Wednesday, April 30, 2008

EADS Tanker Grounded: Revenge of the Bobbittboom

For all the talk of proven technology and the working boom on the EADS/Airbus A330-based tanker, we now find that the Australian A330 Multi-Role Tanker Transport (MRTT), with the prototype EADS boom has been grounded since March because of boom issues.

Boeing has stated in the past that EADS "continue(s) to struggle with the development of the boom they've proposed for the...tanker. Reports indicate their boom is not expected to be operational until late 2010." And Boeing reported that the Air Force had been very concerned about the EADS boom during the contract selection process.

EADS has countered that its "boom has been built, and successfully tested."

"The Australian Multi-Role Tanker Transport (MRTT), the first developmental Airbus A330-based tanker, has been grounded since March while receiving new parts for its refueling boom system.

...The MRTT is expected to return to flight by September, according to Tim Paynter, a Northrop Grumman spokesman. He declined to provide dates for when the A330-based boom is expected to transfer fuel in flight to a receiver.

What is actually being done to the boom during this period is a bit murky."

A bit murky is right! The NG/EADS team has ridiculed Boeing as providing a Frankentanker but as this article points out, EADS has what could be described as the Bobbitboom. (In honor of John Bobbitt and his loving wife Loretta who previously lived in wedded bliss right down the road from DC in Manassas, Virginia.)

The Bobbittboom is currently on an A310 but EADS hopes to have it surgically attached to the A330 and fully functional by 2009 . As the article states:

"EADS has developed this boom specifically to compete with Boeing in the international tanker market. The boom on the A330 has not yet been extended during flight.

The boom system has been flying on an A310 test bed conducting various risk reduction activities."

[The article goes on to say that the Australian tanker program has been restructured "to allow more time for development."]

We are somewhat sure there is a pill these days that can help with the failure to "extend" problem, but as for the boom reattachment to the A330...well your guess is as good as ours.

Tuesday, April 29, 2008

Tanker Funding Fight: Wait until June?

Out today is a Reuters article about Representative Ike Skelton, the Chairman of the House Armed Services Committee, and his call to improve military readiness and the ability of U.S. troops to respond quickly to a crisis.

While he declined to weigh in on the $35 billion aerial tanker contract debate, he did make the following comments:

Skelton said there would undoubtedly be efforts to address the issue during the shaping of the 2009 defense spending bill, but his preference would be to wait until the Government Accountability Office had ruled on the protest in mid-June.

"I would hope to minimize the discussion or the effort until at least the GAO has played out its protest," he said.

Others on the committee, including Ranking Member Duncan Hunter, are on record as being against the contract. Also, many key members on the House Appropriations Subcommittee on Defense are solidly against funding the A330 based tanker.

So while many members might want to wait until the GAO rules in June, there will be significant pressure to act before then. This should make for a lively House of Representatives the next few months.

Monday, April 28, 2008

Thanks for the Clarification

If you are following the tanker contract controversy you could not have missed the fact that defense expert Loren Thompson put out another issue brief Boeing and the Air Force at War: The Damage Spreads today that was immediately seized upon by the KC-30 team and its supporters to attack Boeing.

After Dr. Thompson's recent statements that there were questions as to the claimed transparency of the selection process and comments that, "It appears that the Air Force's pricing methodology was stacked fairly heavily against the Boeing bid."

We at Tanker War Blog were hoping this new brief would be a bit more even handed and not so heavily favored toward leaked Air Force information that can not be cross-examined.

We have great respect for Dr. Thompson but by continually allowing himself to be a conduit for Air Force leaks he has raised some concerns. Such actions are looking less and less like analysis and more and more like trading exposure for insider information.

As was the case the last time one of these leak briefs was published, we at Tanker War Blog started tallying up the damage by counting the number of articles and papers to report on the brief. While doing so, we came upon the following comments to a blog entry at St. Louis Post-Dispatch.

FROM LOREN THOMPSON / LEXINGTON INSTITUTE: I would like to point out that my issue brief does not question the merit of Boeing’s tanker protest. The Air Force believes the protest is baseless, but I share Boeing’s view that some facets of the tanker selection process are hard to fathom. My main focus in today’s brief is on the stridency of statements from both sides, and how such comments are eroding a relationship between Boeing and the Air Force that has endured for three generations.

Comment by Loren Thompson -- April 28th, 2008 at 6:28 pm

While we are thankful for these comments, and we are glad to hear he shares some of Boeing's skepticism over the selection, they still leave us a bit stunned.

The trouble is that this "clarification", posted in the comments area of the St Louis Today, Blog Zone, Business News, Bizz Buzz section, will go completely unread while the extremely damaging original comments will most likely be omnipresent in the papers tomorrow and uncorrected on the web in perpetuity.

Well that's the way things work in D.C., but if nothing else at least the readers of this blog will know the whole story.

Sunday, April 27, 2008

Tanker Whispers

Nothing gets D.C. more excited than a good whisper campaign, and it seems the KC-30 team is trying hard to titillate the K-Street crowd with their latest doozy.

For those fortunate enough to live outside the beltway and not familiar with whisper campaigns, the following is a pretty good description from Wikipedia:

A whisper campaign is a method of persuasion in which damaging rumors or innuendo are spread about the target, while the source of the rumors seeks to avoid being detected while spreading them (for example, a political campaign might distribute anonymous flyers attacking the other candidate). It is generally considered unethical in open societies, particularly in matters of public policy.

In one of their daily e-blasts the KC-30 team suggests Boeing is willing to spend an astounding $250 million to overturn the tanker decision. For this number they cite a National Journal article written by Bara Vaida.

It is reveling though that in the article the only sources for the $250 million figure are a spokesman from EADS NA and a senior VP at Northrop. Here is the passage in the article:
“We’ve heard [the number] through an Air Force source and a couple of other Hill sources,” said Sam Adcock, senior vice president of government relations at EADS North America. Northrop spokesman Randy Belote said he, too, has “heard that number thrown around.” A spokesman for the Air Force said that it “is not aware of the specifics” on how much Boeing is spending on its protest.

We can almost imagine these two going on and on about how they hear this $250 million number in conversations all over town, when they are probably the only ones doing the talking.

The article's author deserves some credit for being able to see right through this and he asks:
Is the quarter-billion-dollar figure realistic, or is it being talked up as part of a strategy to counter Boeing? Doug Kennett, a Boeing spokesman, said the $250 million number is “so ridiculous that you almost don’t want to respond to it.”

In this case, ridiculous may be an understatement. The consensus at Tanker War Blog is that at most the eight figure mark will be broken, and it will probably be on the low end of that. Also, regardless of what Boeing spends, in the end, they will be outspent by NG and EADS. After all, at this point it's the KC-30 team's contract to lose.

We will leave it up to other blogs, or possibly future posts of our own, to hypothesize about any possible motives for wanting to start this rumor, but we will close with a quote from one of the KC-30's very own supporters.

When Senator McCain commented on the people who carried out the whisper campaign against him and his family during the 2000 South Carolina presidential primary he said, "I believe that there is a special place in hell for people like those."

Saturday, April 26, 2008

KC-30 Infrastructure Costs Questioned

On Thursday, Senator Patty Murray questioned DoD Comptroller Tina W. Jones and Deputy Under Secretary of Defense for Installations and Environment Wayne Arny about the additional military construction costs associated with Airbus tankers.

Senator Murray asked why it seems as though retrofit costs to hangars, ramps, and taxiway were not a factor in the decision to the award decision even though the Air Force claims it accounted for all associated life cycle costs.

Both officials, said that they were not part of the decision making process and could not comment on the additional costs.

Upon hearing this Senator Murray voiced her frustration at the lack of cost oversight and that that budget officials for such a huge contract were not part of the Air Force's decision making process.

"These are the people who are responsible for devising the Department of Defense's budget and yet the Air Force never consulted them on all the costs associated with awarding this contract to Airbus," said Senator Murray. "That's like handing your teenager a credit card to go on a car shopping spree...and as taxpayers we certainly shouldn't allow the military to run like that."

Boeing has charged in its protest that the Air Force did not take into account rebuilding air bases for the heavier and bigger Airbus tanker when estimating life cycle costs. And that:

1)The Airbus A330 would require $2 billion more in construction costs to upgrade hangars, runways, ramps and other infrastructure at current tanker bases than the KC-767.
2)The Airbus A330 requires significant investment to be able to operate from the civilian airfields used by Air National Guard and Air Force reserves.

At TWB we have always had the feeling that Assistant Secretary of the Air Force Sue Payton would end up regretting her, “We’ve got it nailed,” comment on the tanker contract. At least when it comes to construction cost, her statment is looking more like bravado than fact. The good news for everyone though is that in the pantheon of misguided overstatements nothing said in the tanker debate can never top George Tenent's WMD "slam dunk".

Friday, April 25, 2008

Politics may be local but it's seldom predictable

AT TWB we have recieved a number of e-mails from people who live near areas directly affected by the final tanker award outcome. Not suprisingly we are finding that residents from the same areas do not have the same reactions. The follwing message was forwarded to us and comes from a Mobile resident who does not support Airbus being in his city:

Why I Am Against The Airbus Plant in Mobile - (Brookley BFM)

I was born and raised in Mobile. In fact, I was born at Brookley AFB Hospital. Ever since my attendance at the Mertz Elementary school, which is on the approach path of RWY 14 BFM, I have been fascinated and could not wait to learn to fly. Heads up - a flyby - love it! You name an aircraft and I can pretty much tell you what it is, sometimes by sound. I spent 33 months in Army Aviation and returned to graduate from the University of South Alabama while expanding my knowledge and skills as an aviator (USA had a flight program & team at the time).

Upon graduation from USA, I worked for a local company, involved in aviation, located at Brookley for over twenty years. Unfortuantely, the business is not as stable as you would hope (2nd layoff for me) and along with hundreds of other loyal employees were let go for bottom line, egotistical, self interest thinking. But that is not my point. 'I Love Aviation' even though I have not been working in the industry for several years, I do stay watchful.

My concern with this project is the wholesale givaway of the designated property for this envisioned plant. Brookley has two major Runways (RWY). RWY 14/32 (SE/NW), and RWY 36/18 (N/S). The U.S. AIR FORCE also had a NE/SW RWY that is currently used as a taxiway and miscellaneous operations at BFM.

In order to get this contract, the Airport Authority in their wisdom deemed the North/South RWY 36/18 as the area over which this planned plant will be built, even though BFM has vast acreage this plant could be located. I suppose its so the Airbus employees working in the newly constructed engineering building can look at the plant across Broad Street.

I would like to question what will happen when RWY 14/32 is shut down for any reason (such as it was for many months for resurfacing/repairs) or if the wind component is too strong for aircraft to utilize? What if there is an emergency where one of the large (or even small) aircraft cannot make it to RWY 14/32, but could have to RWY 18/36). Example: Accident occurred at BFM Thursday, April 24, 2003, of a SOCATA TBM 700B, registration: N705QD, unfortunately fatal.

What if the pilot had to extend to attempt the emergency landing on the only other runway; likely involving others on the ground.

By the way, I live on one of the approach paths of RWY 14/32, and I enjoy watching the flight path of various aircraft. RWY 36/18 is also highly utilize not only for normal operations but for training by civil as well as military, Coast Guard especially. It is also usefull to have two active runways where landing and take off is expedited since the runways were designed for just that reason, to not interfere with each other, and to compensate for varying wind components of differing aircraft.

Anyone who flies knows that a runway is your best friend, and if the need arose to reach one in an emergency, well, you cannot have too many. Or is this just a case where we will let the chips (sic) fall where they may, that the income is worth more than the forethought of safety first . . . Bottom Line Management?

You know, high paying jobs may be good for the goose, but most of us will never see any real benefit from any of these jobs, in reality, they will INCREASE cost of living for the area.

Fortunately my home is paid for, but I could ill aford what new homes costs these days. My property tax continues to rise.

If you wish to review federal grant money spent on varies airports including BFM use the following link to view these expenditures.

I would be more comfortable to support the plant if they would logically not destroy RWY 18/32.

If the planned course of action continues, it would not bother me for Boeing prevailing and winning the contract. I will see it as a victory.

Bo Ayer

Thursday, April 24, 2008

EADS's Tanker: American as Apple Strudel

Like politicians running for public office, the KC-30's nationality seems to change with what ever constituency it is pandering to at the moment.

In case you missed it, last month EADS won an in-name-only competition to lease 14 tankers to the British Air Force for $26 billion dollars. (We will save our commentary for later on how crazy this price is even if it does include infrastructure, training and maintenance services. BTW: In the US we are buying 179 of them for $35 billion. Talk about king of all lease rip offs!)

The interesting thing is that when the British government names the contractors working on the tankers, which we are told are near identical to those the US Air Force wants to buy, Northrop Grumman is not mentioned:

The contract,...was handed to AirTanker Ltd, a consortium led by Franco-German group EADS which includes Cobham, Rolls-Royce and VT Group of Britain as well as Thales of France, the government said.

But some how that same plane is then marketed as America's tanker and has Northrop Grumman listed as the prime contractor here in the good old USA. As we have said on other occasions, "we couldn't make this up if we tried."

We at Tanker War Blog refuse to suspend our disbelief on the nationality of the KC-30, especially when the first of tanker scheduled to be deliver as part of the contract is currently sitting in a hanger in Germany just waiting for the resolution of Boeing's protest. (See photo courtesy of Northrop Grumman above.)

Any nominations for this first EADS tanker delivered to the US be named "The Spirit of Mobile"? It might be fitting given all the phantom Alabama jobs it is supposedly creating.

Inquiring Frenchmen Want to Know

We at Tanker War Blog have been following Secretary Gates' recent scoldings of the Air Force. (Some TWB thinks are unwarranted) While reviewing the transcript of Gates' remarks earlier this week at Maxwell-Gunter Air Force Base, we came across this interesting closing question from a French Air Force Office attending the Air War College:
Question: Good morning, sir. (Inaudible name) from Air War College, from France. Sir, you mentioned this morning in your speech how important interoperability and working in coalition was for the U.S. Air Force. About a couple of months ago, the U.S. government decided that the future tanker will be provided by a consortium led by Grumman and Airbus. Since then, Boeing decided to challenge this decision. I would like to know -- and it will delay the overall process for the Air Force to procure this kind of aircraft. I would like to know what you think about this challenge and how -- (audio break).

SEC. GATES: Well, Boeing is using the legitimate processes that have been established to protest the award of a contract. As I understand it, the General Accountability Office will -- is evaluating the decision process and Boeing's process and Boeing's protest, and they will issue a decision in terms of whether they believe the protest was warranted...

[Secretary Gates goes on to say he wants to move ahead with the purchase and he is concerned that things DoD can not by law consider are in the mix on Capitol Hill.]

So let's frame this properly: A French exchange officer gets the chance of a lifetime to ask the U.S. Secretary of Defense a question....and he wants to know if the Airbus tanker buy will be delayed? This is so cliche we are not sure anyone would believe us if not for the link to the DoD public affairs press release.

Also, this being an election year someone is sure to make the accusation that this was a planted question so DoD could repeat its tanker contract talking points.

So yes intrepid flier of the Armee de l'Air the purchase will be delayed. In fact, we hope that when Americans start to get as interested in this EADS/Airbus tanker contract as those in France, it will be cancelled.

Tuesday, April 22, 2008

TAnchorman says: Stay Classy Northrop

[Note: In this post we would like to introduce someone who we hope will join in from time to time and help us moderate and report on the tanker debate: Tankerman.]

Thanks TWB but please read the prompter correctly, its spelled TAnchorman.

What do you think this is? Amateur hour?!

Anyway, today I would like to reiterated what I have said on a number of occasions, I don't believe an ugly fight between Northrop Grumman and Boeing is good for America. It also misses the point since the true enemy is Airbus.

We all know my friends at TWB have been very hard on EADS, Airbus' parent company, because EADS can not be trusted to be good economic or defense partners.

I am very disappointed to find that Northrop Grumman has decided to counter any questions raised about EADS by handing out fliers attacking its competitor and stating "Boeing has a long history of criminal misconduct".

Sweet Lincoln's mullet that's getting ugly!

Regardless of this attack, I have asked that Boeing not reciprocate by publishing their list of NG missteps because I believe it serves no purpose. As I have stated before, we all understand that companies have employees who have behave badly from time to time. What makes EADS unique in this discussion though is that the French or German governments rarely hold it accountable when its actions are detrimental to the US.

Also, I would like to take NG to task for putting the corporate front group Citizens Against Government Waste (CAGW) up to naming two of the tanker critics as "Porkers of the Month". Maybe it will score some points in Mobile, but everyone in this town has a pretty good idea on KC-30 team money to CAGW. Son of a bee sting! That's not fair to two elected officials who I believed have supported you in the past.

Besides, Airbus can fight their own battles. Here is a nice zinger just reported today:
“I think they [Boeing] are competition-averse, period,” Allan McArtor, chairman of Airbus Americas, told The Hill. He said the production of the commercial aircraft in Mobile will break Boeing’s monopoly in the United States.
Thanks for the aerospace industry insight Airbus, I'll be sure to lead with that story on the evening news.

Now as for you NG, like I said, "You Stay Classy."

Tanker War Gets Nasty

Reuters reports and Tanker War Blog can confirm that last Friday the Vice Chief of Staff of the Air Force, Gen. Duncan McNabb, met the CEOs of Boeing Co and Northrop Grumman Corp to voice concern about the nasty tone of the tanker debate.

Gen. McNabb, who by the way is a great leader and admired by us at TWB, has every right to be concerned. But, the trouble he faces is that his people are not helping the situation.

As our inaugural post Integrity Above All pointed out, it was Air Force procurement personnel who seeded the story that Boeing had lost by a wide margin and to make public and congressional opinion go against a possible Boeing protest. This shameful tactic worked 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.)

Also, left unaddressed are the Air Force rumors of Boeing's "arrogance" that were leaked in the aftermath of the tanker contract announcement. See here, here, here.

BTW: A reporter friend tells us that the defense expert who was the recipient of much of the preemptive information is now highly upset with his Air Force sources as they have backed away from most of their assertions.

We at TWB could have leaked the the Gen. McNabb meeting but Boeing supporters were asked to respect the privacy of the gathering.

Imagine then our surprise to see that Air Force personnel leaked information about the meeting and were sources for the Reuters article:
"It's really gotten ugly," said one Air Force official who spoke on condition he not be identified.

Authorized or not, Air Force leaks and blatant spin have made it an active participant, not an innocent bystander, in the tanker debate. At Tanker War Blog we will continue to do our part to keep the tanker debate civil, we hope others will do the same.

PS-One of our members dared us incessantly to incorporate a Janet photo when she heard the post's topic.....we finally gave in, so we hope you like it. Sorry no Jackson/Timberlake Superbowl photos; that truely would be nasty.

Friday, April 18, 2008

Joining a Mature Engagement

The USAF tanker contract debate, like most controversies, has its fair share of sub-squabbles and sideshows. The current intensity on both sides of the tanker issue and the size of the corresponding fur ball though seems to be growing exponentially.

Even we are now in need of a scorecard to identify the ever growing list of players and issues:

With all the flurry of attacks and counter-maneuvers going on it is easy to get thrown out of one’s OODA loop and lose sight of who the main competitors in this controversy really are: Boeing and Airbus.

We have seen many try to underplay the reality of this decades old grudge match, or muddy the water with lead contractor arguments, but we retain our view that if the NG/EADS bid used any other airframe other than an Airbus product there would be no controversy. (Airbus’ parent company EADS using an U.S. company as the lead contractor was a masterstroke, it even has some believing the A in A330 stands for American.)

As Pat Buchanan has succinctly written on the conflict:

"In its first 25 years, Airbus sold 770 planes but did not make a dime in profit. It was started as a socialist cartel, subsidized by the governments of Spain, France, Britain and Germany, to invade and capture a market owned by Americans who built the planes that won World War II.

Airbus drove Lockheed and McDonnell-Douglas out of the business of commercial aircraft and almost took down Boeing."

Or as Senator Baucus has said:

Don’t take my word for it. Former French Prime Minister Lionel Jospin himself publicly pledged “We will give Airbus the means to win the battle against Boeing.”

True to Mr. Jospin’s promise, decade after decade, project after project, European governments injected massive amounts of subsidies into Airbus – including $15 billion in launch aid. These subsidies underwrote between 100 percent and 60 percent of Airbus’s commercial aircraft development costs, including the A330 aircraft on which this tanker aircraft is based.

These subsidies allowed Airbus to develop aircraft under terms unavailable to unsubsidized market participants. Or as a former British Trade and Industry Secretary boasted: “We are not standing to one side and leaving everything to the market…”

The trouble for Boeing in the tanker controversy is that they have to go through several layers unrelated combatants, DoD procurement officials, misguided free-marketers, and EADS lobbyists/supporters before it can land a punch on their intended Airbus target.

At Tanker War Blog we maintain that allowing an Airbus product to be part of the tanker competition prior to the resolution of the US Trade Representative's dispute over Airbus subsidies/launch aid was a critical mistake that should be reversed.

In his definitive text Fighter Combat, Robert L. Shaw reiterates the old fighter pilot proverb:

“…elements should refrain from joining a mature engagement of roughly equal opposing forces in which friendly fighters appear to be holding their own.” Pg 315

The Department of Defense made a strategic mistake in forcing the Air Force to enter the already mature engagement between the roughly equal opposing forces of Airbus and Boeing that our government appeared to be successfully handling in the World Trade Organization. The Air Force once engaged though compounded the problem with its tactical error of immediately shooting down the friendlies.

So we offer the following guidance to all those who are now in, may be thinking of joining, or find themselves accidentally in the tanker war fur ball: Correctly identify the bogeys, dont' shoot the friendlies, keep you head on a swivel, and be prepared for this thing to get even more chaotic.

Thursday, April 17, 2008

More Air Force Procurement Problems

In another procurement embarrassment, Reuters reported today that Air Force Secretary Michael Wynne disciplined a top Air Force official in the Pentagon and four others involved in the improper awarding of a $50 million Thunderbirds air show marketing and public relations contract.
Reuters reported that,

Wynne's action came after an investigation by the Defense Department's inspector general found the contract was "tainted with improper influence, irregular contracting practices and preferential treatment for the winning company."

While this $50 million contract is not even in the same category as the $35 billion tanker contract, the scandal will certainly have an effect on the perceived credibility and transparency of the Air Force acquisition process.

Tuesday, April 15, 2008

EADS Tanker Funding May Stall in FY2009

In an article published yesterday, former Republican presidential candidate Senator Sam Brownback states that the Air Force's decision to award the tanker deal to France-based Airbus instead of Boeing is not over.

The closing line of the article is the most telling. Senator Brownback,

"states he is hopeful that when the U.S. House sends the fiscal year 2009 defense bill to the Senate it will include language that 'slows down' the Airbus contract, and the Senate will act in similar fashion."

In the FY09 budget the Air Force has requested $831.759 M for the "Next Generation Aerial Refueling Aircraft", which is a new budget item. (Source: pg 34, line #83 of FY09 RTD&E Programs Budget) It also still has available in FY09 $239.8 M from the "Tanker Replacement Transfer Fund," which are funds remaining from FY05 and FY08 appropriations that went unspent.

So, the total to be available to the Air Force if allowed to continue with the purchase of the EADS tanker in FY09 would be $1.0716 billion. Given the overwhelming sentiment of both the House and the Senate, the Air Force should not expect authorization or appropriation of anywhere near that amount.

Monday, April 14, 2008

Anti-EADS but Pro-Northop Grumman?

Although Tanker War Blog has never spoken ill of Northrop Grumman we receive a number of comments from NG employees taking us to task for perceived slights as to their company's Americanism. (Their word not ours)

For the record, most TWB contributors have the highest regard for the great American company that is Northrop Grumman. We would also add that contributors to this blog have over the years worked closely with NG to advance their programs in the public arena and on Capitol Hill. Programs such as the the B-2 Spirit, Global Hawk, the Arleigh Burke-class Aegis guided missile destroyers , the LPD 17 amphibious assault ships, the Virginia-class submarines, and Gerald R. Ford-class of nuclear-powered aircraft carrier, the Advanced Extremely High Frequency (Advanced EHF) spacecraft are but of few of those championed in the past by Tanker War Blog members.

We disagree with NG's choice of partnering with EADS on the tanker contract even though we acknowledge that the current duopoly in large civil aviation airframes left them little choice once they decided to bid. We continue to hope that through the strength of our posts NG realises that no contract, not even a $35 billion one, is worth partnering with EDS to sell Airbus airframes to American tax payers.

Regardless of our fondness for Northrop Grumman though, TWB continues to reserve the right to highlight any inaccuracies in tanker facts, figures, or statements regardless of national origin.

Friday, April 11, 2008

Ethics rule may affect tanker contractor EADS North America

EADS North America, as an American headquartered and owned subsidiary, has always been able to legally distance itself from its parent's ethics issues and criminal investigations. But the ongoing investigation into EADS insider trading may bring this immunity to an end.

The New York Times reports that an 18-page document which details the French stock market regulator’s insider-trading accusations against executives at Airbus and its parent, the European Aeronautic Defense and Space Company accuses,

"more than a dozen executives of Airbus and the parent company, commonly referred to as EADS, of having known as early as June 2005 that profit was likely to decline, largely as a result of development costs and production delays at Airbus.

The executives were also aware of the likelihood of significant delays in the introduction of at least two planes, the two-deck A380 superjumbo jet and the midsize A350, before they exercised stock options in March 2006, the document said, a couple of months before the information became public and sent the share price tumbling.

The accusations form the core of the French regulator’s case against 17 people who, the document said, made a total of 20 million euros (now $31.44 million) while having access to insider information."

Ralph Crosby, the head of EADS North America, is reported to be listed as one of the executives under investigation.

Last December in an effort to turn the page on a number of recent high-profile procurement scandals, federal officials mandated tougher ethical standards for government contractors.
As reported,

The change, published Nov. 23 in the Federal Register, mandates that companies set up a written code of business ethics and conduct, initiate an ethics compliance training program, and institute an internal control system. Subcontractors must submit to their prime contractor documents attesting to their ethical policies.

We at Tanker War Blog hope that Mr. Crosby attended his ethics compliance class and that he did not rip off EADS shareholders by selling his stock before the full extent of EADS's troubles were publicly revealed. If not, he may have an unexpected visit by the Justice Department and the Air Force may find it harder to explain how it is allowing EADS North America to participate in the tanker contract.

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.

Aerospace Union Attacks Tanker Contract

Citing concerns ranging from national security to interference into the Pentagon's internal competitive process, International Federation of Professional and Technical Engineers (IFPTE) has become the first organization, labor or otherwise, to formally request that Congress defund the outsourcing of the Air Force Tanker contract to EADS/Airbus.

The IFPTE, pulling no punches, has also launched a major offensive on the one presidential candidate to who has not spoken out against the contract.

Saturday, April 5, 2008

Faulty Data Drove Tanker Decision

In an eye opening article "Air Force Decision Driven by Faulty Data" on Human Events, Jed Babbin provides insight on the model that was used to evaluated the two aircraft and how it may have erroneously determined that EADS's A330 operational utility.

Mr. Babbin writes that the complex computer model, called the Integrated Fleet Air Refueling Assessment (IFARA), that the Air Force used to rate the capability of each aircraft was not accurate. And, he further states that the data which determined the capacity of airfields to accept the weight and size of the aircraft was especially flawed.

He goes on to say his source who was briefed on the IFARA results,
"said that the Air Force 'rounded up' the data on each airfield’s capacity -- the weight-bearing capacity of runways, taxiways and parking ramps and the size of the parking ramps to base enough aircraft -- so that if any of those aspects was judged adequate, the entire facility was judged capable of having the aircraft operate from

That person said that the IFARA computer model could only accept one variable on the issue of airfield capability. It could not include any differences to account for variances in different parts of each airfield’s capabilities. Thus, the model was flawed and the data fed into it were further skewed by the assumption that the larger aircraft could operate from airfields which in fact it cannot. "

Mr. Babbin reports that at least one Congressional office is investigating this issue and he poses the following questions:

  • Why didn’t the Air Force correct its computer model so that it could accept more accurate data on airfield capabilities?
  • Why was the “rounding up” of airfield capabilities allowed to skew the results to the larger tanker?
  • And -- specific to each airfield -- which other air assets (fighters, cargo aircraft, etc.) will be crowded out by the bigger tanker?

Another issue that members of tanker war blog will investigate is that in time of conflict, when we will need the tankers most, we may well find airfields being degraded by enemy action. If the model assigned overly optimistic peacetime airfield capabilities we can only imagine the inaccuracy of the assessed wartime airfield capabilities.