The way we live now: Northrop Grumman and EADS dropped out on Monday, so Boeing is "the likely winner of one of the Pentagon's largest contracts," probably ultimately on the order of $100 billion, the New York Times reported on Monday.[1] -- The news came only four (count 'em, four) days after our own Norm Dicks (D-WA 6th) was, as expected, elected to succeed the late John Murtha (D-PA 12th), as head of the Defense Appropriations Subcommittee.[2] -- Attaining the chairmanship of this panel has been the lodestar of the one-time UW footballer and Warren Magnuson protégé for decades, since the subcommittee "controls half of the discretionary spending in the federal budget, to the tune of $708 billion for 2011," as Kyung Song noted. -- (Boeing shares have risen about 16% since Murtha died, compared to a rise of about 6.5% of the Dow, in which Boeing is of course included, in the same period, and it's a safe bet that they will rise further.) -- Dicks's hometown paper, the News Tribune, took a stab at pretending that Boeing might still lose the contract.[3] -- But Les Blumenthal gave the game away: he also reported that Dicks is pushing to scrap the bidding process altogether and "just negotiate a contract directly with Boeing." -- COMMENT: Only two years ago Rich Thomas was chortling about Boeing's having (supposedly) failed to get the very same contract, writing: "Boeing's arrogance and corruption lost them the contract, and to overturn the results of the open bidding to provide the USAF with a new tanker would be rewarding their misdeeds." -- Repeat: "rewarding their misdeeds." -- Repeat: "rewarding their misdeeds." -- Now repeat "rewarding their misdeeds" 99,999,999,997 times more....
1.
NORTHROP AND EADS TO DROP BID FOR TANKER
By Christopher Drew
New York Times
March 8, 2010
http://www.nytimes.com/2010/03/09/business/09tanker.html?ref=us
The Northrop Grumman Corporation said on Monday that it would not bid for a $40 billion contract to build aerial refueling planes for the Air Force, leaving its rival, Boeing, as the likely winner of one of the Pentagon’s largest contracts.
Northrop complained that the government’s requirements favored the smaller plane that Boeing planned to offer.
Northrop’s executives had also questioned whether the contract would be profitable enough given the Pentagon’s insistence on setting the final price largely before the design and testing were completed.
Northrop’s decision adds more controversy to the long-running effort to replace a fleet of tankers dating back to the Eisenhower administration.
It also raises questions about President Obama’s plan to foster more competition and shift more of the responsibility for covering cost increases to military contractors.
Military analysts said Boeing, based in Chicago, could probably charge a higher price if it was the only bidder.
“Given how much emphasis the Obama administration has put on acquisition reform, it is ironic that the biggest new weapons program of the Obama years will not have competition,” said Loren B. Thompson, an analyst at the Lexington Institute, a policy group financed by military contractors.
Northrop, based in Los Angeles, had planned to team up with the European company that makes the Airbus planes, and officials of that company -- the European Aeronautic Defense and Space Company -- said it would not try to bid on its own. Several analysts said it would have been hard for the company, also known as EADS, to win the political backing needed to outmaneuver Boeing.
The effort to obtain new tankers has been going on for nearly a decade, and it has come to represent much of what lawmakers say has gone wrong in military contracting.
The Air Force’s first effort collapsed in 2004 amid corruption charges involving a proposed leasing deal with Boeing. Northrop Grumman and EADS then won a competition in 2008, only to have the award overturned after Boeing protested that the evaluations had been unfair.
The Air Force began its third effort last September, and Pentagon officials promised that the rules would be clear enough to steer the contest “straight down the middle.” But analysts said the service’s numerical scoring system seemed to favor Boeing’s plans to offer a smaller plane, which could save billions in fuel costs over the next 40 years.
And what had been the strength of the previous Northrop and EADS bid -- a plane that could carry more fuel and cargo than the Air Force had sought -- became a liability, as the competition turned into a shootout over which bidder could offer the lower price.
Northrop’s chief executive, Wesley G. Bush, said in a statement on Monday that the request for bids “clearly favors” Boeing’s smaller plane, even though Northrop felt that its larger plane represented “the most capable tanker for the warfighter.” But Mr. Bush said Northrop would not file a formal protest, given that “service men and women have been forced to wait too long for new tankers.”
Mr. Bush, who became the company’s chief in January, has placed more emphasis on improving Northrop’s profit margins than on increasing revenue. Mr. Thompson, the industry analyst, said Northrop officials had told him that “they could not find a way of bidding on the solicitation that was consistent with that guidance.”
Michael B. Donley, the Air Force secretary, said recently that the service would go forward with the contract even if Northrop dropped out. He also said he believed it would have the leverage to obtain a fair price from Boeing.
The Air Force has said the contract would be for 179 tankers. It could be extended for decades and eventually cost $100 billion for 400 to 500 planes.
Northrop’s decision to forgo any protests could also head off a hot political dispute over the contract and the jobs it will create.
Boeing plans to build the plane, based on the 767 jetliner, in Everett, Wash., and in Kansas. Northrop and EADS would have built a plant in Alabama, which also would have given the European company a beachhead to assemble commercial airplanes in the United States.
Representative Norman Dicks, a Democrat from Washington who recently became the chairman of a House panel that oversees the Pentagon budget, said in an interview that if EADS had tried to bid on its own, there would have been “a real knockdown, drag-out battle” over a preliminary trade ruling indicating it had received improper subsidies to develop its planes.
EADS said in a statement that it remained committed to the American market, where it has helicopter and other contracts. But some analysts said that without the tanker contract, EADS would have to rethink its strategy in the United States, where it is eager to expand as military budgets shrink in Europe.
“The opportunities for any significant acquisitions in the military arena are very, very slim,” said Howard Wheeldon, senior strategist at BGC Partners in London. He said EADS would need to focus more on emerging markets than on the United States.
--Nicola Clark contributed reporting from Paris.
2.
Local news
DICKS PICKED TO CHAIR POWERFUL DEFENSE-BUDGET PANEL
By Kyung M. Song
** It took three weeks -- or three decades, depending how you count it -- but Rep. Norm Dicks finally got tapped for the job he's always coveted: chairman of the House subcommittee that controls the Pentagon's purse strings. **
Seattle Times
March 4, 2010 (updated Mar. 5)
http://seattletimes.nwsource.com/html/localnews/2011260147_normdicks05m.html
WASHINGTON -- It took three weeks -- or three decades, depending how you count it -- but Rep. Norm Dicks finally got tapped for the job he's always coveted: chairman of the House subcommittee that controls the Pentagon's purse strings.
The House Appropriations Committee on Thursday voted to install the Bremerton Democrat to succeed Rep. John Murtha, D-Pa., as head of the Defense Appropriations Subcommittee. Murtha died Feb. 8 of complications following surgery to remove his gallbladder.
In turn, Dicks yielded the chairmanship of the Appropriations subcommittee for Interior, Environment, and Related Agencies. Rep. Jim Moran, D-Va., was named to the post.
Dicks, 69, has served on the defense subcommittee since 1979 alongside Murtha. The panel controls half of the discretionary spending in the federal budget, to the tune of $708 billion for 2011. By comparison, the interior subcommittee oversees $27 billion in programs.
Dicks' ascension comes as Boeing and Northrop Grumman are vying to build the next generation of Air Force tankers, one of the largest purchases ever for the Pentagon. Unlike Dicks, Murtha had favored splitting the estimated $40 billion initial contract between the two companies.
Now that he is the one wielding the gavel, "I hope nobody is talking about a split buy," Dicks said.
Dicks is a much more expansive personality than Murtha was, the type who instinctively holds elevator doors ajar for late dashers. Dicks said he intends to hold more hearings as well as seek more active participation from his fellow committee members, some of whom are relatively new to the panel and less familiar with complex weapons, intelligence and other issues.
The billions in discretionary military spending Dicks will oversee equals 60 percent of individual income taxes collected each year. The money pays for military wages to health care to fighter jets. About $100 billion of that is for the war in Afghanistan and $60 billion for Iraq.
In an interview Thursday, Dicks said more should be done to provide troops with the best equipment, medical care, and post-combat support.
"Our biggest job is to be supportive of the troops and make sure that they have good equipment and not waste money," he said. "The country owes them a lot."
Another priority, Dicks said, is beefing up the Pentagon's acquisitions division, which was shrunk under the Bush administration. Dicks blamed the downsizing for the decade-long debacle over the air-refueling tanker contract.
The Pentagon twice had to void the award -- once given to Boeing and once to Northrop -- first because of illegal actions by a defense-procurement official and Boeing's chief financial officer, and then because of flawed contract evaluations.
This time around, Dicks said, Boeing should have "a big advantage" with its smaller 767 tanker that uses less fuel than the larger-capacity A330 tanker being offer by Northrop and its partner, EADS, the parent company of Airbus. The components for that tanker would be made in Europe and assembled in Alabama.
The lower fuel cost "I think will help us win," Dicks said.
And what difference, if any, it should make to have a lawmaker from the Puget Sound-area head the congressional panel in charge of paying for the tankers? "It certainly doesn't hurt," Dick said.
Dicks, called by some as "Mr. Boeing," may be feeling chastened since his brush last year with the Office of Congressional Ethics.
Dicks, Murtha and James Moran Jr., D-Va., who also serves on the defense subcommittee, directed $137 million in defense contracts to companies that had hired a lobbying firm, PMA Group, founded by a former subcommittee staffer. PMA Group donated $133,000 to Dicks.
The ethics office ended the investigation without taking action. The House ethics committee opted not to pursue its own probe.
Dicks said he favors greater transparency and other reforms on earmarks, spending projects directed by individual lawmakers. Asked if that means he would ask for fewer earmarks, Dicks said, "I'm not prepared to talk about that. But obviously as chairman, I don't want any problems."
Dicks rejected criticism by government watchdogs that earmarks are inherently corrupting. He said, for instance, that giving money to the Pentagon for projects it didn't ask for can prove valuable.
He cited the Predator drone, which the Air Force initially balked at buying. They now have become the primary unmanned aerial vehicle in use in Afghanistan and parts of Pakistan.
Dicks' appointment must still be approved by the Democratic Steering and Policy Committee and by the full Democratic caucus. He had no challengers.
Kyung Song: 202-662-7455 or
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3.
BOEING LEFT ALONE IN TANKER CONTEST
By Les Blumenthal
** $35 billion job: Northrop Grumman decides not to bid **
News Tribune (Tacoma, WA)
March 9, 2010 (posted Mar. 8)
http://www.thenewstribune.com/2010/03/09/1101935/boeing-left-alone-in-tanker-contest.html
WASHINGTON -- The Boeing Co. now has the inside track on a $35 billion contract to start replacing the Air Force’s aging fleet of aerial refueling tanks after Northrop Grumman announced Monday that it wouldn’t bid.
Northrop’s partner, the European Aeronautic Defense and Space Co., left open the possibility it could bid on its own, though lawmakers and military analysts said that might be difficult. [NOTE: The *New York Times* article above contradicts this: "[O]fficials of that company -- the European Aeronautic Defense and Space Company -- said it would not try to bid on its own."]
“This is now Boeing’s contract to lose,” said Loren Thompson, a defense analyst with the Lexington Institute, a national security think tank based in northern Virginia.
Sen. Maria Cantwell, D-Wash., cautioned Boeing supporters against becoming overly confident.
“It’s too soon to pop the champagne corks,” Cantwell said.
Washington’s other senator, Democrat Patty Murray, agreed.
“Boeing still must bring a very competitive bid to the table that meets all the requirements the Pentagon has set forth,” Murray said.
Defense Department officials didn’t indicate Monday whether they would follow through with the bid process -- even though there will likely be only one bid -- or negotiate a sole source contract with Boeing. Bids are due in May, and the contract was expected to be awarded this fall.
In a statement, deputy secretary of defense William Lynn said the Pentagon was disappointed Northrop had decided not to bid and insisted the competition was structured fairly, allowing both companies an opportunity to compete effectively.
Boeing supporters on Capitol Hill said Defense Secretary Robert Gates had told them the Air Force would move ahead with awarding the contract even if there was only one bidder.
But Rep. Norm Dicks, D-Belfair, who is about to become the chairman of the powerful House defense appropriations subcommittee, said the bidding should be scrapped and the Air Force should just negotiate a contract directly with Boeing.
“I am confident they can now utilize their authority to proceed with the procurement of KC-767 tankers as quickly as possible, negotiating a contract that will allow the Air Force to begin replacing its tanker fleet rapidly,” Dicks said.
Dicks also suggested that once the tanker is in production, he would push to increase production levels from 15 a year to 20 to 25 a year in an effort to replace the current Cold War-era tankers as rapidly as possible.
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