What happens if EADS wins the KC-X contract?

What-if, what-if, what-if? Some people went to the Moon after asking that question. I just went to my blog. The KC-X contract could be awarded in days or perhaps weeks. I have no idea who will win or lose, but I think I’m ready to play out a what-if exercise. Please, let me know what you think. 

1. What if EADS wins the KC-X contract by under-bidding Boeing?

If you’re a KC-767 supporter, you may argue disproportionate subsidies gives Airbus an unfair commercial advantage. If you’re a KC-45 supporter, you may argue that EADS North America can price more aggressively because it’s not offering a paper airplane. The point is, both sides agree it can happen. Sooo…

2. What if Boeing decides NOT to protest?

No matter who wins the KC-X contract the losing bidder will file a protest. That seems to be the widely accepted and perhaps forgiveably cynical viewpoint about the tanker competition. But let’s consider, for a moment, the facts.

The previous contract award was overturned by the US Government Accountability Office because the air force made a critical error. After specifically informing Boeing that aircraft size was not a factor in the evaluation, the air force awarded the contract to the then-Northrop Grumman/EADS KC-45 and cited the aircraft’s larger size as the reason. According to the GAO, that’s not fair.

It may be a lot harder to make that case this time, notwithstanding the mail switcher-oo blunder by the air force in November. It’s very clear that this competition is a price shoot-out. To win a protest on similar grounds as the previous case, the losing bidder may be forced to argue the air force decided to buy the most expensive aircraft because it was the most expensive. That seems like a hard-sell.

Of course, there are other considerations. If there is evidence of wrongdoing (remember Darleen Druyun?), that will be automatic grounds to sustain a protest. It’s still not clear if the botched shipment by the air force could be a factor. Finally, filing a protest simply as a stalling tactic is possible — as long as the contractor doesn’t mind really offending its biggest customer.

3. What if Congress refuses to approve funding for the KC-X program?

KC-767 supporters may argue that appropriating funds for the KC-45 steals jobs from Americans and rewards a world trade-scofflaw for undermining US competitiveness. KC-45 supporters may argue that EADS North America will be creating thousands of jobs, and revitalizing domestic competition for large commercial aircraft. The point is, Boeing’s supporters in Congress may seek to ensure that EADS doesn’t win, even if Boeing loses. This would then become a test of political strength. If Northrop was still involved, I’d consider it a fair fight. With EADS standing alone, I’m not so sure.

4. What if Congress, as a compromise, requires the air force to buy both?

This is maybe the biggest what-if of them all. It probably isn’t possible until after the retirement of Secretary of Defense Robert Gates, an outspoken opponent of a split-buy deal. But such a compromise would probably not be reached in the immediate future anyway.

If there’s anything we have learned about the KC-X competition, it is certainly this: Anything can happen.

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9 Responses to What happens if EADS wins the KC-X contract?

  1. Royce 18 February, 2011 at 2:46 pm #

    I don’t agree with people who worry about a protest from the loser. It’s a hugely expensive contract that will run for a decade or more. Taking a couple of extra months to get GAO review doesn’t seem all that burdensome under the circumstances.

    If EADS has underbid Boeing, I’d expect a deal to go ahead despite the irritation of Boeing’s supporters in Congress. The DoD’s public sales job is pretty easy when you can say, “KC-45 is just cheaper than KC-767.” This is why they went to a price-centric bidding process this time, I think.

  2. aeroxavier 18 February, 2011 at 3:56 pm #

    boeing can’t lose because boeing is american,not airbus….
    (that’s the real mentality of major US people)

  3. RobH 18 February, 2011 at 4:36 pm #

    Am I the only one that senses that the Air Force loathes Boeing? Maybe it’s the spectacular failure of FIA (Future Imagery Architecture) or maybe the original KC-X lease thing that the Honorable Arizona Senator John McCain blew out of the water.

    There’s been a palpable tension there for years. I’m not sure why, but I am sure Air Force pilots and maintainers are doing the absolute best they can do with those antiquated airframes…

  4. ewaggin 18 February, 2011 at 5:11 pm #

    The anti-Boeing bias in the previous competition was grounds, in itself, for overturning the award. However, it was not the most critical reason for doing so.

    The GAO also found that Northrop/Airbus had failed to demonstrate that the Airbus tanker was capable of refueling all aircraft in the US inventory, and that it had not developed a maintenance plan, both mandatory requirements.

    Because of these failures, said the GAO, the Northrop/Airbus proposal could not serve as the basis for a contract award.

  5. sferrin 18 February, 2011 at 6:52 pm #

    They did a split buy on the LCS so who knows?

  6. Matt 18 February, 2011 at 8:17 pm #

    A price shootout is amusing. As the bid price won’t be at all realistic. Just wait for the CCPs/ECPs to roll on through.

  7. PMS 18 February, 2011 at 10:11 pm #

    All fighters, bombers, helicopters (and recently UAVs) are US made – and it seems to be obvious.
    I thus cannot understand why USAF is looking for non-US offers for tankers??

  8. Joe Katzman 19 February, 2011 at 9:48 am #

    John Murtha had this right. Option #3 is really the only option here, and the last election exacerbates things. Everything else leads to protests, and major Congressional interference. If Boeing wins, too many EADS supporters who have influence (esp. within the GOP), and feel the competition was taken away from them. If EADS wins, the reverse but even more sharply fought.

    Murtha was a crook. But no-one ever accused him of not understanding retail politics, or being able to count noses and size up a situaiton.

    The thing is, it’s also the right military choice. The USAF will moan about operating 4 types: KC-135, KC-10, KC-30, KC-767. But they have a legit need for the A330 in the Pacific, and the 767 in Europe and elsewhere. They say that’s what the follow-on KLC-Y/Z are for, a KC-10 replacement, but let’s get real smnd do the budgetary/ demographic math. There won’t be a KC-Y, or Z. This is it. So, to replace both the higher and lower end, run a bid that offers both larger and smaller aircraft. Because when the KC-10s and KC-135s leave service, which could happen sooner than expected due to unpredivctable fatigue issues, the USAF’s KC-X buy will be all they have left.

  9. Joe Katzman 24 February, 2011 at 11:12 pm #

    Sry, should have said option #4. The Tea Party Republicans are a wild card, but the Buy America and No subsidies angles are likely to resonate with them. If that happens, the USAF plan will be shot down, a dual-buy would become the only option…. and the USAF gets to wait a few more years, in a deteriorating fiscal environment.

    In retrospect, the revised KC-X RFP’s decision not to pursue a dual-buy option is likely to be seen as an act of colossal arrogance by Gates & company. One that could be even more expensive than some of Gates’ other moves.

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