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.

Congress Seeks Ways to Stop EADS Contract

Congressional strategies are now being formulated to stop the award of the tanker contract to the team that includes EADS.

The Seattle Post-Intelligencer reports the legislative options under discussion include:

• Prohibiting the award of a U.S. government contract to any company found by the U.S. government to be receiving illegal subsidies. (The U.S. Trade Representative has stated EADS, the parent of plane maker Airbus, receives illegal subsidies from European governments, the effect of which has been to undercut Boeing's prices on commercial aircraft and gain worldwide market share.)


• Directing the Air Force to reconsider the competing tanker proposals and "factor in the subsidies.


• Directing the Air Force to reopen the bidding and allow Boeing to propose building a tanker based on a larger airplane.


• Canceling the EADS-Northrop contract outright.


• Rep. John Murtha, D-Pa., chairman of the House subcommitee that oversees military spending, has also warned that he might freezing tanker funds if the contract is not overturned.

As the economy continues to slow and the November election frenzy continues to build, we at Tanker War Blog do not forsee the tanker contract surviving in its current form. The Bush administation has been curiously silent, so we expect it will be left to Congress to carry out the will of the people.

Aviation Expert Supports Protest and Congressional Tanker Hearings

Highly respected aviation expert Scott Hamilton, founder of Leeham Companies, LLC calls for Congressional Hearings and a vigorous protest by Boeing.

In his recent report on the tanker issue Mr. Hamilton writes:

Boeing should pursue the protest of the award by the US Air Force of the KC-45A tanker to Northrop Grumman as aggressively as possible. Furthermore, Congressional hearings should also be pursued aggressively.

This is a complete about face of our previous positions. Here’s why: Once Boeing filed the protest, a move we did not support, and Boeing explained its reasoning, it’s clear that there is a real disconnect between what the public has been hearing from the Air Force, Northrop, aerospace analyst Loren Thompson, whose close ties to the Air Force and his information published became the focus of some criticism, and what Boeing understands from its debrief. [Note: see our previous post on this issue.]

Northrop, the Air Force and Thompson said the win by Northrop for its KC-30 wasn’t even close. Boeing says not only was the win not close, Boeing’s KC-767 actually outscored the KC-30 in several areas. Furthermore, Boeing claims the process was changed, sometimes without the Air Force telling it, during the evaluation. These changes, Boeing said, were designed to keep Northrop’s KC-30 in the competition. With the huge disconnect and the Boeing assertions, there is only one way to resolve the issue and to provide affirmation, modification or rejection of the process and decision, and that’s to aggressively pursue the protest.

Anything less will leave a cloud of doubt hanging over the Air Force’s decision and continue to subject the award to Congressional, labor and public criticisms. Even if the Government Accountability Office, with which Boeing filed the protest, affirms the award, it’s unlikely to completely quell the criticism because of the political ramifications that have enveloped this process from the start of the competition.

Mr. Hamilton's support for Boeing's protest and Congressional inquiry into the matter are welcomed by those of us here at Tanker War Blog.

Too big, Too heavy

Jed Babbin, a man most of us admire (we are bipartisan remember) but all of us respect, has just written a great entry "Too Big, Too Heavy" about the tanker controversy on his blog at Human Events.

As a former a deputy undersecretary of defense in President George H.W. Bush's administration, the author of many books including "Inside the Asylum: Why the UN and Old Europe are Worse than You Think" and someone who has three decades of experience in trying cases before the GAO we are not surprised to see that Mr. Babbin concluded that the current tanker contract with NG-EADS is a bad deal for the warfighters.

Mr. Babbin calls for Secretary Gates to assemble "all the combatant commanders and all of the Air Mobility Command former bosses he can find who aren’t working for one of the competitors. Get to the bottom of why the warfighters were apparently ignored. And fix this before billions of dollars and precious years are spent on what may reduce the Air Force’s ability to fly and to fight. "

V-22 Refueling Issue Continued

We have received a great number of e-mails and comments on the V-22 refueling issue. In this post we will address some of the comments, summarize questions that seem to be still unanswered, and specify those issues on which we have conflicting information.

1) An anonymous post took us to task for declaring, "that the Marine Corps and the Special Operations community are up in arms," when no official statement has been made by either organization. Upon checking with our sources they have asked that we not get them out in front of their high headquarters on this issue and that we simply state that a number of people within those organizations were very surprised to learn the EADS aircraft could not refuel the V-22. We have since made that edit to our previous post.

2) Another e-mail asked under what flight parameters can the Boeing tanker refuel the V-22. The answer is that we do not know exactly. None of us at Tanker War Blog are refueler pilots but since the Air Force slide says, "throughout entire flight envelope," we are under the assumption that it can refuel the V-22 under all conditions. (Note: if you are a tanker pilot and want to help us with posts please e-mail us at tankerblog@gmail.com to offer your services.)

3) Mr. F. You from Alabama sent a comment that we can not post due to his very colorful language, but he did make a claim that we will reverify. Specifically he stated that the ability to refuel the V-22 was not part of the evaluation process. We were given the impression that it was. Since we do not currently have the source document stating V-22 refueling was, or was not, a discriminator we feel we owe it to our readers to research this and get back to you with an update. [Update: See John S. comments below. He provides the link to the source document where tilt rotor refueling is listed as an Object KPP (a disciminator that is desirable but not mandatory).]

4) A number of you felt that this issue was a bit of a red herring. From what information we have been given to date we don't believe this to be the case, but if it turns out to be a non-issue we will be glad to post such findings. We continue to believe EADS has enough faults that we don't need to manufacture any for them.

5) A number of others asked what was the specific reason the EADS aircraft could could not refuel the V-22. We are currently still researching this. Some have commented that it was due to stall speed, several people sent us that it was due to the turbulence of a larger aircraft, one person told us it was due to the refueling attachment (drouge?). The truth is we don't the reason know for sure yet, but we hope to have a clearer picture soon. [Update: NG now claims that their aircraft can also refuel the V-22. The only problem is that the Air Force has not changed their postion that it can't. Our view remains that until the Air Force says the NG/EADS aircraft can refuel the V-22 the issue is still very open.]

USAF's Tanker Choice Can Not Refuel the V-22?

Sources in the Pentagon tell us that some members of the Marine Corps and the Special Operations community are very surprised that the Air Force's new tanker of choice may not refuel the V-22 Osprey.

Although the ability to refuel the V-22 (which the Air Force also owns) was part of Key Performance Parameter (KPP) #1 for Aerial Refueling, the EADS tanker is said to have no ability to refuel this revolutionary tilt rotor aircraft.

Specifically the Air Force briefing slides on Key System Requirements Comparison on Aerial Refueling issues are reported to state:

"Boeing can refuel all current USAF tanker compatible Tilt Rotor Aircraft

-Benefit: Provides the V-22 fleet additional refueling options while tanker maneuvering throughout entire flight envelope vs no tilt rotor refueling for NG"

The NG above stands for Northrop Grumman, EADS's American tanker partner.

To understand why this is so shocking you need to know that the V-22 was built to address may of the lessons learned from the Iranian hostage rescue debacle which required the on ground refueling of helicopters at a site the military labeled as Desert One.

In this operation America lost eight of its bravest men, seven helicopters, and a C-130 in the chaos of a remote Iranian refueling/staging area and did not even made contact with the enemy.

The Osprey - with its superior range, speed and ability to refuel in the air - was built specifically to allow forces to move directly to the objective area and not require the type of risky staging areas that proved disastrous at Desert One.

If it is true that the Air Force picked a tanker that can not refuel the V-22, this decision is astonishing to say the least.

PS - You think Murtha was mad before? When the Retired Marine Colonel hears it can't refuel the Corps latest bird, look out!

The Undisputed Champion of Corruption?

The past few weeks we have been hearing many naive and somewhat uninformed pundits say that Boeing deserved to lose the contract because of the original corrupt tanker lease deal.

The trouble with such thinking is that it assumes EADS and its subsidiary Airbus are good corporate citizens. As this Economist article "Airbus's Secret Past" and this Center for Security Policy report on EADS show, this is far from the truth. The scale and depth of the historic corruption at EADS and Airbus is truly staggering.

Here is a list of some recent and past notorious EADS, its subsidiaries and predecessors, corruption and bribe scandals:

• EADS senior management and worker insider trading (Current investigation)


• EADS lobbyist pays Austrian Air Force General's wife (Current investigation)


• The Clearstream Scandal: Nothing in American History is Comparable (2006)


• EADS implicated then mysteriously cleared of bribery in Singapore (2005)


• Convictions on EADS bribes in South Africa South (2003)


• Airbus Middlemen convicted of bribing SyarianAir Officials (2001)


• Sebena Airlines goes bankrupt over suspicious Airbus purchases (2001)


• Canada uncovers slush fund of Airbus consultant (2000)


• Air India Airbus purchases (1986-2000)


• NSA twarts Airbus bribes to Saudi officals (1994)


• Kuwait Airways purchase of Airbus aircraft over Boeing (1991)

The really troubling thing about the above list is that the examples are only the corrupt EADS/Airbus practices that have been uncovered. (Note: Please e-mail us if you know of other EADS/Airbus malfeasance)

The fact the governments of Spain, Russia, France, Dubai and Germany own EADS means that it is in their best interest that EADS corruption is not brought to light. Cover-ups and refusals to investigate these corrupt practices is often the norm.

In the US we prosecute such corruption. For its part in the Darleen Druyun fiasco Boeing paid a $615 million fine, its CEO was forced to resigned and the individuals who committed the crimes went to jail. EADS has never been held to such standards.

Boeing Protests

Thanks to our friends at the Center for Security Policy we now have a copy of the publicly releasable version of the Boeing protest.

Contrary to public option, Boeing contends that the competition was very close and the EADS won only because the Air Force misapplied the selection criteria and disregarded sections of the Request for Proposal.

Congress now has a decision to make will they try to nullify/not fund the contract now or wait for the GAO to hopefully rule in favor of Boeing.

It should be noted that a freeze was automatically made on the contract award under federal regulations due to the protest. But, those same rules gave the Air Force leeway to resume work in certain circumstances prior to the GAO ruling. The fact the Air Force is not fighting the freeze probably means they don't want to antagonize Congress again so soon. (Don't make them mad when next year's budget is currently being discussed.)

Our guess is given what Boeing says in their protest, Congress will make threats but will not move on the issue until the GAO rules on the dispute which could be in 3 months. (GAO has 100 days, June 19th, to make a ruling.)

Integrity "Above All"

For our first post we want to address a leak in this announced contract that in our view requires clarification and tarnishes the Air Force's good name.

At a press conference on 29 February Sue Payton, Assistant Secretary of the Air Force for Acquisition, announced that the Northrop Grumman/EADS team had won the contract to produce the next generation aerial refueler over rival Boeing.

When asked about specifics about the proposals Ms. Payton replied, “Actually, until we debrief Boeing, I will not -- I will not go into details there. We owe it to Boeing to give them the first debrief on this, so I will defer that question and the answer to that question until we've debriefed the offer.”

When questioned later to provide other proposal details Ms. Payton replied again, “No, I don't think I should do that. I think I owe it to Boeing to discuss the elements of our decision with them first.”

Too bad this moral high ground and honesty “above all” approach to the procurement process lasted for only 24 hours.

Contrary to Ms. Payton’s public statements Air Force personnel briefed at least one outside defense expert and sought to brief members of congress while telling Boeing that the earliest they could be briefed was the 12th of March. (Pentagon acquisition chief John Young eventually stepped in an ordered the Air Force to brief Boeing earlier on 7 March.)

These actions were taken to seed the story that Boeing had lost decisively and to make public and congressional opinion go against a possible Boeing protest. This shameful tactic did work in the media and generated numerous stories that Boeing lost decisively see here, here, and here. But if anything it only hardened congressional opinion and may have actually forced Boeing into protesting the decision. (How else were they going to get the straight story from an organization that seeming sold its integrity for preemptive media spin.)