Boeing wins again

The New York Times has an article by Christopher Drew about the latest move in the tanker business:

The Northrop Grumman Corporation said that it would not bid for a $40 billion contract to build aerial refueling planes for the Air Force, leaving its rival, Boeing, as the likely winner of one of the Pentagon’s largest contracts. Northrop complained that the government’s requirements favored the smaller plane that Boeing planned to offer. Northrop’s executives had also questioned whether the contract would be profitable enough, given the Pentagon’s insistence on setting the final price largely before the design and testing were completed.
Northrop’s decision adds more controversy to the long-running effort to replace a fleet of tankers dating back to the Eisenhower administration. It also raises questions about President Obama’s plan to foster more competition and shift more of the responsibility for covering cost increases to military contractors. Military analysts said Boeing, based in Chicago, could probably charge a higher price if it was the only bidder.
“Given how much emphasis the Obama administration has put on acquisition reform, it is ironic that the biggest new weapons program of the Obama years will not have competition,” said Loren B. Thompson, an analyst at the Lexington Institute, a policy group financed by military contractors.
Northrop, based in Los Angeles, had planned to team up with the European company that makes the Airbus planes, and officials of that company— the European Aeronautic Defense and Space Company— said it would not try to bid on its own. Several analysts said it would have been hard for the company, also known as EADS, to win the political backing needed to outmaneuver Boeing.
The effort to obtain new tankers has been going on for nearly a decade, and it has come to represent much of what lawmakers say has gone wrong in military contracting. The Air Force’s first effort collapsed in 2004 amid corruption charges involving a proposed leasing deal with Boeing. Northrop Grumman and EADS then won a competition in 2008, only to have the award overturned after Boeing protested that the evaluations had been unfair.
The Air Force began its third effort last September, and Pentagon officials promised that the rules would be clear enough to steer the contest “straight down the middle”. But analysts said the service’s numerical scoring system seemed to favor Boeing’s plans to offer a smaller plane, which could save billions in fuel costs over the next forty years.
And what had been the strength of the previous Northrop and EADS bid— a plane that could carry more fuel and cargo than the Air Force had sought— became a liability as the competition turned into a shootout over which bidder could offer the lower price.
Northrop’s chief executive, Wesley G. Bush, said in a statement on Monday that the request for bids “clearly favors” Boeing’s smaller plane, even though Northrop felt that its larger plane represented “the most capable tanker for the warfighter”. But Mr. Bush said Northrop would not file a formal protest, given that “service men and women have been forced to wait too long for new tankers”. Mr. Bush, who became the company’s chief in January, has placed more emphasis on improving Northrop’s profit margins than on increasing revenue. Mr. Thompson, the industry analyst, said Northrop officials had told him that “they could not find a way of bidding on the solicitation that was consistent with that guidance.”
Michael B. Donley, the Air Force secretary, said recently that the service would go forward with the contract even if Northrop dropped out. He also said he believed it would have the leverage to obtain a fair price from Boeing. The Air Force has said the contract would be for 179 tankers. It could be extended for decades and eventually cost $100 billion for 400 to 500 planes.
Northrop’s decision to forgo any protests could also head off a hot political dispute over the contract and the jobs it will create.
Boeing plans to build the plane, based on the 767 jetliner, in Everett, Washington and in Kansas. Northrop and EADS would have built a plant in Alabama, which also would have given the European company a beachhead to assemble commercial airplanes in the United States.
Representative Norman Dicks, a Democrat from Washington who recently became the chairman of a House panel that oversees the Pentagon budget, said in an interview that if EADS had tried to bid on its own, there would have been “a real knockdown, drag-out battle” over a preliminary trade ruling indicating it had received improper subsidies to develop its planes.
EADS said in a statement that it remained committed to the American market, where it has helicopter and other contracts. But some analysts said that without the tanker contract, EADS would have to rethink its strategy in the United States, where it is eager to expand as military budgets shrink in Europe. “The opportunities for any significant acquisitions in the military arena are very, very slim,” said Howard Wheeldon, senior strategist at BGC Partners in London. He said EADS would need to focus more on emerging markets than on the United States.

Rico says they're whiners, which is unbecoming in corporate executives trying to get the public's money...