Boeing, EADS clash again as KC-X tanker war resumes
Boeing will reveal more details here today about the NewGen Tanker, its entry for the third round of the U.S. Air Force KC-X competition. In the war of words accompanying the long-running and ill-starred contest, Boeing has not previously specified exactly how it will add a digital 787-style cockpit and a new fly-by-wire boom to the 767 airframe. Rival contender EADS North America (EADS NA) has again bid the A330MRTT, as the KC-45. In a pointed reference to the Boeing NewGen Tanker, EADS CEO Louis Gallois said in London on Saturday that “a large part of our development cost and risk are behind us…compared to our competitor.” The bids were delivered on July 8 and 9.
EADS has evidently put aside earlier concerns that the Pentagon’s bid terms were skewed in favor of the smaller 767. Northrop Grumman thought otherwise, ending its partnership with the European company for the KC-X and obliging EADS NA to bid as prime contractor. But Gallois expressed his confidence in the bid process. “I’ve been very impressed with the way the Pentagon is working with us. I think that their judgment will be fair,” he said. EADS NA chief executive officer Sean O’Keefe added, “The A330MRTT is 90 percent common with our KC-45 offer. It would be a quintessential off-the-shelf procurement of the kind that the Department of Defense seeks.”
When asked how EADS could match Boeing’s price with the larger A330MRTT, Gallois noted that the new competition calls for fixed-price bids. He opined that Boeing would surely have to price the risk of “a completely new airplane and refueling system, whereas we are able to have an aggressive price and still be profitable.” He noted that in the last, aborted KC-X competition, the KC-45 was cheaper, even after the Defense Department added a development-risk premium to the A330MRTT.
When AIN asked Boeing Military Aircraft president Chris Chadwick recently how Boeing would factor the development risk of the NewGen Tanker into its KC-X bid price, he hinted that the company is leaning heavily on its suppliers to reduce their costs. “We have also learned from [the KC-767 sales to] Japan and Italy,” he said. Deliveries to both countries lagged well behind schedule after development problems. The Japan Air Self-Defense Force (JASDF) has now declared initial operating capability for its flying boom-equipped aircraft, and recently received its fourth and last aircraft. But two of the four boom-plus-drogue KC-767s for the Italian air force are still in the U.S., and the service has not yet formally accepted the type.
Meanwhile, Airbus Military will deliver the first A330MRTT to the Royal Australian Air Force (RAAF) early this fall, according to O’Keefe. This is also behind schedule, by 18 months. But company officials are buoyed by the fact that their airplane has won the last five competitions for tanker aircraft. By this they mean the KC-X Round Two, plus those in Australia, Saudi Arabia, the UK and the United Arab Emirates. They note that the A330MRTT also came close to securing an order from India, before that country decided to “explore other political avenues.” India has now issued a new request for information.
The Big Prize
But the KC-X is the big prize, and a win would be the largest contract in the 10-year history of EADS, according to O’Keefe. Referring to the plan to set up a final assembly plant for the KC-45 in Mobile, Alabama, to which would be added assembly of the commercial A330-200 Freighter, Gallois called it “a very big deal, even if it is only 15 to 18 aircraft per year.”
O’Keefe discounted reports that U.S. suppliers had declined to join the European company’s bid after being subjected to “Buy America” pressure from Boeing and the U.S. Congress. “All the KC-45 suppliers are listed on our Web site,” he added. But Gallois acknowledged that the U.S. Congress is still a big problem; legislation has been introduced that would oblige the defense department to inflate the KC-45 bid price to take into account alleged European government subsidies in developing the A330.
If the KC-X evaluation process outlined by the defense department remains intact, it will proceed as follows: The rival contenders will be assessed to ensure that they meet all 372 technical requirements. The defense department will then modify the proposed prices submitted by the compliant bidders by applying three separate calculations. One is for military construction, another is for fuel burn and the third is the now-infamous Integrated Fleet Aerial Refueling Assessment program, which models the KC-X tanker refueling needs in four different scenarios.
The defense department will then have arrived at an evaluated price. If, and only if, the evaluated prices of the competing bids are within 1 percent of each other, the department will give credit for 19 additional factors, to arrive at a modified evaluated price for each contender.