Wednesday, April 02, 2008

Northrop Fights Back

Jen Dimascio at the Politico details the latest skirmish in the tanker war between Boeing and its rival, Northrop-Grumman. When the Air Force recently awarded a contract for new refueling planes to a team led by Northrop-Grumman and European defense consortium EADS, Boeing cried foul. It has filed a formal protest over the decision, and enlisted its allies in Congress to challenge the contract, worth an estimated $40 billion.

Now, Northrop-Grumman is fighting back, with a public relations offensive aimed at members of Congress and other influential officials across the country. Northrop took out a full-page ad in Monday’s Washington Post, and according to Ms. Dimascio, the defense contractor is planning “an outreach effort to all 535 members of Congress,” and will publish op-ed pieces in papers in Alabama and West Virginia. The media blitz is aimed at countering claims that the contract is a boon for Northrop’s European partner, EADS.

While key aircraft components would be built in Europe, Northrop is planning to assemble the tankers at a new plant near Mobile, Alabama. Refueling equipment for the aircraft will be built at a new factory in West Virginia, home of Senator Robert Byrd, the powerful chairman of the Senate Appropriations Committee.

Northrop claims that 60% of the new refueling plane will be American-made, noting that suppliers in 49 states will have a stake in the project.

As the Politico observes, Northrop’s p.r. campaign also creates some difficult lobbying choices for Boeing. While Congressional supporters of the aircraft giant have been touting the Northrop contract as a “foreign giveaway,” that positions creates problems for Boeing, which sells its products around the world—and sources thousands of components from foreign suppliers.

Not surprisingly, Boeing’s opposition to the tanker decision has been based on how the contract was awarded, rather than the "European connection" of the winning team. Boeing says it believed the Air Force wanted a “medium-sized” tanker, and offered a design based on its 767 jetliner. But Boeing claims that the service gave Northrop “extra credit” for offering a larger refueling platform, utilizing an Airbus A330.

That charge surfaced again Monday, at a House Armed Service sub-committee hearing on the tanker deal. Missouri Congressman Todd Arkin asked Sue Payton, the Air Force Undersecretary for Acquisition if the service “extra benefit to people who exceeded what was required?”

As reported by John Doyle of Aerospace Daily, Ms. Payton's response left little doubt that the "extra credit" provision was well-understood by all competitors:

“Now, it was also very clear that extra credit would be given to the offeror who exceeded that threshold,” Payton said. She explained that while the RFP made it “clear that we had no requirement for size — large or medium,” nonetheless, “we did have requirements to meet capabilities, and there would be extra credit given for exceeding that minimum threshold. And on three occasions we did debrief each of the offerors… exactly what they were getting credit for,” she said.

The tanker battle will likely intensify during the run-up to a Government Accountability Office ruling on Boeing’s protest. If the GAO upholds the Northrop contract (as some expect), then lawmakers aligned with Boeing may attempt to insert “Buy American” provisions into tanker funding bills, in an effort to dent or defeat the deal.

But, even those proposals face an uphill fight. While there is support for such measures in the House, they would encounter strong opposition in the Senate. In addition to Mr. Byrd (whose state would gain hundreds of jobs from the contract), Virginia Senator John Warner has also expressed support for Northrop-Grumman and its entry. Mr. Warner has accused Boeing supporters of “trying to put up a virtual fence around free trade.”

Did we mention that the largest private employer in John Warner’s home state is the giant shipyard in Newport News, owned by--you guessed it--Northrop-Grumman.


ADDENDUM: In yet another twist of the tanker battle, a number of retired Air Force generals have signed a letter, urging Defense Secretary Robert Gates to "stand up and defend" the tanker award to the Northrop-Grumman/EADS team. As the Seattle Post-Intelligencer reports, the 22 retired generals share something in common, other than their service affiliation. All are employees of Northrop-Grumman or EADS, or serve as consultants for those firms.

Among the signatories of the letter are General Michael Ryan, a former Air Force Chief of Staff, and General Chuck Horner, who led the air campaign during Operation Desert Storm.

H/T to Sean Meade at Aviation Week for the link on Northrop's strong letter of support--from its own executives and consultants.


davod said...

"As the Seattle Post-Intelligencer reports, the 22 retired generals share something in common, other than their service affiliation. All are employees of Northrop-Grumman or EADS, or serve as consultants for those firms."

I wonder how many former generals with an affiliation to these companies declined to lobby for the aircraft.

Maguro said...

Well, each side has its paid-for generals and politicians but even Boeing seems to concede that the NG bid provides more capability for the same price.

There's no way the GAO is overturning the contract and NG probably has enough friends in congress to prevent an earmark to Boeing.

Sorry Boeing, you lose.

John said...

The answer is simple. All Northrop has to do is set up an assemble line to build the major components of the Tanker in the US. I assume the major components are the wings and body of the airplane.