Northrop Grumman threatens to no-bid KC-X deal

Washington DC
Source: Flightglobal.com
This story is sourced from Flightglobal.com

Northrop Grumman has escalated its efforts to pressure Pentagon officials to make major changes to the criteria for evaluating bids for the KC-X tanker contract.

In a letter sent today to Undersecretary of Defense Ashton Carter, Northrop CEO Wes Bush threatens to withdraw from the competition against Boeing unless the Pentagon adopts his company’s recommended changes.

“Absent a responsive set of changes in the final RFP, Northrop Grumman has determined that it cannot submit a bid to the Department for the KC-X programme,” Bush wrote.

Northrop’s concerns are focused on several evaluation metrics perceived as biasing the competition in favour of a “smaller aircraft with limited multirole capability”, Bush wrote.

In October, Northrop officials complained the competition was unfair. The US Air Force had decided to make the existing KC-135R tanker’s performance the benchmark for winning the contract. Northrop’s Airbus A330-based KC-45 tanker is larger than Boeing’s potential KC-767 platform.

Bush’s letter also criticizes a contract structure that “places contractual and financial burdens on the company that we simply cannot accept”.

The Pentagon has adopted a fixed-price structure for the contract, meaning the bidders must accept the financial risk of cost overruns. The evaluation is also tilted towards the lowest-price bidder, which Northrop previously complained will result in a “race to the bottom”.

“For all of the reasons we have provided, Northrop Grumman cannot proceed to submit a bid to the Department against the RFP as currently structured,” Bush wrote.

The Pentagon released the draft request for proposals in September, which proposed awarding the contract to the bidder who could meet 373 requirements at the lowest price.

According to Northrop’s letter, Carter’s office has rejected the company’s request to publish a dramatically revised version of the draft RFP. The Pentagon plans to proceed with issuing a final RFP later this month, which prompted Northrop’s warning letter.

For its part, Boeing has decided not to publicly comment on the evaluation criteria, although the company has submitted comments and proposed revisions privately to the USAF.

“We are focused on constructive engagement with our customer in order to offer an advanced tanker that meets their need,” a Boeing spokesman said.

[Read Northrop Grumman's letter on The DEW Line blog.]