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Recriminations in Kansas for Boeing

As can be expected with Boeing’s (BA) decision to close their Wichita, KS facility and move work to Washington and Texas the politicians who represent the state are not happy. Many Congressman and Senators who provided support to Boeing to win the KC-46A contract from the U.S. Air Force feel betrayed.

They cite the fact that Boeing executives basically promised the work would be done in Kansas if the contract was one creating thousands of jobs in that state.

The Mayor of Wichita, Carl Brewer, feels the same way. He claims Boeing has betrayed the city by their decision. Wichita has invested millions of the taxpayers money in the plant which has been open since the 1930’s and built bombers during World War II and the Cold War. Now in about 24 months it will stop work and the jobs will be eliminated or moved.

The decision by Boeing based the company claims on cost considerations alone highlight what may happen across the U.S. as the defense budget shrinks and programs are cut or eliminated. Similar scenes have happened before in the 70’s and 90’s as military spending has been reduced. Wichita may be the first of many cities this time around.

That, of course, does not make those who supported Boeing feel better but now they may join the Florida and Alabama representatives who tried to aid Northrop Grumman (NOC) and EADS North America, part of EADS (EADS:P) who worked for those companies to win the KC-X contract. The goal for them of course was investment and jobs in a time when manufacturing ones are hard to find.

As government spending is cut back there will be many other politicians crying foul.

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And the Winner is Boeing!

The U.S. Defense Department and Air Force announced that Boeing (BA) has been selected to provide the new KC-X aerial tanker. The design submitted by EADS NA (EADS:P) was not chosen.

The new KC-46A will be based on Boeing’s 767 airliner design.

The Secretary of the Air Force, Mr. Michael Donley, stated that the decision was based on “mission effectiveness in wartime and life cycle costs as embodied in fuel efficiency and military construction costs”. This might be a hint that the larger KC-30 aircraft from EADS might have required more investment in new and bigger facilities then the smaller 767 tanker.

The contract has been very political with states that stand to gain thousands of jobs from the program using their Senators and Representatives to push for the respective bidders.

EADS does have the right to protest the decision as Boeing did in 2008 when the contract was awarded to Northrop Grumman (NOC) and EADS. They will have to wait until their debrief by the Air Force before making any decision about that.

Even an unsuccessful protest may delay the start of the program for several weeks and the Air Force plans on receiving the first 18 aircraft in 2017. The new KC-46A will replace Cold War era KC-135R tankers some of which have been flying for fifty years.

Cross posted at Defense Procurement News.

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Air Force Plans Award Before April 1st

Despite the current issues with defense funding the Defense Department and Air Force reportedly said that they hope to award the KC-X aerial tanker contract within a month. The budget sent forward for 2012 on Monday stated that the planned contract was valued at around $35 billion.

It sounds like that even with the Pentagon acting under a continuing resolution rather then an official budget that at least the winner will be announced. There is some concern that without a 2011 budget resolution from Congress a new contract of this magnitude might not be able to be awarded. This means that the Air Force will have to wait until October 2011 to have initial funding for the purchase of the new tanker.

The KC-X saga is heavy with political overtones as supporters of both Boeing (BA) and EADS (EADS:P) in Congress continue to lobby OSD and threaten problems if their preferred source is not chosen.

The Air Force has been trying since early in this decade to buy a new tanker and this award may be the last step towards doing that. Although the chances of a protest by the loser remain high and the current budget situation between President Obama and Congress may make it difficult to get the funding resolved anytime soon.

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Reports Final Proposals Due Next Week for KC-X

Both Boeing (BA) and EADS NA (EADS:P) have met with the U.S. Air Force reportedly to discuss final changes to the KC-X RFP. The companies have until 11 February to submit their final revisions to their proposed solutions to the new aerial tanking requirement.

Boeing has said that they will update their proposal although EADS NA has said they may not. Swirling around all of this final burst of activity is the concerns by some in Congress, the media and at the bidders about the accidental release of information by the U.S. Air Force to each team as well as the two World Trade Organizations (WTO) rulings on both companies receiving illegal subsidies.

Some Boeing supporters in Congress are now saying that the data release gives EADS an advantage and that there should be deeper investigations. The Air Force “reassigned” two personnel as punishment and Congress did have hearings last week about the matter. Washington state, Illinois and Kansas legislators all from states that stand to gain work if Boeing wins sent a letter to the DOD IG asking them to look to see if the data released skewed the contest in EADS’ favor.

All of these conditions make it seem inevitable that there will be a protest to the contract award no matter who wins it. There will also be political pressure from supporters of both companies to review the contract and make sure that there favored winner was not treated unfairly.

All this adds up to further delays in replacing the KC-135 systems made during the Cold War. Once again this problem has been created by the disappearance from the U.S. industrial base of multiple suppliers of large aircraft. Currently only Boeing and EADS make aircraft acceptable to the Air Force to meet this requirement. If there is to be even a modicum of competition the two have to be involved which leads us to the current ugly situation of charges and counter charges of favoritism, jingoism and bias.

This will probably be the biggest contract awarded for the next decade by the Defense Department and is critical to both companies maintaining a foothold in the large military aircraft business worldwide which is leading us to the current situation which does not seem like it will end well.

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Loren Thompson Predicts EADS Win

The well known aerospace analyst writes that based on discussions he has had it looks good for EADS North America to win the current KC-X new aerial tanker competition. He believes that the information accidentally shared by the U.S. Air Force with EADS and its U.S. competitor, Boeing (BA), indicate that the analysis by the source selection board favors EADS A330 MTT based bid.

EADS did win the contest two years ago teamed with Northrop Grumman (NOC) only to have it overturned on protest by Boeing. The Government Accountability Office (GAO) ruled that the Air Force had not applied its own criteria properly in evaluating those bids.

This time around EADS bid by itself and proposed basically the same aircraft. Boeing bid a modified version of their 767 tanker incorporating parts of the new 787 cockpit and other improvements.

Last month the Air Force had to admit it sent information to the two bidders about the others after mixing up the CD’s with data.

In Thompson’s analysis the data showed the Air Force favoring the EADS aircraft. Of course Boeing will have a chance to protest if they really do lose this contract.

In another piece of this very complicated puzzle this latest development may have serious affects on the latest attempt to replace the KC-135 Cold War era tankers.

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Effort to Add EADS Subsidies Consideration to Defense Authorization Bill Fails

Senator Murray (D-WA) and Senator Brownback (R-KS) attempted to attach an amendment to the Senate’s 2011 Defense Authorization Bill today that would force the Defense Department and U.S. Air Force to take into account the World Trade Organization (WTO) ruling on subsidies to EADS (EADS:P) by European governments. Due to the fact that the bill did not win enough votes to advance mainly due to the attempt by the Democratic leadership to add the repeal of “Don’t Ask/Don’t Tell” policy on gays in the military the amendment wasn’t considered.

The two whose states stand to gain several thousand jobs if Boeing (BA) wins the KC-X contract will have to wait for this bill to be re-considered or add the amendment to another one. Certainly there are Senators from Alabama and other Southern states who favor EADS who might try to work against the amendment.

Currently the U.S. military cannot consider these kind of trade disputes and rulings in their source selection which is why the attempt was made to add the rule.

This continues to show that the fight for this contract will continue in Congress, the media and across the internet.

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Alabama Remains Supportive of EADS North America

Governor Bob Riley (R-AL) made a speech yesterday to the Economic Development Association of Alabama at which he discussed upcoming industries moving to Alabama. He stressed his administration’s continuing efforts to move large manufacturing facilities to the state. Riley will leave office this year due to term limits.

He is hoping that EADS North America will win the KC-X contract before he does go as one of the key industrial developments for the state. Now Riley is always going to be positive about this effort right up to the time a winner is announced but it does illustrate how well EADS has built relations with leadership in Southern states that have benefited from their investment.

Riley has seen some successes with the building of a Hyundai assembly plant in the state and the ongoing construction of a steel mill by ThyssenKrupp which will open in the near future.

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EADS North America Turns in Proposal Today

EADS North America, the American subsidiary of EADS (EADS:P), turned in their proposal for the KC-X aerial tanker today to the U.S. Air Force. This represents their second attempt to win the program and the Air Force’s third try.

EADS North America will base their program on a modified Airbus A330 transport aircraft. As with the previous attempt in 2008 they will assemble the aircraft at a facility in Mobile, AL. Then they will receive the necessary modifications to meet the U.S. requirements. Airbus will also assemble all of their A330 transports at this new facility if EADS does win the contract when it is awarded in November.

Boeing (BA) will also turn in their proposal by tomorrow. A third contended, U.S. Aerospace, has committed to submit a proposal by Friday if the Air Force does not grant their extension request.

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EADS Ups Commitment to Alabama

In a sign that they are ramping up work on their bid for the new KC-X aerial tanker program EADS (EADS:P) announced that they are moving their proposal preparation team to new offices in Mobile, AL. If the European defense giant does win the contract they will assemble the A330 aircraft at that city and then apply the specific military modifications there or at another facility.

Reportedly EADS will concentrate about 100 workers in Mobile. They are currently based in Arlington, VA where the EADS North America headquarters is and Melbourne, FL. The Melbourne site was most likely established when EADS was working with Northorp Grumman (NOC) on their last attempt in 2008. Northrop has an aircraft modification facility there used to support the E-8 JSTARS program.

The Defense Department and Air Force expect to received proposals in July and award in the Fall. The Boeing (BA) team and their “NewGen Tanker is considered the only other potential offer.

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Good Summary Of The KC-X Situation

The Kansas City Star has this lengthy article that describes the whole situation and explains how we got where we are with the KC-X tanker RFP. The article by Cleon Rickle may be found here. Key takeaways are:

“”I am confident Boeing can build the best plane for the Air Force, no matter the competition,” said U.S. Sen. Pat Roberts,of Kansas. “However, I urge the Department of Defense to run a fair competition and avoid coddling EADS to the detriment of American warfighters who have waited eight years for this contest to end and decades for a new tanker.”

“We will offer a modern, more capable tanker in response to the Defense Department’s decision to encourage competition for this major taxpayer investment,” said EADS North America chairman Ralph Crosby, Jr. “Our KC-45 is the only real, flying, low-risk solution that today meets the demanding Air Force air refueling requirements and is actually in production now. ”

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