Tuesday, March 25, 2008

Libertarians Against EADS

Libertarian’s have always been a great source of wonder to the us at Tanker War Blog for the delightfully unexpected answers they sometimes give to the questions-of-the-day.

You might expect everyone at the CATO Institute to rubberstamp the EADS contract decision as a triumph for the globalized free market and a success for the depoliticized buying process. It turns out not to be so simple. In fact, CATO scholar Benjamin H. Friedman in his post on the CATO at Liberty blog has quite the opposite view:

“But while getting the best plane for the least money is essential, when it awards contracts, the Pentagon should be able to consider their effect on the political landscape, because that landscape drives future contracts. You can’t get the politics out of defense contracting, so you need to get the politics right.

The political problem with the Airbus deal is that it opens a production facility in Alabama to make conventional aircraft assembled elsewhere into tankers, but will not close Boeing’s similar plant in Wichita, Kansas. This means taxpayers have a new mouth to feed. Because they create concentrated interests, US military production facilities are nearly impossible to close.”
So to recap: DoD should have consider the political ramifications of this contract and a new aircraft production facility in Alabama is a bad thing for taxpayers. These are two points some members of Tanker War Blog has been saying even before this controversy, although admittedly for very different reasons.

Mr. Friedman then goes on to explain how the competition in this case was not the work of a real free market. (To maintain our bipartisanship we have disguised the identities of prominent Republican and Democratic politicians.)
“But keep in mind what fair competition here means. As my friend Owen Cote, a researcher at MIT, points out, with only two viable competitors, this is a not a real market. Ensuring competition among two sellers means giving both leverage over the buyer, because if one exits the process, competition is lost. What the press has not pointed out is that [Sen. M’s] insistence on competition gave Airbus the power to force changes in the Air Force’s criteria.

There were two disputes about the Pentagon’s request for proposals that [Sen. M] got involved in to the benefit of Northrop-Airbus. First, in September and December 2006, just before the Pentagon was to release its RFP, [Sen. M.] wrote to top Pentagon officials, asking them to eliminate language in the RFP forcing consideration of how penalties due to a WTO dispute over subsidies might affect the tanker’s production cost. That provision, championed by Boeing booster [Rep. D.], would have hurt Northrop-Airbus more than Boeing. [Sen. M] got his wish.

Second, in the December letter, [Sen. M] asked the Pentagon to give the proposals credit for having more cargo space, instead of equal points for having in excess of a certain amount of space. Meanwhile, the Northrop-Airbus team, which was proposing a bigger aircraft, threatened to withdraw their bid if the Air Force did not change its criteria on this issue. This double whammy put the Air Force up a creek. If Northrop and Airbus weren’t bluffing, leaving the criteria be would hand the deal to Boeing, and enrage [Sen. M], who could then accuse the Air Force in public hearings of giving Boeing another sweetheart deal. The Air Force complied, giving another advantage to Northrop-Airbus.”

Tanker War Blog highly recommends that all our visitors read Mr. Friedman’s full entry Airbus, Alabama, Boeing… as it offers a truly insightful and unique analysis on how competion became the goal of this contract instead of getting the right sized tanker for the Air Force.


Anonymous said...

I really wonder if the aerospace industry has ever existed without the government facilitating, financing, educating, stimulating & taking the risk involved with innovation.

We Europeans have a WTO case too against Boeing.

Take a quick look & you deep down know it isn't nonsense, to say it mildly..

And there is more fishy stuff :


Looking at Europe we no doubt have similar funding and processes. It has always been part of the aerospace business.

One sided blaming & denial is not gonna change it I'm afraid.

BTW like your blog. Maybe it is possible to start a USAF transporter Blog already. A lot of similarities here.

Oldish limited C130 and extremely expensive / heavy C-17 products in the US.

EADS is circling above hundreds of old Herc's with, after delays, an undeniable excellent, state of the art A400M, right inbetween the 20 tonnes C130 and 80 tonnes C-17. It seems EADS don't even feel the need to advertise.

Maybe a low profile route proving flight around the US next year with English Jookes, German Engineers, Spanish food & French Champagne.

Where's my beer & pop corn ;)

Aurora said...

The "undeniable excellent, state of the art A400M, is behind schedule, running over cost, and the engines are, to be kind, "problematic". However, the A400 is an excellent example to our own Air Force that it should be supporting our own aerospace industry--just like Germany and France. By the time the "undeniable excellent" A400M actually enters squadron service (IF...) it will probably cost more than the "heavy" C-17.

Anonymous said...

The "heavy" C-17 is heavier than the KC-45. Why Boeing never mentioned that there maybe problems with tarmac strength?

Aurora said...

Most sources place the MTOW for the C-17 at 265000 kg, while the A330-200 is 233000 kg. What that portends for a fully loaded KC-45 is debatable at present, but I suspect it will be comparable to that of the C-17--if not greater.

The real issue isn't tarmac strength. The issue are the costs required to upgrade the infrastructure (i.e., hangars, ramp space, etc) to accommodate the much larger KC-45. Focusing on weights is at best a red herring.

Anonymous said...

Comparison C-17 / KC-45:

Wingspan: 51.75 m / 60.3 m (+17 %)
Length: 53 m / 58.8 m (+ 11 %)
Height: 16.8 m / 16.9 m (+ 1 %)

Please show me an Air Force hanger there a C-17 fits and a KC-45 won't.

That red herring is from this blog.
"-- the weight-bearing capacity of runways, taxiways and parking ramps and the size of the parking ramps to base enough aircraft --"