NG/EADS to receive Cease and Desist Order

Air Force Magazine online is reporting that NG/EADS will no longer be able to refer to its KC-30 tanker as the KC-45A in advertisements and press releases. An Air Force spokesperson told the Daily report that:

USAF created the nomenclature KC-45A to refer to its next tanker aircraft, but now that the KC-X competition is back up for grabs, neither Boeing nor Northrop Grumman can claim the KC-45A designation—not yet, at least. The Air Force has not yet notified Northrop Grumman to quit calling its airplane the KC-45A, “but the Air Force will do so and we expect that they will [comply],” the spokeswoman said.

The KC-30 team though remained defiant; if not delusional. Randy Belote, Northrop’s VP for communications, was quoted as saying yesterday, "As winner of the KC-X program and while under contract for the KC-45, we have no plans to change the name or nomenclature of our tanker.”

Also, Air Force Magazine online reports that the naming of the KC-45 has been delayed and put on hold due to the the recent shake-up of Air Force leadership:

The rumored top name for the new tanker is “Expeditor II,” which honors the Beech C-45 Expeditor of the World War II era. The nickname would seem to echo the KC-45A designation chosen for the new aircraft (see item above), but the original Expeditor was a relatively small transport specializing in light loads and small airfields, while the two KC-X contenders—Boeing’s KC-767 and Northrop Grumman’s KC-30—are based on widebody airliners.

It seems strange that the Air Force would choose a name associated with a small transport aircraft, but their whole fixation on more pallets and cargo for a tanker has always been beyond comprehension.

We will not be too hasy in our judgment though. Maybe the Airmen on the flightline know what they are doing. When the KC-767 is eventually chosen as the new tanker, naming it the "Expeditor II" might make sense as it can use a lot more of those "small airfields" than the KC-30.

FYI: in case you missed last month's name the KC-30 contest, proceedings and results can be viewed on TAnchorman's blog.

Fired Air Force Sec. Makes Wild Accusations

In today's print edition of Defense News (subscription required), fired Air Force Secretary Michael Wynne makes several accusations that show just how in denial Air Force officials are on the GAO's findings. When questioned about the GAO decision, and the fact that it appears that there were "Acquisition 101" type errors, Wynne had this to say:

"The Air Force overcomplicated it, probably based on the CSAR-X outcome. The CSAR-X outcome was a conditioning exercise. As a result, they really wanted both competitors to be almost equal."

Whether Wynne knows it or not, this statement is pretty damning. The competitor's products were not equal. The KC-30 team proposed an aircraft that was bigger than required, and only through the tweaking of grading criteria and weighting was the Air Force able to make them equal. As we have mentioned, time and time again, we believe that Air Force acquisition's goal became having a competition and not getting the best tanker for the mission.

The second part of Wynn's answer, which as previously reported, veers from damning to bizarre and bitter:

"Here's one of those cases where Boeing had probably assessed their prospects were dimming. I would say they systematically began to build a case, and I'm not sure they shared everything they could have shared with the Air Force along the way. They were essentially building a Pearl Harbor file" that they could use later."

We would like to inform the former secretary that we have never found anyone in Boeing who thought "their prospects were dimming". In fact, every Boeing supporter or person from Boeing we have come in contact with was truly shocked when it was announced that the Air Force had selected the KC-30. We would add that they had every right to be shocked because, as we now know, the competition was so riddled with errors that DoD has been forced to take the program away for the Air Force.

In the same interview and article, Wynne asserts that Boeing was unwilling to submit commercial rates on their support organizations and that he was surprised that the GAO sided with Boeing on this point:

"I was surprised the GAO did not see that for what it was," he said, "which is: bid high for the stuff that you're going to contract for and bid low on the stuff that you're not going to contract for." Pressed to say whether Boeing's alleged move was dishonest, Wynne said, "Anything that is used to acquire, that is legitimate in the eyes of the customer or the evaluator is legitimate. ... I would say that it depends on how you characterize it. It was a good business idea that seems to have sustained the protest. No different than calling a steal in baseball when the pitcher doesn't realize it."

Many of us in Washington initially gave Wynne a pass on his failures on the tanker and other procurement programs. But, given his lack of understanding of the GAO decision and his wild accusations it is impossible to do so anymore.

One of the main reasons Wynne was promoted to Air Force Secretary was to clean up the procurement mess of the tanker lease deal. In this he failed just as miserably as he did in ensuring his service accounted for nuclear weapons.

The record will show that Wynne's tenure was a complete loss. (pun intended)

Past 4-Star Transport/Tanker Boss Comments

Human Events yesterday published an extremely important article by Retired General John Handy, former Commander of both TRANSCOM and Air Mobility Command (AMC). In it Gen. Handy provides compelling rationale on why the KC-135 replacement program should be based on small to medium size aircraft.

Like most of us General Handy was "a bit surprised" by the decision to buy the KC-30 and even more shocked by the "unusually harsh language used by the Government Accountability Office" in its recommendation that the contract be rebid. He says that the harsh GAO language:

...compels me to do something I've never done before: to speak out publicly. I am not employed by either Boeing or Northrop-Grumman. But the service I've devoted most of my life to appears to need a bit of help.

Somewhere in the acquisition process, it is obvious to me that someone lost sight of the requirement. Based on what the GAO decided, it's up to people such as myself to remind everyone of the warfighter requirement for a modern air refueling tanker aircraft.

General Handy lays out what he believes are the three major requirements for the KC-X tanker:

1) The ability to deploy and bed down in sufficient numbers in order to accomplish all assigned tasks.
2) The tanker must be survivable and provide the crew with superior situational awareness.
3) The ability to integrate in the current defense transportation system. That means 463L compatible pallets; floor loaded on a freighter capable floor all compatible with the current modern airlift fleet.

General Handy concludes that:

Now, if you look at these rather simple requirements and look at the previous offerings from industry, you might agree with me that the KC-767 more closely meets these needs than the competition. If that's what the warfighters need, that's what they should get.

We could not agree more with General Handy's assessment that Air Force procurement lost sight of the requirement. In our view, the pressure to have a competition was so great that the Air Force was forced to make changes to the RFP to accommodate an larger aircraft that they did not want. These changes, both pre and post final RFP, tilted the metrics of the competition toward a larger tanker.

It almost seems as though the goal of the SSA became having a competition, and not getting the best tanker for the mission. (As we have previously pointed out, the pressure that led to this was constant and irresistible.)

Competition is a good thing. But, when it becomes the ends, and not the means, thereby causing one to lose sight of the requirement; well, the whole procurement process is worthless.

Air Force Admits to GAO that the KC-30 Costs More

Now that the GAO has wrapped up its tanker contract hearings and is currently determining its decision, some redacted documents are now being released. One document that has been released in part are Boeing's comments on the Agency Report (USAF's response to the Boeing's protest).

At Tanker War Blog we were not able to obtain the full version of the comments, which we are told total over 400 pages, but one of our members on the Hill did get a very interesting section on Most Probably Life Cycle Cost(MPLLCC) calculations. These comments are heavily redacted, but from them it seems that the Air Force in its Agency Report has apparently now conceded that the KC-30's MPLCC is higher than Boeing's. This of course is the exact opposite of what the Air Force had briefed Boeing and publicly stated as a reason for selecting the KC-30. Page 103 of the comments has the following:

III. THE AGENCY REPORT CONFIRMS THAT THE AIR FORCE'S COST/PRICE EVALUATION WAS IMPROPER AND UNREASONABLE.

With respect to the Cost/Price evaluation, as an initial matter, the Air Force now concedes that Boeing's most probable life cycle cost (MPLCC) is lower than NG/EADS'. See MOL, AR Tab 001 at 201-02. This renders even more troubling the SSA's initial public assertions that NGIEADS "offered great advantage to the Government in cost price." See Protest, AR Tab 003(a) at 94. The Air Force's concession, however, addresses only a miniscule fraction of the errors in the Cost/Price evaluation confirmed in the Agency Report.

On page 107 it seems that a small part of this error was even caused by someone in Air Force procurement not properly using an Excel spreadsheet:

In particular, in its Third Supplemental Protest, Boeing demonstrated that the Air Force underestimated [redacted]costs by $ [redacted] as a result of an erroneous spreadsheet cell reference.

Now, the Air Force likely responded in the hearings that the error in their calculations was minor and irrelevant to the overall outcome. But, we expect this error will have considerable impact on the GAO in terms of their assessment of the thoroughness and credibility of the evaluation.

As more of the documents are released we will attempt to post them. Given that the Boeing documents are by their nature one-sided, we will generally refrain from commenting except when new information is brought to light, or we see items where the Air Force seems to concede it made errors.

Letter to Last Woman Standing

With members of the Air Force leadership being forced out the door yesterday, Congressman Norm Dicks and Congressman Todd Tiahrt wrote a letter to one of the purge's survivors, the Assistant Secretary of the Air Force for Acquisition, Sue Payton.

The letter specifically questions how the Air Force determined that the relative risks of the two proposals are comparable in terms of cost, schedule and technical performance.

The letter states:

On the one hand, you have the EADS team that proposed to build the first several planes in a number of different combinations of production facilities (most of which are either overseas or do not exist today). This approach entails building new facilities, hiring and training a new workforce, transferring design and production information among multiple nations, languages and cultures, and establishing and certifying production processes multiple times.

In contrast, the Boeing bid proposes to make a one-time investment of time and effort on the front end of the program to adapt an existing production line and develop production processes that maximize the in-line militarization modifications on an ITAR-compliant line that will be proven and certified only once. This is consistent with the underlying approach used by the Rand Corporation in the KC-X Tanker Analysis of Alternatives; an approach that they used because it "eliminates the rework of sequential green aircraft production and tanker modification at two locations."

The letter went on to mention Boeing's approach to the KC-X proposal is fundamentally the same as the one that they are successfully using today for the Navy’s P-8A Poseidon aircraft:

This program, awarded to Boeing in 2004, is performing on its original program plan to begin delivering aircraft next year....Just a couple of weeks ago, VADM David Venlet (Commander of Naval Aviation Systems Command) stated "Normally with non-commercial-built airplanes, it takes us longer to build them and we have more time, but with this one, we're almost running behind Boeing to catch up and to keep up with that airframe, and we're very pleased with that concept."

Next Up: The Tanker Ground Game

In every political campaign there comes a time when the ground game, or the ability to get more of your supporters out pressing your message, plays a decisive role.

In the Air Force tanker contract dispute, now is the time for both the KC-30 team/EADS and Boeing to finalize their ground games. With the Government Accountability Office (GAO) to rule on Boeing's protest by June 19th and the World Trade Organization (WTO) possibly also ruling this month on the US complaint of Airbus subsidies; each side must build their coalition now in order to take advantage of a favorable ruling or withstand a possible setback.

The KC-30 team has a much stronger political right now and has mainly stuck to holding employee rallies, astroturfing in the form of taxpayer groups, and coordinated letters written by military officers who are current/former employees. They also have a fairly decent "war room" that sends out e-mail updates to supporters.

For Boeing though, because it faces a much harder task of possibly getting the decision reversed in Congress if the GAO does not rule favorable, it must build support on the ground in key states and congressional districts beyond tanker employment areas. This article yesterday caught our eye as it shows the efforts being taken in West Virginia who's Senior Senator, Robert Byrd, is President pro tempore of the Senate and Chairman of the Senate Appropriations Committee.

Since the move to reduce or overturn the tanker contract will probably come from the appropriations bills, having a West Virginia ground game will extremely important for Boeing.

The article points to a number of veterans who have written in protest to the Air Force or their elected officials including:

West Virginia’s best-known veteran, Hershel “Woody”Williams, sent the Air Force a letter of protest.

“As a Marine who served in Iwo Jima during World War II, it boils my blood every time I see an American flag labeled ‘Made in China,’” the Medal of Honor winner from Ona wrote.

“So I am even more dismayed that the Pentagon has chosen a foreign country to make military planes over a good American company. I hope this decision is reversed and that the Defense Department will put American interests first in equipping our armed forces in the future.”

The Air Force selection of an Airbus based tanker has stirred up some strong feelings in West Virgina and the rest of America. How those feelings are turned into constructive action and political power will play a key role in how the tanker decision plays out in the aftermath of the GAO and WTO rulings.

Police Detain Ex-EADS Chief

Noel Forgeard, the former co-chief executive of EADS has been detained since Wednesday by French police under suspicion of insider trading. Although Forgeard has strenuously denied the accusations, investigators are unimpressed and have detained him.

The Times reports that Mr. Forgeard, was due to be interviewed by the magistrate in charge of the inquiry last night. The magistrate will decide whether to place Mr. Forgeard – once the most powerful figure in Europe’s aerospace industry – under formal investigation on suspicion of insider dealing. The article goes on to state:

A report by the French Financial Markets Authority (AMF) pointed to “massive” insider dealing by 17 current and former executives of EADS and Airbus, who sold a total of 1,708,600 shares for almost €20 million.

...According to the AMF, they were in possession of privileged information about A380 production problems and should have abstained from exercising stock options.
All may be questioned by the Paris police’s financial brigade.

While the Times article does not mention it, the New York Times had already reported that one of the 17 EADS executives implicated in the scandal is none other than Ralph Crosby, head of EADS North America. Yes, that is the same EADS that is Northrop Grumman's main partner on the KC-30 tanker which was selected by the Air Force in the KC-X tanker competition.

It was probably a good idea that Mr. Crosby skipped Cannes this year. It might have been a one way trip.

[Update: Reuters now reports that last night Mr. Forgeard was officially placed under formal investigation, the US equivalent to being charged, on suspicion of insider trading.]

Congressional Eyes Now on the GAO and Appropriators

The 2009 House Defense Authorization Bill (H.R.5658)and the fight to get tanker related language inserted into it is pretty much a done deal. The bill is now being discussed on the house floor and should be voted on tonight. The fight will be taken up again when the bill goes to conference with the Senate. The Senate Bill (S. 3001) does not have the following provisions:

Review of Illegal Subsidies
If the World Trade Organization (WTO) rules that an illegal subsidy was given to any large commercial aircraft manufacturer, the Committee requires the Air Force to review the potential impact of that subsidy on the recent source selection process for the KC-45 aerial refueling tanker program. If the Air Force determines that the subsidy did impact the competition, then it must find a way to remove the impact from the competition to ensure the fairness of the process.

Prohibition on Illegal Subsidies in Defense Contract Awards
The bill prohibits any future DOD contract from being awarded to a company that benefits from illegal subsidies.

Industrial Base Consideration
DOD is requires to consider the potential impact on the domestic industrial base during all future competitions for major program contracts.

Consideration of Employee Benefits
DOD must ensure that no foreign company receives a competitive advantage if its employee benefits costs are borne by the government.

Also, the House bill reduced the authorization for the KC-45 Tanker to $831.8 million, a cut of about $62 million. This was done because, according to Air Force officials, advanced procurement funding is not required during FY09 program. The Senate authorized the full $893,419 requested; all under RTD&E.

Congressional Quarterly reports that the White House has already lodged veto threats against provisions in the bills ranging from a timetable for withdrawal of U.S. troops from Iraq to an attempt to nullify President Bush’s executive order directing agencies to ignore “earmarks,” or lawmakers’ projects, unless they are spelled out in bill texts. So even after Senate-House conference, the 2009 Defense Authorization Act may have a long way to go before being signed into law.

On Wednesday night the House Rules Committee voted not to allow Rep. Duncan Hunter's amendment that would have barred the military from going to full production of the tanker until the U.S. Air Force certified that no more than 15 percent of the aircraft was foreign-made and that final assembly would take place in the United States. This was the only language that could have had an effect on the tanker contract regardless of GAO or WTO rulings.

A number of other tanker related amendments were either ruled agaist or pulled due to overwhelming resistance from the wait-for-the-GAO report faction. Our members have stated that this wait-and-see group is larger than the pro-Boeing faction and the pro-EADS faction put together. We believed this would end up being the case when we posted much the same back in March.

Given the history of tanker controversy in Congress only the true believers like ourselves are willing to fully weigh in now. Most in Congress will need some sort of positive ruling from either the GAO or the WTO before committing.

The real action should come later in the House Appropriations Subcommittee on Defense (HAC-D) which will do its mark-up after the GAO ruling. Also, the Subcommittee membership is heavily pro-Boeing.

WTO Rejects Request to Stall Airbus Subsidies Case

World Trade Online (Note: This not a free service; you must pay to see the full article) in a 9 Mar headline story "EU Rebuffed In Attempt To Harmonize Boeing-Airbus Cases", reported that its sources say that the World Trade Organization denied an EU request to harmonize the content and timing of the U.S. case against alleged EU subsidies to Airbus and EU case against alleged U.S. subsidies to Boeing.

The EU sought this request to possibly delay the WTO ruling and to possibly force the US into negotiating a settlement. But as the article states:

Within days of making the request, the panel reviewing the U.S. case (DS316) denied it, sources said, giving some credence to the notion it may deliver its interim ruling in the case by June. The EU case (DS353) is on a slower track than the other case, with both sides submitting comments on answers to panel questions earlier this week. The DS316 panel saw the last filings by the parties in March.

The EU argument to the WTO included claims that the parties would be unable to keep the interim rulings confidential in the time between the two rulings. "Parts of the case are very similar," one source argued.The U.S. responded to the brief, arguing that WTO law permits harmonization of cases brought by multiple members against the same alleged WTO violation, but does not prescribe the type of harmonization sought by the EU.

While one source close to the EU sees a DS316 ruling in September, another source said the swift response on the EU request was a sign the DS316 panel is approaching a decision by June.

Many eyes are on the GAO ruling on the tanker competition due by June 19th, but the WTO case ruling may have an even greater impact. Even a partial victory for the U.S. in the first case could spell the end of the $35 billion refueling tanker contract awarded by the U.S. Air Force to EADS and Northrop Grumman over Boeing.

It is an election year and very few in Congress will want to be seen as aiding a foreign company that undermines free trade to the detriment of US companies and their workers, especially when the economy is faltering.

The EADS team has been successful to date in its efforts to spin the tanker controversy as simple protectionism vs. free markets. If the WTO determines that Airbus has broken the rules of free trade, EADS's strongest point now becomes their weakest. Expect the public backlash to be justifiably merciless.

Timber! Falling Faith In US Trade Policy

A central theme of this blog has always been that the tanker issue is not really about Boeing vs. Northrop Grumman or Boeing vs. the USAF, but in fact Boeing and US aerospace workers vs. Airbus and the illegal subsidies it receives.

At Tanker War Blog we contend that the US government has a duty to balance the promotion of free trade with enforcement of free trade. Blindly clinging to the idea that competition and market forces will result in fair trade is folly. Competition doesn't work when the playing field is tilted toward one side or one of the competitors is given an unfair advantage.

Some of us at TWB had hoped that the Executive Branch would realize its mistake in buying an illegally subsidized product like the EADS/Airbus A330 and stop the tanker contract. But others here, who have long since lost faith in US trade policy, have pointed out that even when the administration seemingly stands up for fair trade it may in fact be just lining insider's pockets.

A case in point is the 2006 timber trade settlement with Canada. The Seattle Post-Intelligencer in a recent article by Robert McClure asks the question:

Is it an illegal $1 billion slush fund for Bush administration friends in the timber industry, extorted from Canada and designed to evade congressional oversight?

Or is it a fairly negotiated end to an expensive trade war that's "the best thing that has happened to private forest land conservation in the United States in 100 years?"

Given that at least one of the groups to receive money from the settlement, the U.S. Endowment for Forestry & Communities ($200 million), was hastily set up during the settlement and established just before the deal was finalized, it is probably right to ask these questions. The article also notes that the deal was monitored by Harriet Myers, then still the President's chief lawyer, so suspicions should be heightened all the more.

At Tanker War Blog we believe our government should stand for fair trade and look after the interests of US workers and consumers in trade disputes and not just industry and party insiders. We firmly believe this is also what the American people want.

We further believe that if there was proper enforcement of free trade EADS would never have been allowed participate in the tanker contract.

It is also becoming clearer to us that only Congress has the will and the ability to properly solve disputes such as the tanker controversy.

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."

Here is what Aviation Week reported today:

"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.

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."

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:

• US labor unions vs. Non-US manufacturing and likely non-union jobs (EADS right-to-work state and foreign locations)
  
• Senator M vs. Boeing Round 1 (Real hero for fighting the corrupt tanker lease)
  
• Senator M vs. Boeing Round 2 (Making the tanker RFP favorable to competition/EADS?)
  
• USAF vs. Senator M’s Staff (Sec. Roche resigned/USAF has kowtowed since)
  
• Northrop Grumman corporate vs. Boeing corporate (Ongoing continuous defense contract competition)
  
• Northrop and EADS North American workers against all contract critics (They feel their “Americanism”/patriotism is being questioned)
  
• New leaders in Old Europe vs. Old Europe's strained relations with U.S.
  
• The DNC vs. the presumptive Republican presidential nominee
• US Trade Rep vs. EU nations that provide subsidies to Airbus
  
• Revoking contract vs. Need for NATO troops in Afghanistan
  
• Seattle, WA vs. Mobile, AL (Seattle doesn’t seem to care/Mobile gets nasty and spends over $450,000 on a tanker website)
  
• Buy American vs. Globalization
  
• The unacknowledged strained relationship between the Air Force and Boeing

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.

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.

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.

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 GovernmentExecutive.com 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.