Thursday, April 10, 2008

Tanker cost data tweeked in favor of EADS airplane

At the heart of Boeing's tanker contract protest (pg 80) filed March 11 with the GAO was the claim that the Air Force improperly made adjustments to its and its competitors bid costs. (It should be noted that this charge was not one of the claims that the Air Force asked the GAO to dismiss outright.)

Many of us did not truly realise the extent of the alleged manipulation though, until an alert reader sent us a recent Reuters article which states that,

"The U.S. Air Force added $5.2 billion in costs to Boeing Co's unsuccessful aerial tanker proposal, far more than it added to the winner, Northrop Grumman Corp, according to Boeing and documents viewed by Reuters."

The article goes on to say that the competitor's,

"tanker, based on the A330 made by EADS' Airbus unit, saw its estimated operation and support costs actually lowered by $1.4 billion, according to the documents."

If true, the Air Force procurement officials in essence penalized Boeing's bid by the astonishing amount of $6.6 billion!

Even defense expert Loren Thompson ,who has been a stanch defender of the Air Force's decision, noted that it is now clear the selection process was not as transparent as the Air Force had hoped.

"It appears that the Air Force's pricing methodology was stacked fairly heavily against the Boeing bid," he said.

Given this data tweeking, it is not surprising Boeing lost the competition, but that it was even a close race.

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