Tanker News 2 July

The following tanker related items caught our eye:

Alabama Register: Mobile's Brookley Airfield Boss Fired
Key Passage:

[Marc] Pelham had the delicate task of executing the master plan for Brookley adopted by the board. It called for relocating or moving out some tenants who didn't fit the vision for the complex. The former Air Force base has 6 million square feet of industrial space, a significant share of all such space in southwest Alabama.

..."My reaction would be one of amazement and disbelief," said [Winston] Wells, whose company's 40-year tenure at Brookley is among the longest. "I thought Marc was the most personable person they'd had in that office for a while."

Marc was a visitor to, but hardly a fan of, Tanker War Blog. He could be counted on to rise in support of Mobile or offer insight as he did in the comments section to this post. This is new and a very strange twist to the KC-30 team's efforts in Mobile which saw the June 28th ground breaking ceremony for its new assembly plant cancelled due to the GAO decision.

CNBC: KC-30 Team Launches New PR Campaign
Key Passage:

Now, buy your popcorn for “The Return of the Euros.” After a couple of weeks of not talking, Northrop Grumman has reemerged to tout its Airbus-based tanker entry with the new, edgy ads, and with a new press release. The release announces that the KC-45's refueling boom has completed its 100th flight.

We think TAnchorman has made better ads without having to pay someone on Madison Avenue hundreds of thousands of dollars. (This is a spoof of a KC-30 ad.) The new KC-30 PR campaign though definitely signals they are going back on the attack, and we sense an escalation in the hostilities.

NYTimes: Another EADS Executive Taken Into Custody

Ho-hum, another day and another EADS executive being detained by the French authorities for insider trading. This time it is former Airbus president Gustav Humbert. It seems as it is only a matter of time until Ralph Crosby, CEO of EADS North America has his number called.

Dueling Talking Points: GAO Decision

The KC-30 team has struck back at the GAO report with a set of talking points that uses many of TruthyPR's suggestions. The KC-30 team's conclusion: It is the Air Force's decision if a rebid is needed. But if they do decide to rebid it, the result would be the same.

Boeing, as you might expect, has a slightly different view and has provided us with some talking points of their own. In their view the KC-30 does not even meet the RFP requirements and may not even be able to be considered.

We have combined both companies' statements to form this Dueling Talking Points paper which is housed on our documents site. Please note that although we used many of their statements verbatim, this not a Boeing document. We have edited some of their points and added some of our own.

As a side note, the Air Force just announced they had not ask the Government Accountability Office to reconsider its tanker decision. The Air Force did not file any request for reconsideration during the initial 10-day period after the decision. Many experts agree this means that Air Force, as a practical matter, has waived its right to appeal.

In the spirit of a good feud, please be sure to hit play above to listen to a song while reading the talking points. The song is popularly known as "Dueling Banjos" and is an instrumental composition that was made famous in the 1972 movie Deliverance.

The song was arranged and performed in the movie for guitar and banjo by Eric Weissberg and Steve Mandel and was on the movie's soundtrack album. After the movie's release, the song went straight to #2 on the U.S. pop charts. From March 17, 1973 - April 6, 1973 the Dueling Banjos EP was the #1 album on the Billboard 200.

The piece though was originally composed by Arthur "Guitar Boogie" Smith and Don Reno as a duel between a 5-string banjo and a tenor banjo entitled Feuding Banjos in Charlotte, North Carolina 1955. Not initially given credit for his work by the producers of the movie, Arthur Smith had to sue to set the record straight.

We at Tanker War Blog believe in setting the record straight. The GAO has done its part by determining the Air Force made significant errors and should rebid the tanker contract.

We hope that by posting the dueling talking points we have done our part in setting the record straight on what the GAO decision means.

France Set to Announce Purchase of EADS Tankers Without A Competition

Last week Aviation Week military editor Amy Butler, in a for subscribers only Aerospace Daily & Defense Report (Vol. 226,Issue 24), broke a bit of news of which no one seems to have grasped the significance. Specifically Ms. Butler reported that:

Plans for French President Nicolas Sarkozy to make a big announcement next month at the Farnborough Air Show related to his country's own refueling tanker program have apparently fizzled out after recent events in the United States, according to industry sources.

Sarkozy was set to announce that Paris was planning to buy A330-based tankers assembled at the yet-to-be built EADS North America manufacturing facility in Mobile, Ala. The country has a need for new refuelers, though a procurement strategy hasn't been released.

If this report is accurate, it means that France planned to buy EADS tankers without a competition. And, they hoped that because the tankers would be assembled in the US, everyone here would overlook the fact that this once again proves the hypocrisy of French defense firms.

These firms demand that they be allowed equal treatment for US defense contracts. Yet, behind the scenes, they seek to deny American companies the same rights in their country. Ed Morrisy on the Hot Air blog had a good post on this issue in March.

This is not the first time the France did not allow Boeing to compete in a defense contract. When the France asked for proposals for an air transport contract in 2004 they stipulated that the aircraft proposed must be of European conception. This effectively barred Boeing from participating.

It should be noted that the German's procured A310 tankers from EADS, also without a competition. Granted, the A310s retrofitted for this role were already in service with the German Air Force. But, given that the A310s were originally procured without a credible competition, and that the tanker retrofit contract opened the door for EADS to get into the tanker business, the German's procurement actions should be viewed with some suspicion.

It never ceases to amaze us here at Tanker War Blog how the KC-30 team was able to brand themselves as the defenders of the free-market; while at the same time, labeling all Boeing supporters rank protectionists. Though, we sense that this is about to change.

A case in point is an op-ed that ran in Sunday's Washington Post titled "5 Myths About the Death Of the American Factory". Myth 2 was especially interesting:

U.S. manufacturers can save themselves by investing in innovation.

Okay, but how much are you going to invest? U.S. private-sector companies can't put as much money into technology and research and development as foreign governments do to build up their sectors. As the chief executive of a technology firm with whom I've worked for many years says, "We're the best company in the world, but we can't compete with foreign governments." Consider Airbus. The European Union has put more than $15 billion into building this aircraft company from the ground up. Whatever you may think about the recent U.S. Air Force decision to buy tankers from Airbus rather than Boeing, one thing is clear: Through its subsidies, the E.U. has managed to build a highly competitive aircraft industry. South Korea has put more than $12 billion into its semiconductor industry to similar effect, severely harming the U.S. semiconductor manufacturing base.

At Tanker War Blog we continue to contend that the US government has a duty to balance the promotion of free trade with enforcement of free trade. Competition works great, if the all participants play by the rules of the free market, and if all countries agree to hold free and fair competitions.

If US defense companies are not allowed to compete at Away games in certain EU counties, then our government should ban those countries' competitors from Home games here in the US. Such action is not protectionism; it is enforcement of free market rules.

HASC Tanker Briefing Round Up

Yesterday the Air and Land Subcommittee of the HASC met with GAO officials and a last minute DoD procurement stand-in for the Sue Payton.

From the reports we received, it is clear that the majority of members came away from the brief more convinced then ever that the Air Force has continually misled Congress about the tanker selection process.

By their remarks, even those Members who support the KC-30 seemed to have concluded that GAO did a thorough job in rendering its decision and that the reasons for rebidding the contract are compelling and overwhelming.

When questioned if the GAO believed that the was malice directed against Boeing, the reply was that they did not believe so. But, they did mentioned that there was pattern of incompetence that clearly resulted in favoring the KC-30.

Chairman Abercrombie, who reportedly was none to happy with what he heard yesterday, has scheduled another Air and Land Forces Subcommittee hearing on the tanker contract for July 10th. This time around Ms. Payton and DoD acquisition chief John Young are expect to be in attendance.

Tanker Recompete Act

We have received a number of e-mails asking for more information on the KC-X Tanker Recompete Act. Below is a summary of the Act, and you may also view the full text of HR 6426 on our documents site.

The bill introduced by Representative Todd Tiahrt (KS) in the House and by U.S. Senators Pat Roberts (KS) and Sam Brownback (KS) in the Senate, seeks to prohibit the use of any funds by DoD on the KC-X Tanker unless the Department of Defense chooses to outright award the KC-X tanker to the bidder whose protest of the February 29, 2008, was upheld or DoD decides to recomplete the KC-X contract using the KC-135 criteria.

This legislation would ensure that the following areas be considered in a recompetition:

Independent Cost Estimate - Ensures that an independent cost estimate is completed. The cost estimate shall include an estimate of (1) all costs borne by the suppliers; (2) all costs borne by foreign governments; (3) all costs borne by domestic suppliers (if the proposal involves any domestic suppliers); and (4) all costs covered by cost accounting standards under the Federal Acquisition Regulation.

Requirement to offset Illegal Subsidization – When conducting the cost or price evaluation of any proposal submitted by a subsidized person, increase the cost or price of the proposal by the amount of illegal subsidization.

Ensuring Fair Competition - Ensures that any covered contractor, foreign or domestic, for the contract, as part of the cost criteria, is evaluated both on the cost borne by the supplier and any cost borne by a foreign government that is not borne by a government (local, State, or Federal) in the United States.

National Security Considerations - It is the responsibility of the DoD to take into consideration the national security impacts, the industrial base impacts, and the economic impact to the United States of awarding contracts for critical capabilities to foreign entities.

Industrial Base Considerations - It is the responsibility of the DoD to take into consideration the industrial base impacts and the economic impact to the United States of awarding contracts involving critical jobs to foreign entities.

Loss of Employee Tax Revenue - It is the responsibility of the DoD to take into consideration the impact of lost personal income tax revenues to the United States, as a result of awarding defense contracts to foreign entities.

Loss of Corporate Tax Revenue - It is the responsibility of the DoD to take into consideration the impact of lost corporate tax revenues to the United States, as a result of awarding defense contracts to foreign entities.

Regulatory Burden - It is the responsibility of the DoD to take into consideration the impact of all regulations waived or that are not applicable with respect to foreign entities. These regulations include cost accounting standards, Buy America provisions, specialty metal provisions, the Foreign Corrupt Practices Acts, and compliance with the International Traffic in Arms Regulation.

Foreign Corrupt Practices Act - Requires that any contractor or subcontractor described in paragraph (2) that is not already covered by the Foreign Corrupt Practices Act shall be required, as a condition of the contract, to comply with the requirements of such Act.

Report Requirement - The Secretary of Defense shall submit to the congressional defense committees a report on compliance by the DoD with the provisions of this Act during the acquisition process for the award of a contract for a replacement for the KC-135 tanker. The report shall be submitted no later than the date of award of such contract.

[Update: Michelle Dunlop at HeraldNet beat us to the punch and reported on 27 June that Sen. Jeff Sessions (AL) put a hold on the Senate bill. This effectively stops the bill until a supermajority of 60 Senators frees it for further debate. ]

Tanker News 27 June

The following tanker related items caught our eye:

Tanker Recompete Act Introduced:
U.S. Representative Todd Tiahrt (KS), U.S. Senators Pat Roberts (KS) and Sam Brownback (KS) introduced the KC-X Tanker Recompete Act in both the U.S. House of Representatives and the U.S. Senate. The legislation would prohibit use of any funds by the Department of Defense (DoD) on the KC-X Tanker unless the DoD chooses to outright award the KC-X tanker to Boeing or decides to fairly recompete the KC-X contract.

Chairman Waxman Announces Tanker Hearing:
The House Oversight Committee Announces Tanker Hearing for July 15 to examine the actions of the Air Force in awarding the contract to manufacture aerial refueling tanker aircraft. The Honorable Gene L. Dodaro, Acting Comptroller General of the United States (Head of the GAO) will testify.

Labor Unions Deliver Letters in Support of Boeing to Congress:
Twenty-three unions,labor federations and affiliated organizations have signed and delivered a letter to House and Senate lawmakers calling for Boeing to be immediately awarded the Air Force refueling tanker contract.

Citing the Government Accountability Office (GAO) report that said the KC-30 tanker lacked the ability to refuel all of the Air Force's aircraft and calling Boeing's KC-767 "the clear winner" in the competition to replace the Air Force's aging fleet of tankers, the labor groups urged Congress to award the contract to Boeing without delay.

AFP: Gates Says No decision yet on US air tanker purchase
Key passage:

"I haven't made any decisions yet," Gates said. "But I would say that I take the GAO report very seriously. They've clearly pointed out some areas where we were deficient.

"We've clearly had problems with the tanker contract. And this time around is not the first time, obviously. And so, I think I need to get a better feel for the GAO report and for the criticisms and the nature of the criticisms that they have made."

Congress is now out of session until 7 July, so Gates has some time to think it over before everyone gets back in town. After that, the pressure that has already building will become extreme. DoD has until mid-August to respond to the GAO decision, but no one expects them to try to run the clock down and punt to the next administration.

GAO Decision Analysis

These is a great deal of commentary on today's released redacted version of the GAO Tanker Decision. We have some observations of our own but first we want to point out some analysis by others:

Dr. Loren Thompson of the Lexington Institute released a new brief on the GAO decision titled Tanker Fiasco: Five Steps to Fix the Problem. In it he makes it clear he is for rebidding the contract sooner rather than later. He also believes that changing the bid criteria will only delay the process and that there is a "simple problem to fix -- not by developing new capability metrics, but by finding competent evaluators to apply the existing ones." Sounds like a call for some personnel changes in Air Force procurement.

We have also received a rather comprehensive set of GAO KC-X Decision Talking Points from our members the Hill. The strongest points are that in addition to the number of errors made by the Air Force, the KC-30 may not have even been eligible for the contract because: 1) the KC-30 proposal did not meet the minimum required task to establish a depot maintenance capability within two year after the delivery of the first full-rate production aircraft. 2) The KC-30 proposal failed to prove that it could refuel all currently compatible planes using current Air Force procedures.

Also, while not really an analysis Senator Jeff Sessions did released a statement that highlights extremely well many of the points KC-30 supporters have been making since the GAO decision: 1) The GAO’s concerns were strictly related to the Air Force’s selection process, not the merits of the KC-30 2) The Air Force is the agency to best determine which tanker it wants 3) The tankers are need now rather than later 4) Further comments will be made after Air Force’s response to the GAO decision is known.

On point #4 above, the experts at TruthyPR believe that waiting for the Air Force answer is the worst thing they can be doing. Instead he offers that the KC-30 team:

...should have followed [the GAO decision] up with a response that they welcomed a rebid, but since it would result in the same outcome, and because the tankers are desperately needed by our men and women in harm's way, there's no reason to delay.

The goal is to promulgate the message that a new process is going to generate the same outcome. And if you don't start saying it, nobody else will believe it.

Well count us as not believing it, even if they do start saying it more forcefully.