Northrop says no bid on tanker unless…
Update, December 2, 3:00 pm: DOD Buzz reports that Rep. John Murtha, a powerful House member, says there has to be competition for the KC-X and doesn’t rule out Congress stepping in.
This is something we forgot to mention in our Update below. We fully expect an effort on the part of some Members of Congress to renew the effort for a split buy. As we have written many times before, we can think of many strategic reasons this makes sense, let alone the political solution. But this also only makes sense if the procurement is doubled from the 12-18 per year proposed by DOD to 24-36 a year. We also believe the KC-777 is the best replacement for the aging KC-10.
There is enough strategic need to go around for everyone. That this continues to be a political football should be an embarrassment to all concerned.
Update, December 2:
(See Original Post below the jump for background.)
The prospect that Northrop Grumman won’t submit a bid unless the Final RFP is changed to allow for the different sizes between the KC-30 and the KC-767 is very similar to what happened with the 2006 competition.
The USAF then initially did not plan an “extra credit” for larger capabilities exceeding the minimum requirements of the airplane. Northrop threatened to withdraw from that competition unless the FRFP allowed for extra credit–and prevailed.
During the evaluation period, Boeing called the KC-30′s extra capacity “gold plated” that was nice to have but unnecessary and more costly on a life-cycle basis. After Northrop won that competition on the basis of offering “more” (in the words of a general upon announcing the award), Boeing protested that it did not understand the extra capacity would be granted extra credit. The GAO upheld this and seven other protest points.
Today Northrop claims the DRFP favors the smaller airplane. We agree, but we have always said that if all the USAF wants is “just” a tanker, the KC-767 is the choice. If the USAF wants a more capable Multi-Role Tanker Transport, the KC-30 is the choice. We think a KC-777 is too big, but also believe Boeing would checkmate Northrop if bids were submitted offering the KC-767 and KC-777.
But setting aside the issue over size, we think a larger issue in the DRFP is the fixed-price contract provision for 18 years. This is fraught with risk for Northrop and Boeing, for “mission creep” by the services are often what cause cost-overruns in programs. Northrop is vocal in its criticism of this provision; Boeing won’t comment.
Whether Northrop stays in the competition or not, the fixed price contract provision needs to get some attention. This is the one that could really muck up the works.
Repeating a threat made in the 2006 KC-X competition, Northrop Grumman said it will not bid on the KC-X program unless significant changes are made to the Final Request for Proposals.
Here are the first of what will be many stories: