Tanker News 28 July

The following tanker related items caught our eye:

Wash Post: Pentagon Auditors Pressured To Favor Contractors, GAO Says
Key passage:

The Defense Contract Audit Agency, which oversees contractors for the Defense Department, "improperly influenced the audit scope, conclusions and opinions" of reviews of contractor performance, the GAO said, creating a "serious independence issue."

The report does not name the projects or the contractors involved, but staff members on the Senate Homeland Security and Governmental Affairs Committee who were briefed on the findings cited seven contractors, some of whom are among the biggest in the defense industry: Boeing, Northrop Grumman, Fluor, Parker Hannifin, Sparta, SRS Technologies and a subsidiary of L3 Communications.

It is hard for us to understand how KC-30 supporters, both here and abroad, could bash the GAO and label their tanker contract protest decision as biased. Seems like the GAO is not afraid to call either side, or both, out if they think something is wrong.

China.org.cn : 1st Airbus segments arrive in Tianjin
Key passage:

The first aircraft segments for a planned Airbus A320 arrived in the new single-aisle assembly line in Tianjin on Friday from the Airbus production sites in Europe, Xinhua News Agency reported.

The segments include the forward and rear fuselage section, a pair of wings, the horizontal and vertical tailplane and engine pylons.

The assembly process of the first aircraft, which is for Sichuan Airlines, will start in August 2008. Delivery of the aircraft is scheduled for the first half of 2009. It hopes to begin producing four A320 planes a month by 2011.

Heck, why don't we just cut out the Mobile middleman and get Chinese assembled Airbus planes for the new tanker. At least then we can stop having to pretend an Airbus A330 can somehow magically be turned into an American made tanker.

Czech News: Czech Chief of Staff against purchase of EADS CASA planes
Key passage:

In June, Alenia Aeronautica lodged a complaint with the EC, the Czech anti-monopoly office (UOHS) and the Defence Ministry, challenging the Czech government's decision to buy transport planes for the military from EADS.

Alenia Aeronautica's representatives in the Czech Republic said the planned deal had breached the EU's principles of transparency and no discrimination in placing public orders.

Like the article above, this is not a tanker story per say, but it is good to know we are not the only country having procurement transparency problems when buying EADS aircraft.

EPI Releases Tanker Jobs Study

A just released Economic Policy Institute (EPI) analysis of the Air Force tanker contract finds a significant difference in U.S. job creation between proposals by Boeing and the KC-30 team.

We at Tanker War Blog have only been able to glance over the report as of yet, but in a press release the Institute states:

Boeing would likely create at least twice as many US jobs as NG/Airbus under the 35 billion contract, according to EPI economist Robert Scott.

Also, at the end of the press release the Institute mentions EADS's prior inflated job statistics in regards to the Army light duty helo contract; an issue we had specifically questioned in the past:

Total employment impact estimates put forward by both bidders were higher than the figures arrived at by EPI, although the difference was far greater in the case of NG/Airbus. Scott said the claims by NG/Airbus were at least 45% higher, and as much as 179% higher, than what could be realistically expected. A previous contract for light duty helicopters awarded to Airbus parent company EADS failed to create even half of the U.S. jobs claimed.

It should be noted that EPI's methodology for categorizing and determining of what they call re-spending jobs is very different than the Commerce Department. In the report EPI determines the following:

Direct jobs:	Boeing 6,838	KC-30 Team 3,419
Indirect jobs:	Boeing 7,098	KC-30 Team 3,549
Re-spending jobs:	Boeing 14,770	KC-30 Team 7,385
Total Employment:	Boeing 28,707	KC-30 Team 14,353

In order to determine the truthfulness of the competitors previously claimed statistics, and compare the job numbers of Boeing and the KC-30 team, you need to understand that both their claims use Commerce Department nomenclature and methodology.

As we mentioned, EPI seems to use its own jobs model. What EPI labels separately as direct jobs and indirect jobs, the Commerce Department labels both as direct jobs. Second, what EPI calls re-spending jobs the Commerce Department calls indirect jobs. Lastly, while the EPI jobs model uses an implied average "re-spending" multiplier of 1.06, the Department of Commerce uses a multiplier of 2.3 for its indirect jobs calculations.

In other words EPI multiplies the sum of its direct and indirect job estimates by 1.06 to calculate the number of re-spending job that are created; while the Commerce Department model simply multiplies the number of direct jobs by 2.3 to calculate the number of indirect jobs created.

It is sort of confusing, but in the end if you use EPIs job creation analysis but the Commerce Department nomenclature and 2.3 multiplier you can adequately compare the past job claims:

Direct jobs:
Boeing claim: 13,497	Boeing EPI/Commerce hybrid estimate: 13,936
KC-30 claim: 14,147	KC-30 EPI/Commerce hybrid estimate: 6,968

Indirect jobs:
Boeing claim: 30,600	Boeing EPI/Commerce hybrid estimate: 32,053
KC-30 claim: 34,190	KC-30 EPI/Commerce hybrid estimate: 16,026

Total jobs:
Boeing claim: 44,097	Boeing EPI/Commerce hybrid estimate: 45,989
KC-30 claim: 48,000	KC-30 EPI/Commerce hybrid estimate: 22,994

So the bottom line is that Boeing seems to have fairly estimated is jobs numbers. But, the KC-30 team has grossly exaggerated its contribution to the economy and will produce not only half the jobs as Boeing but less than half of the jobs they claim.

It is also very interesting that the EPI/Commerce Department hybrid estimate we came up with is about the same number of jobs the KC-30 team originally stated prior to the KC-X contract selection. Or as a Seattle Post-Intelligencer article stated:

The Northrop team originally projected that the new tanker contract would create about 25,000 U.S. jobs. Amid the uproar following the Air Force announcement, the team increased its jobs creation claim to 48,000 jobs.

Remember, Senators Maria Cantwell (WA), Debbie Stabenow (MI), Patty Murray (WA), and Ron Wyden (OR) last month sent a letter to Secretary of Commerce Carlos Gutierrez and Secretary of Labor Elaine Chao asking them to verify the claims made by KC-30 team concerning the creation of U.S. jobs.

Given the fact that the KC-30 team claims more US jobs than Boeing while also admitting the KC-30 has less US content, we can't imagine why it is taking Mr. Gutierrez or Ms. Chao so long to determine what EPI has already figured out.

Note: Jobs claims for Boeing were taken from the EPI report. And, jobs claims for the KC-30 Team are were taken from Leeham Companies, LLC's state by state listing, which is identical to the job claim numbers the KC-30 team has distributed to offices on the Hill.

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."