Tanker

The officially controversial $40 billion deal for the Air Force fuel tanker keeps on kicking up dust in Washington. First there was the surprise award to Northrop Grumman and its partner, European Aeronautic Defence and Space. In other words, NOT to Boeing, which many insiders assumed had a virtual lock on it.

Then came harrumphing from certain members of Congress, who painted the deal as unpatriotic because it would mean losing jobs to a, yes, European company. There has been talk of stalling the contract from none other than Rep. John P. Murtha (D-Pa.), chairman of the powerful armed services appropriations committee, who threatened to cut off money for the program. "This is not a done deal," he said earlier this month.

Now comes a non-profit advocacy group called Citizens Against Government Waste, which has declared its intention to "make sure Congress doesn't reverse the decision of a fair and competitive bid." That's according to an email the group sent out to other non-profits and procurement-savvy groups in town.

From Government Inc.'s perspective, this latest quiet turn is fascinating. For starters, the group's vice president for government affairs wrote in the email that CAGW, as the group calls itself, was "participating in a new coalition concerning the Air Force's fuel tanker."

"Don't bother looking for the coalition on the web, there is no home page yet, but we would like for you to learn more about the coalition and hopefully you will join too."

But when Government Inc. called about the coalition -- and whether Northrop was participating -- we were told flat out: "There is no coalition." That's a quote from the group's spokeswoman Leslie Paige.

There was another little snag that we wanted to sort out. It had to do with a "fact sheet" that was included in the email recruiting the other taxpayer groups. It included a number of "talking points" touting the reasons Northrop deserved to win the deal.

Government Inc. is interested because the "fact sheet" tracked almost word for word with a "fact sheet" that Northrop had been sending out to reporters, including to my colleague Dana Hedgpeth, who graciously pointed out the striking similarities.

The CAGW email: "The KC-45A competition underwent the most rigorous, fair and transparent acquisition process in Defense Department history."

The Northrop fact sheet: "The KC-45A competition underwent the most rigorous, transparent acquisition process in U.S. Department of Defense history."

The CAGW email: The Northrop Grumman KC-45A U.S. supplier base includes 230 companies in 49 states."

The Northrop fact sheet: "The KC-45A U.S. supplier base will include 230 companies in 49 states."

CAGW spokeswoman Paige said that her colleague "clipped and pasted some of the facts" in her email, and that the group takes "talking points from all sorts of people." She said the group has a long track record on this issue and takes it seriously.

"We are not promoting anyone's interests," she said, adding that Northrop was not a part of the coalition because the coalition mentioned in the email doesn't really exist.

When asked whether Northrop was supporting the CAGW push, company spokesman Randy Belote said, "We certainly agree with those views." But he said he had no idea whether the company was actively involved it. He said he would check and get back to us.

In a phone message, he said that CAGW and other groups had contacted Northrop about the matter. He said CAGW and was working to preserve "integrity" in the procurement process.

"I wouldn't characterize it as working with them," he said.

In Addition

Government Inc. received a nice atta boy note from a reader, who suggested we take a look at a St. Pete Times story about CAGW two years ago. According to the story, the organization has a history of getting involved in certain issues and working closely with and, in some cases taking money from, vested interests.

In one of those cases, CAGW pressed hard to allow avacado imports from Mexico while taking $100,000 from Mexican avocado growers, said the story by reporter Bill Adair.

"That's just one of many instances in which CAGW has traded on its watchdog reputation by taking money from companies and trade associations and then conducted lobbying and public relations campaigns on their behalf - without revealing that money changed hands," the story said.

In a phone call, CAGW President Tom Schatz called the story "inaccurate" and "biased." But he declined to provide details. He acknowledged accepting money from entities involved on the same side of issues as his group, but he said "the amount of money is irrelevant." Here is the group's rebuttal to the article.

"The beneficiaries of our advocacy are the taxpayers," he said.


By Robert O'Harrow |  March 26, 2008; 6:47 AM ET defense
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Comments

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If the group is simply a couple of concerned citizens focusing, with good reason, on the troubled acquisition system or this deal, that's fine. There are many established nonprofits doing this. The more the merrier. If the group is getting NG/EADS funding and trying to influence officials, that's bad--and maybe illegal if they are not registered lobbyists. Whatever they are doing, its a smidgen of the treasure and political capital that Boeing is spending on this on the basis of asserted flaws in the acq process, the unrecognized superiority of their bid,
"patriotism," and also, some sense of entitlement. Would love to see you burrow into the substance of what's happening.

Posted by: Michael Lent | March 26, 2008 9:19 AM

I think Boeing is just crying, not only because they lost the contract but also the readers should remember Boeing's previous actions. I hope you all recall Boeing getting in bed with a government contracting officer and promising her a lucritive job after her government service. Boeing was trying to "Buy" the contract. Several people went to prison over this shady deal. Now, after the other contract was scuttled Because of Boeing's misdeeds they want to scream that it is unfair!!! Give me a break!

Posted by: Tommy | March 26, 2008 12:59 PM

yes, lets reverse this contract and reverse the next one and keep on reversing them until we've spent $17 trillion and three decades and haven't actually acquired a thing

government = waste

Posted by: Anonymous | March 26, 2008 1:18 PM

If the group is promoting the best deal for the taxpayer I propose that they support the Boeing offering instead of the Airbus offering. By the time the taxpayers foot the bill for the increased fuel costs of the Airbus plane, the expense for the increased sized hangars and runways needed for the Airbus offering, on top of the huge amount of money going to the economy of Europe where the highest paying jobs will be for the production of this plane, I can't see how the Airbus plane can possibly be the best deal for the American taxpayer!!!

Posted by: For America | March 26, 2008 1:20 PM

We need to make sure Congress doesn't reverse the decision of a fair and competitive bid. But the fact that they are investing in Alabama is suspect. We wouldn't fund investments in Sudan, why would we fund investments in Alabama? If the Alabama plant were moved abroad, the deal would be less suspect.

Posted by: S. Senator | March 26, 2008 2:56 PM

This procurement needs to be done over. The jobs that will be going overseas at the time the US Ecomomy is in a recession (that's right I said the R-word no one wants to say). We are in a recession, the dollar is losing against the Euro everyday. The future parts for the plane is where the big money is. If Airbus makes the Tanker the US will be paying a fortune for replacement parts over the next 30 years (The Boeing KC-135 has been in service since about 1958). The US definitely needs a new tanker and with the sorry state of the American Economy it needs to be built here and the taxes need to be paid to the USA not France, Germany, Etc. The problem with the US is we don't make anything anymore so we contract it out to other countries and when our jobs go down the toliet we want to point fingers. The builder of this plane is going to be retro fitting this plane for the next forty years. Boeing has the track record for Tankers and the Boeing 767 has been already proven as a tanker. No, I don't work for Boeing but, presently I'm an Air Force Reservist who happens to work on a 50 plus year old KC-135 Tanker made by Boeing that is still flying and working great.

Posted by: Mike | March 26, 2008 3:27 PM

didn't Boeing already lose this once for committing crimes to get the deal? but they have to keep opening it up again until the criminals can win???

Posted by: Anonymous | March 26, 2008 3:53 PM

The process through the GAO is the correct path, however the grandstanding in congress nothing more than mob rules.

Posted by: Anonymous | March 26, 2008 8:04 PM

Don't you guys have anything more exciting to report? CAGW and groups like them are the good guys... why don't you report on wasteful spending by the current group serving in Congress... your Blog was a waste of my time. If the process was fair and competitive, Boeing is the one at fault, not the groups trying to protect the procurement process... We need more groups monitoring Congress.. you think the Baseball/steriods hearings wasn't a giant waste of taxpayer dollars? Lets not make that mistake with this issue.

Posted by: Rachel | March 26, 2008 8:35 PM

A few things chap my rear. While Boeing has not behaved in a stellar manner in previous deals, I will be damned if we give a leg up to France! They have NOT been a friend to this country and peed on us at a time when we were still trying to seek the enemy (which we now know wasnt Suddam-even though he was a bad seed).

Secondly, we need to send people to the unemployment line like we need another hole in our head. Come on-isnt there any one political or agency head that has half a brain? Just a nano of a brain cell? The older I get the more I am seeing clearer and for what its worth-I think I liked it better when I was an ignirant 20 yr old who's only worry was what outfit I was going to wear and if my butt looked too big in those pants!

Posted by: Lisa Looooo | March 26, 2008 8:47 PM

After I read this, I wondered if Citizens Against Government Waste was just a corporate shill for Northrop Grumman but the only articles I found on their website were critical of the company.

So I dont get it,is Government Inc arguing FOR Congress to reverse the decision and give it back to Boeing?

Posted by: JimE | March 26, 2008 9:59 PM

Rather than being riveted on her anatomy and body waste, Lisa Looooo might try to focus on some facts. The 767 is a 25 year old design that can't be adequately updated; the Airbus is only about 10 years old, and can use proven, newer technology. Also, although the AF has not released details, the source selection authority just might have noticed Boeing's past performance on the Army FCS, DHS SBI net, and some intel satellite deals. The firm has wasted time, money, and played with immature technologies at our expense. Why give them something else to plow under? LL needs to recognize that acquisitions are not supposed to be political. If her leanings were applied to all big buys, we would be building even more useless or defective systems. DoD's budget is not supposed to be corporate welfare, but it often does look like that. Time for a change. All three presidential wannabes would be effective in reigning in the waste. The Tanker award to NG with EADS as a sub is strong step in that direction.

Posted by: Axolotl | March 27, 2008 9:33 AM

Boeing management thought the tanker contract was a slam dunk. Obviously they were wrong and rather then blame themselves for submitting a inferior proposal/product, they rather blame the proposal process. They had every chance to bring these issues up during the proposal process. Why now?? SHAME ON THEM.

Posted by: pas | March 27, 2008 2:06 PM

Agree. Shame on them! Fact is the source selection scored Boeing very poorly in the program management criteria. Gee what could that be all about?

33% off your 52 week high. RAF going Airbus as announced today. Congrats on your Tajerkistan sale. That ought to pay for a few more exec lunches.

Better get your act together. There's a trend evolving.

Posted by: Anonymous | March 27, 2008 5:26 PM

No one hates Boeing they are just sore losers. Both contractors made numerous public statements on how transparent and complete the process was. Boeing was delighted with the process until they lost; they basically just assumed they would win.

While I have no love for Airbus or EADS, Boeing doesn't really even care about the Tanker Contract; its small potato's compared to the commercial business. After driving Lockheed out of the commercial aircraft business, buying McDonald Douglas, and then systematically closing their commercial assembly lines, they have achieved monopoly status in the US. They have severely reduced our industrial infrastructure. Another wide body assembly line in the lower cost South East has Boeing sweating bullets. Boeing gets the message big time! They may have an American made commercial airliner business to compete with again. That's what this is about. The Tanker contract is big, but it's only 20 planes a year, Boeing sell's 500 planes a year to the airlines they don't want competition in the US again. EADS has already announced they will produce commercial A330 freighters in the Tanker facility. Boeing may actually have to compete and the US industrial base will expand. There will actually be 3 places in the world where commercial wide bodies are assembled, 2 of them in the US again.

When Northrop announced, and then quickly retracted, that the contract would actually be in-sourcing 1500 jobs from Europe they were talking about the A330 freighter work. EADS had a fit because the Germans, French and Britt's might actually realize that they are not competitive with the facilities and workers Northrop and EADS are establishing in Alabama. Because of the Dollar/Euro exchange rate, any work done on an aircraft in the US saves 40% in labor costs on the finished product. This is not even counting the lower labor cost in the US compared to the European welfare states. This is in-sourcing jobs to the US. EADS has an incentive to do as much work here as they possibly can; not because they love America, but because it reduces the cost of the finial product. American subcontractors will actually be able to compete for more of the piece part work because of the favorable exchange rate. For once we are the lower cost market. Northrop's 2nd and 3rd Tanker contract bid's in a few years will in all probability have even more American content than this one, Boeing's is likely to have less since all of there new commercial line are heavily outsourced. Boeing will not have that drum to beat anymore.

What Boeing won't tell you is that they have outsourced more than 50% of their commercial aircraft business out of the US. The only reason the 767 has 85% domestic content is because the line is shutting down due to lack of commercial orders. If Boeing had offered the 777 it would have had less domestic US content than the A330. A large portion of the high tech 787 is manufactured in Japan, including the wings! Exporting this cutting edge program is where the danger is. There is not very much high tech work in building a 20 year old 767 design. Wake up; the political hacks in Washington State are the ones whining the loudest. Less than 10% of A330 Tanker work is French, the major portion of the foreign content is from the UK one of our best allies. All of the militarization work will be done in Northrop's new facility adjacent to the EADS assembly building. Northrop's engineering work will be done in Melbourne Florida.

Posted by: Bob | March 28, 2008 1:19 PM

if we're not supposed to buy anything from those dirty foreigners, why do we let them bid?

Posted by: Anonymous | March 28, 2008 5:16 PM

The dirty foreigners didn't bid. They're a supplier to Northrop Grumman. This is all about Boeing protecting their cash cow - and a little about pride. Now, with the Euro so strong it may mean more work moved to the US and more competition to Boeing. I'd fight too. But considering all the trends I think Boeing better start getting creative with their business model.

Posted by: Anonymous | March 28, 2008 8:59 PM

Boeing's problem is the fairness of the competition. The Request for Proposal(RFP) was for a mid-size tanker that can operate from smaller, less than perfect runways closer a military operation. Pay attention here: The KC-135 is currently the mid-size tanker and the KC-10 is currently the largest tanker in the Air Force inventory. The NG/Airbus plane is BIGGER than the KC-10. What is more, the Air Force didn't inform Boeing of any change in requirements but consistently made concessions to Airbus because they don't even have an airframe of the right size. It is like asking for a red sportscar but picking for the giant SUV when the bidders present their offering. There will be another contract at a later time to replace the KC-10... NG/AirBus should have presented their plane at that bid and it would have been fair.
If people are worried about this delaying a vital plane to our soldiers don't worry... Northrup Grumman doesn't even have the production plant built for the plane yet. They have to build the factory FIRST before they can even begin building the plane.
The first Air Force core value is "Integrity First" but this is the furthest thing from integrity in my opinion.

Posted by: Anonymous | April 2, 2008 6:48 PM

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