chicago Way — a deal the Pentagon (in mob-speak) could not refuse.
What does all this mean? The incomparable James Hasik explains: The Pentagon is “stuck with that awkward problem of double monopoly: one buyer, one interested seller, and a Kabuki dance of bilateral contracting relations on the way…. Sure, it’s a fixed price contract, but Boeing must disclose both its costs and its profit margin, so even without competition from Northrop and EADS, the government will get a good deal, no? Eh, no. The problem is that effective regulatory regimes are generally elusive, and for four reasons:… [2] Auditors and regulators can set rules, but smart people will always find a way around them. …[3] Regulators are very frequently observed to go native in the firms they regulate. The problem is particularly severe in technologically intensive industries where the regulators, by virtue of the domain knowledge required to participate in the regulatory process, most frequently hail from the industry itself. Sooner or later, factions within the KC-X program office, the DCAA, and AFCAA, and any other organization with what people on Capitol Hill like to call “oversight” would come to think about Boeing’s interests as synonymous with the Air Force’s interests…. [4] Finally, the regulatory burden itself is costly, which contributes to the overall cost of the project, even if no further rents accrue to Boeing. Ultimately, the Air Force has to pay for those squadrons of bean-counters and fact-checkers, and all those clipboards and green eye shades cost money. But more significantly, at a certain point, the managerial cost of the added oversight, through gummed-up processes and drawn-out schedules, exceeds its marginal returns.”
This also isn’t without costs to the economy. Mobile County Commission Stephen Nodine notes: “I’m disgusted at the way our southern workers have been treated as second class citizens by organized labor which fought so hard to protect its power structure at the cost of 48,000 jobs nationwide that the KC-45 program would have supported.”
As I have reported again and again, independent analysts repeatedly have said that Northrop offered the better plane, but politics and backroom deals have gotten in the way.
If there is one thing John McCain is reliable on, and deeply honorable about, it is his insistence that the men and women of our armed forced be given the best material to work with and that the Pentagon eliminate corruption. Now is the time for McCain to shine again. Now is the time for him to raise holy hell about the coming sole-source contract. Now is the time for him to ask if there were any shenanigans of the sort that sent Boeing executives to jail earlier in the decade, over the same tanker project.
Now also is the time for swing House members such as Steve Driehaus, Zack Space, Charlie Wilson, Gary Peters and Dan Maffei to play the same hardball that the White House has been playing. Their “rust belt” states will lose jobs because of the White House decision to screw over Northrop. They should let it be known that in return, they owe the White House no consideration on the coming Obamacare vote. Their constituents don’t want Obamacare anyway. So why not switch their previous “yes” votes to no, and serve their constituents well both on health care and on the tanker at the same time?
For that matter, Northrop is trying to decide where to locate its new corporate HQ. One big option is northern Virginia, right next to the district of endangered freshman Democrat Gerry Connolly. Why shouldn’t Connolly stick up for Northrop by telling the White House “no” on Obamacare unless it rules out the sole-source tanker contract for Boeing?
This White House has bullied enough people for long enough. On the matter of the tanker, it has now gotten the worst possible deal for taxpayers and airmen alike. It is time for it to be bullied back — until it allows simple fairness back into the tanker mix.
View all comments (22) | Leave a comment
More Blog Posts by Quin Hillyer
http://spectator.org/blog/2010/03/09/tanker-deal-tanks
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Jeff| 3.9.10 @ 7:04PM
Hey Quin give it up, EADS is out of the competition there is no more reason to shrill for them. It's time to get over it and move. The KC-30 was always a lousy deal for the USAF, the American Taxpayer and Worker, good ridance that it's gone. EADS needs to get back to doing what the do best fleecing their European buyer. They just extorted an additional $3.5 billion for the A400M and there is absolutely no reason to allow them to play the same kind of games over here.
Oldefarte| 3.10.10 @ 11:52AM
Jeff: No offense, but you obviously don't KNOW YOUR BACKSIDE FROM A HOLE IN THE GROUND! Having lived in Alabama for many years now, I predicted [on 11/4/08] accurately that [because of the presidential election results] Mobile/EADS did not have a DOGS' CHANCE IN HELL of ever securing that KC-45 contract. The reasons [some as Quin states] are: Obama and his White House staff are all political operatives that grew up under THE CHICAGO WAY [including the likes of Chicago Rod B., Burris, Daley, Jesse Jackson, Al Capone,etc]; Boeing's HQ's was questionably relocated years earliar from Seattle to Chicago [gee, we all should wonder WHY?] and its major manufacturing facilites are located in Kansas; Boeing is a labor union employer, whereas EADS/Mobile's workers would have been NON-UNION; and Alabama, as a southern state, typically is supportive of Republicans, not Democrats. These are just a few examples, so Jeff, get your head out of your backside, and grow some brain cells, okay???????
astonerii | 3.9.10 @ 7:57PM
While I agree with you that there should be competition, I will disagree with you in this case. There is only one airplane manufacturer in this nation that can build planes big enough to be refuelers. The other options are the European Union made Airbus, then you have Russia and Chinese manufacturers.
Lets look at our options. We can pretty much toss the idea of using Russian and Chinese aircraft, as they are direct competitors to our philosophy of government and life.
That leaves Airbus from the European Union. The European Union is going through some transitions these days, and even at its most pro-American, it steadfastly tries to stand in our way of conducting our foreign affairs to our own advantage. They have also adopted a suicidal trajectory of Islamification of their member states. This means that, at some point in time, we will no long be able to count on them to supply replacement parts for our aircraft.
Either the government creates an airplane company to compete with Boeing, or it should just work with Boeing to get a reasonable deal for the purchase of the planes it needs.
SC Mike| 3.9.10 @ 10:30PM
The EADS solution is the lower risk, technologically, financially, and programmatically, because they are offering an airframe better suited to the task and with a proven track record. While there are some minor uncertainties regarding the establishment of new plants in the South, the NG team does not face the vagaries of future union shenanigans.
As a citizen of South Carolina, home to a new Boeing plant, this is not easy for me to write. However, Boeing decided to open its new Dreamliner facility in the Palmetto State in large part because of bad faith on the part of the machinists at its base in Washington state.
And as a contracts manager for a large federal contractor, I know full well the force that DCAA can apply, but also what it can’t do despite the best contracting oversight the feds can bring to the table. James Hasik is spot on in his analysis: without the discipline of competition, Boeing personnel will find a way to weasel the rules around the government personnel to implement and execute at a cost much lower (and profit much higher) than its DCAA-approved win price.
And today, with unemployment so high throughout most of the country, don’t you think that the NG team can come up with much lower but realistic labor rates in the South than Boeing can guarantee with its union contracts in the Northwest? An award to the NG team would bring about what commenter astonerii is looking for, a US-based competitor.
Fix the RFP to enable the competition. We would all win.
Sal| 4.12.10 @ 2:35PM
Lower risk? Tell the Royal Australian Air Force that. There are still technical issues with the RAAF KC-30's aerial refueling boom, you know the aerial boom technology that Boeing INVENTED 50 years ago. The Air Force wants a tanker, not a mutipurpose transport that could be used effectively by smaller air forces with limited resources. Boeing builds the best aircraft in the world (Remember the aircraft the KC-X is replacing and the aircraft that aircraft was designed to support, the B-52). To some of my fellow Republicans colleagues this is only about jobs in Mobile, AL and has little to do what whats best for the Air Force and the United States at large, including our own people desining and building weapons systems for their sons and daughters. What is getting lost here is that EADS/Airbus will be building 80% of the KC-30 in Europe. And they sure have the best interests of our young service people in mind don't they... The money and jobs programs Airbus provide is secondary, isn't it. :|
Sal| 4.12.10 @ 3:05PM
Oh and let's not forget that we should continue to fund Europe's aerospace industry with U.S. taxpayers dollars... The socialists over on the other side of the Atlantic need as much funding as possible to sustain their failed economic models of cradle to grave entitlements, but since they're out of money, let's have the American taxpayer foot the bill for their aerospace industry too.
Tim| 3.10.10 @ 8:33AM
The Obama way way would be to simply cancel the program outright. The new tankers could join the legion of other cancelled modernization programs from F-22s to rifles.
Oldefarte| 3.12.10 @ 10:07AM
Him being the SUBVERSIVE POLITICIAN that he is, he couldn't cancel it outright, he had to use Boeing and the AFL-CIO to effectively do his sleezy, dirty work!!!!!
David T.| 3.10.10 @ 9:11AM
I was no fan of the late John Murtha, but I will say that his voice is sorely missed in this debate. His split-the-baby solution was the best for everyone, as it would have provided competition for the life of the program. The weenies in the Pentagon whined about the cost of maintaining "two logistics tails," but experience on other systems has shown that these costs do not outweigh the benefits of a two-source competition over the lifecycle of the aircraft, which in this case would be at least 50 years.
Oldefarte| 3.12.10 @ 10:11AM
The 'split-the-baby' solution was similar to what Monica gave to Bill in the oval office. Boeing did not deserve consideration, since EADS [and Mobile] representated the best product for the most economical price for the country and the military. EADS/Mobile have now effectively been EXCREMENTED UPON in CHICAGO WAY fashion, due to his political underhandedness!!!!!
Sal| 4.12.10 @ 3:08PM
Oldefart, EUROPEAN AERONAUTICS and DEFENSE SYSTEMS is what EADS stands for. Is that what you stand for?
Sal| 4.12.10 @ 3:35PM
It's all about getting a flimsy assembly line you your state. That's all it's about to my good friends in Mobile. Let's face some hard facts. YOU WILL NOT BE BUILDING ANYTHING. You'll, at best, be assembling an aircraft that is BUILT and DESIGNED in EUROPE, with a spotty history, at best. Pilots (And let me tell you now that I'm a former F-15E pilot) generally don't like it when you can override the flight computers... A big issue with Airbus aircraft. Having flown the 767 for year with a large American airline for almost 20 years, I can tell you with all honesty it's one of the finest aircraft in the sky. And what many people seem to forget, especially the Airbus-cheerleaders in Alabama, the 767 being proposed by Boeing isn't the same aircraft that was first delivered in the early 80s, nor is it the same tanker that the Italians and Japanese ordered. It will be a completely new aircraft, built specifically for the United States Air Force. Now, Mr. Oldefart, with all due respect, it seems to me its you that is having a hard time with the facts. The KC-30 (There isn't a KC-45A anymore, and when there is one, if ever, it will be a Boeing product) is having issues and is two years late with the RAAF, but no one knows why. Airbus isn't saying anything, nor is the RAAF. When the full extent of technical issues becomes public, we can revisit this discussion. In the mean time, there are KC-767s in service toady. That should tell you, as an American all you need to know. For my son, who flies KC-135Rs today, I need to know he's in a safe and reliable aircraft. To this day, Airbus hasn't produced a single KC-30 that is in combat, nor has their boom system been proven.
Those are the facts.
Thomas| 3.10.10 @ 11:24AM
The Pentagon procurement office is responsible for this situation. The original procurement process unfairly favored the EADS K-30 over the Boeing KC-767 in so many areas that the GAO was forced to recommend that the contract awarded to EADS/NG be rescinded and the results of the procurement study be reevaluated.
In reality, the 767 and the 30 ran neck-and-neck, until the AF changed the rules in mid-evaluation in favor of the EADS product.
One of the biggest problems was that the AF specified a medium airframe for their new tanker. The 767 is at the upper end of that spectrum. The KC-30, analogous to the Boeing 777, is a much larger plane. Yet, the AF also designated that as a medium airframe. On the basis of the larger airframe, the procurement team additional extra credit, not specified in the original RFP, to the KC-30.
What happened is that the AF put out a bid for a four passenger coupe and one participant showed up with a Cadillac Escalade. While that is fine, Boeing should not have been penalized because they brought what the original RFP specified. If, after seeing the KC-30, the AF wanted a larger airframe, they should have rewritten the RFP to give additional credit for the larger aircraft and give Boeing the opportunity to field a 777 sized aircraft. They didn't and thereby skewed the competition in favor of the larger aircraft.
NOw, all things being equal, the KC-30 might be a better fit for the AF than either the KC-767 or a KC-777. But, when the specifications for the new competition were re-written, NG decided that they could not beat the Boeing candidate. One has to wonder if that was the situation all along and why the KC-30 was fielded in the first place.
Oldefarte| 3.12.10 @ 10:19AM
You can POLITICALLY SPIN it any way you wish, but the TRUTH is that the DEMOCRATIC PARTY, THE AFL-CIO, AND THE CHICAGO WAY COMMANDER-IN-CHIEF played political hardball and gatcha methods to assault the State of Alabama, Mobile, the citizens of Alabama, the people of America, the taxpayers,etc; in politically stiffarming EADS out of the competition/awarding of this federal contract!!!!
Pingback| 3.10.10 @ 9:13PM
The Hitchhiker's Guide to …: SmallRuby | Smalltalk WebDev Insider links to this page. Here’s an excerpt:
Boompilot| 3.17.10 @ 2:28AM
John McCain - Honorable? Who was a major contributor to his campain run...........EADS. I am all for competition, but was this his true motivation? UMMM!!!
sick and tired | 5.11.10 @ 1:30AM
I could say a lot about some of the comments made, but I want to keep it simple. I want you to consider two things in this matter, this has nothing to do with the current administration. I feel that every single American should be outraged that 1) tax payers money would have gone to a foreign company and 2) it is a matter of national security yall.