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Business

Northrop, EADS drop out of US tanker contract bid

Video by Nicholas RUSHWORTH

Text by News Wires

Latest update : 2010-03-09

US defence contractor Northrop Grumman and its European partner EADS announced late Monday that they would not bid for a $35 billion contract to build tankers for the US Air Force, making Boeing the only bidder.

AFP - Top US defense contractor Northrop Grumman and European partner EADS said Monday they would not bid for a 35-billion-dollar US Air Force tanker plane contract, clearing the way for a Boeing win.
  
Northrop Grumman said it had decided not to compete because the US Air Force's request for proposals for the contract published last month "favors" Boeing.
  
Northrop said it would not submit a bid to the Department of Defense for the KC-X tanker plane program following a "comprehensive analysis" of the requirements.
  
The request "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," Wes Bush, chief executive and president of Northrop Grumman, said in a statement.
  
The tankers refuel warplanes in mid-air.
  
The Northrop-EADS team won the contract in February 2008, but the deal was canceled after Boeing successfully appealed the decision to the Government Accountability Office, the investigative arm of Congress.
  
The European Aeronautic Defence and Space Company (EADS) confirmed the decision of Northrop, the prime contractor with which it partnered five years ago to pursue the contract and gain a greater foothold in the massive US defense market, where it currently has a small presence.
  
EADS and Northrop had then offered a modified version of the commercial Airbus A330, while Boeing proposed a 767-based tanker in the previous contract.
  
"This is particularly disappointing given that the Air Force previously had selected the A330-based KC-45 because of its added capability, lower risk and best value," EADS said in a statement on Monday.
  
Boeing announced last week it planned to offer a modified version of its 767 commercial airliner, which is smaller than the A330 and consumes less fuel.
  
The US aerospace giant had said it would submit its proposal by May 10, within the 75-day period set out in the Pentagon's request for proposals.
  
The Pentagon has struggled since 2003 to get a new tanker built.
  
In 2003, the Pentagon awarded a contract to Boeing but later suspended it amid an ethics scandal involving a company executive and an Air Force official, who was subsequently convicted of criminal conspiracy.
  
With the exit of Northrop and EADS, Boeing effectively is in prime position for the contract to replace the 1950s-era aging fleet of Boeing tankers.
  
"The Boeing NewGen Tanker will be safe and survivable in combat, will save the American taxpayer 10 billion dollars in fuel costs over its 40-year life, and is American designed and built," Boeing spokesman Bill Barksdale said in a statement after the Northrop-EADS announcements.
  
Richard Aboulafia, vice president of Teal Group Corp., cautioned that this may be just another twist in the tortured contest to replace the aging fleet.
  
"This looks like a significant Boeing win, but we’ve seen several other false starts to this program," Aboulafia said.
  
"Additional congressional scrutiny is likely, but congressmen and senators scrutinize programs most heavily when they can produce results for their districts. If there’s no competition, there’s little to be gained from paying more than a token amount of attention," he told AFP.
  
An Alabama senator whose state would have benefited from EADS's promise to open a plant to assemble the tankers, creating 300 jobs, accused the US Air Force of kowtowing to political pressure.
  
"The Air Force had a chance to deliver the most capable tanker possible to our warfighters and blew it," US Senator Richard Shelby said.
  
"This so-called competition was not structured to produce the best outcome for our men and women in uniform; it was structured to produce the best outcome for Boeing," the Republican lawmaker said.
 

Date created : 2010-03-09

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