Boeing Threatens To Quit $40B Marathon Military Bid Process For Tanker

Boeing Co. said it is inclined to bail out of its effort to win a $40 billion contract to build aerial refueling tankers for the U.S. Air Force unless the Pentagon agrees to give it a total of six months to submit a new bid.

The threat of walking away -- and leaving the government with no competition at all for a high-profile defense contract -- is perhaps the biggest weapon Boeing has at its disposal in this latest chapter of a long-running tanker saga. Jim Albaugh, head of Boeing's defense unit, said in an interview Thursday that Boeing has taken a hard look at the latest proposal and has concluded that they call for a plane that can haul more fuel than the plane Boeing originally bid.

"I think the option we would have if we were not given the six months, there is a really high likelihood that we would no-bid the program," Mr. Albaugh said.

According to people familiar with the situation, the government is leaning toward adding 15 days for Boeing and rival Northrop Grumman Corp. to respond to the latest request for proposals, giving the competitors a total of 60 days to submit a new bid. Because Boeing would have to figure out how to convert a larger airplane into a flying gas station, the Chicago aerospace company said it needs an additional four months to prepare a competitive proposal.

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Comments

[dukeitout]

08:55 PM on 08/25/2008

What's the big rush Mr. Pentagon? Are you angry at Boeing for questioning the original bid process? You have obviously and recently made some big changes to the design requirements, especially a requirement to haul more fuel making it difficult for Boeing (and maybe the competition too) to respond within 60 days. I hope you haven't forgotten that it's the taxpayers who will be paying for these flying gas stations. We need as much competiton as possible. Give the bidders 180 days. What's the big deal?

[bugdog]

11:04 AM on 08/25/2008

WAAAAAA!!!!! WWWWAAAAAAAA!!!!!

Screw Boeing... The same way they have screwed the Pacific NW, the unions, and the USA.

They ought to be nationalized.

[larry278]

01:39 AM on 08/24/2008

How 'bout some real 'Murican outfit getting into the USAF tanker bids? Reconfiguring, redesigning, enlarging & updating the Ford tri-motor or the Barling bomber to serve as the USAF's 21st century tanker would be a good start. The fact that these aircraft were 100% 'Murican made & are proven, reliable designs is another plus. Ford may still have control of the right to the Ford tri-motor; Ford could use 1 of its vacant plants to build the 21st century, jet powered version of the Ford tri-motor to serve as the USAF's new tanker. The updated Barling Bomber tanker version with jet power could also be built in 'Murica, no sweat. All that remains is for Uncle Sugar to ante up the r & d costs & give whomever builds the best design a 10% plus contract for 200 of 'em. Who needs Boeing or Airbus?

[dadw5boys]

08:13 PM on 08/23/2008

THE SEC NEEDS TO CHECK THE INVESTMENTS OF THE AIR FORCES COMMANDERS INVOLUVED IN THE CONTRACTS HERE !!!!!!!!!

[dbawden]

12:09 PM on 08/23/2008

Having followed this issue for years, what I see as a viable argument of Boeings is that the government changed the criteria for selection after the initial one both manufactures were given. The new emphasis on extra fuel carrying capacity criteria can be likened to intentionally writing a job description so that only one applicant could qualify.

[rationalcon]

11:09 AM on 08/23/2008

What everyone should be upset about is NOT whether Boeing or Northrop Grumman/EADS wins, but the amount of foreign content is roughly 50-60% for BOTH of them. We may be saving a few tax dollars in the near term by allowing foreign content in major government contracts, and also short term increasing exports due to offsets negotiated by the State Department, HOWEVER, we are gutting our lead in technology.

The innovation required to develop the technologies for the future require a degree of risk spending that individual companies cannot shoulder - the government has traditionally shoulder this risk in the form of funded R&D. This type of spending has plummeted in the last 10 years as the military and even NASA have adopted a "buy COTS" (commercial-off-the-shelf) mentality - to supposedly save money on procurement. Guess where all the COTS equipment comes from? (Hint, NOT the USA) China, India, Japan and many other low cost manufacturing countries have captured ever increasing portions of YOUR tax dollars - meanwhile back at the ranch, US industry is being gutted.

For all of you that continually rail on the defense business, stop using your cell phones, flat screens, ipods, and computers because the underlying materials and manufacturing processes that allow these devices to exist came from government funded R&D. Now that these dollars are going overseas, we are funding the very competition that will wipe out US competitiveness (what little there is left).

[Harrier]

03:59 AM on 08/23/2008

Let me see if I understand this right. Boeing lost a perfectly legal and competitive competition because it lost in each and every single category the government uses to analyze a bid. By political means, Boeing gets an opportunity to re-bid, but now that the original bid is now opened an Boeing knows that it really did lose and why, it still is not able to beat Northrop and is asking for more time to complete a bid it was suppose to do over a year ago. These guy are paying every dirty trick in the book. They know they cannot win, then threaten to pull out of the bidding to give themselves even more time because even after cheating the first time around, they are still somehow able to keep bidding. I hope Northrop sue the government for favoritism and refusing to allow both competitors to play by the same rules.

[mawrm]

09:39 PM on 08/22/2008

Now I'm going to get sick. Why don't we give up the blasted charade of a "fair" competition and just hand the contract to Boeing? This is complete BS! I l respect Boeing and the fact that they make good aircraft, but this is absolutely unacceptable behavior on their part. Boeing shot themselves in the foot when they tried to rip off the government in the initial bid years back. They know this and when the competition was re-bid, they simply didn't have an aircraft to fully meet the mission. Now they want 6 months simply because they figure Obama might win, and being a Chicago-based company they'd have a better chance at winning support from his White House. So they prefer to waste millions of taxpayer dollars on this mess meanwhile USAF is throwing millions away trying to keep ancient airframes airborne.
I'm frankly tired of defense contractors running this country and giving the gov't ultimatums. Who's in charge here?!? At one point, Lockheed threatened to raise the price on the C-130J unless the gov't kept buying more F-22 than USAF needed. If the gov't continues to reward this spoiled brat behavior, it will only get worse.
BTW, Europe buys billions in hardware from the US so those who are thinking protectionism need to think again - it's a 2-way street and we'd be in a world of hurt if they closed their markets.

[ADVOCATE4ZPG]

10:51 PM on 08/22/2008

Boeing believed that through its network of patronage goons, "headed" by "Sen." Patty Murray (the Senate's unofficial 'dingbat'), it could "guilt trip" the Congress and fob off what it could not otherwise sell. This would allow it to MILK a few extra billions from the 767 tooling.

The strategic mistake was to allow the number of airframe supplies to dwindle to one in North America and one in Europe.

[leftLibertarian]

07:45 PM on 08/22/2008

Boeing loves big mommy government.

[Wiredwilly]

04:53 PM on 08/22/2008

Oh No !!!! Boeing is going to bail out of another multi-billion defense contract.
How will I pay the for the groceries !!! I won't sleep tonight.

[KillTheMessenger]

12:29 PM on 08/22/2008

Good. Let Boeing throw a tantrum and walk out. Maybe then the military would actually get the tankers it needs rather then the ones Boeing wants to jam down its throat.

[KCFreedom]

11:29 AM on 08/22/2008

If we had a REAL competitive environment in the defense industry these days (consolidation) then this might be a race between TWO U.S. aerospace companies with all components built in the U.S. for all competing proposals. Instead, we end up with two U.S. aerospace companies, Boeing tainted by the stank of the last tanker contract debacle, and Northrop-Grumman, who has to partner with someone else in Europe, since they appear to have lost their own manufacturing capacity, and never had any experience with in-air tankers or airliner-type aircraft.

Just think if McDonnel-Douglas were still an independent company. There'd be a real competitor.

So much for any real domestic competition in the defense industry. It also conveniently keeps prices higher for the players.

[javaman]

10:55 AM on 08/22/2008

so boeing wants to take their blocks and go home? fine. call their f'n bluff. then see home much this is BS.

the faster we break away from the military industrial complex the better the world will be for it.

we live in the era of kill for profit.

[ratcityreprobate]

10:39 AM on 08/22/2008

Why stay in the game if the house is dealing from a stacked deck? Boeing should tell the AF to go stick it.

[RabidRightRebel]

10:11 AM on 08/22/2008

Pathetic but why not!!

If they were not going to win the contract at least this give them the chance to cry foul and complain about how unfairly they have been treated regardless of it being an open and fair bidding process.

My problem is that it just seems that Americans in general have become poor losers. No longer does America care about being the best and winning on merit. Today it is about just winning or whining. You see it everywhere, in business, in sport, and in politics.

Sadly people who care more about just winning than they do about winning on merit tend to spend a lot of time losing and whining because they lost jobs to better competitors.

[Nardwilly]

08:55 PM on 08/22/2008

The government has changed the specification since the bid was first offered last year. There was a bid process in 2005 with sizes equal. There was a bid in 2007 with same size planes. In 2008 without warning the government changed the size of the plane.

Purchasing engineered items requires specifications that are equal and fair to all bidders. Changing the specification during a re-bid is not fair.

[ADVOCATE4ZPG]

11:00 PM on 08/22/2008

"Nardwilly" seems to be creating his own history: This is NOT the THIRD time this contract has been let for bids? If Boeing is a victim, it is a VICTIM of its own strategy and superannuated design entry!