* Pentagon says Northrop not harmed by data release
* Says different pricing required for new competition
By Andrea Shalal-Esa
WASHINGTON, Oct 23 Boeing declined a Pentagon
request to release Boeing's pricing information from the last
aerial tanker competition after Northrop raised concerns that it
was disadvantaged by the Air Force's release of Northrop's pricing
data to Boeing, according to a Pentagon letter.
Pentagon General Counsel Jeh Johnson told Northrop Grumman
Corp (NOC.N) in a letter dated Sept. 23, a copy of which was
obtained by Reuters, that defense officials did not believe the
company was competitively harmed by Boeing Co's (BA.N) knowledge
of "some of the prior pricing" and remained convinced that "the
integrity of the procurement process will be maintained without
the release of additional pricing information."
But Johnson said the Pentagon "actually sought Boeing's
permission to release this information, and Boeing declined,"
according to the letter.
Analysts say the dispute over the release of Northrop pricing
information could provide the basis for a future legal protest by
the company. That could further delay a weapons program that Air
Force officials call a top priority.
One source familiar with the letter, who was not authorized to
speak on the record, said Boeing's refusal to release the
information was telling. "It must be important if they don't want
to release it," said the source.
Northrop declined comment on the letter, saying it did not
discuss correspondence sent to or received from its customers.
Boeing could not be immediately reached for comment.
Northrop and its European partner, EADS EAD.PA, say they are
concerned about the Air Force's disclosure of pricing data to
Boeing when Northrop and EADS won a potential $35 billion contract
for new refueling tankers in February 2008. That deal was later
The Pentagon canceled Northrop's contract one year ago after
government auditors upheld a Boeing protest. The Air Force
released rules for a new competition between the two teams last
In his letter, Johnson told Northrop that the key terms of the
solicitation had changed dramatically since the last competition,
which would necessitate "dramatically different pricing proposals
and strategies" anyway.
He said the Air Force provided both companies with
"substantially identical information" regarding its competitor's
evaluation prices, but acknowledged that the Air Force gave Boeing
"some additional limited information concerning Northrop Grumman's
proposed prices under the now canceled prior contract."
However, he said those "dollar amounts are of questionable
value since Boeing is unaware of the extent to which the dollar
figures provided were rounded up or down, and/or were truncated by
hundreds of millions of dollars."
In addition, he said, Boeing did not know whether the
disclosed dollar amounts represented all or only some of the line
items associated with various contract phases.
"It is the case that Boeing would be at significant risk if it
tried to recreate Northrop Grumman's actual contract line item
dollar amounts proposed under the canceled procurement, based on
the information provided," Johnson said.
"Any attempt by Boeing to estimate this would likely be
inaccurate by tens or hundreds of millions of dollars, which could
easily cover the cost of one or more of the aircraft."
Johnson said that the pricing would probably be long overtaken
anyway by the time that new proposals were submitted for the
acquisition since close to two years would have passed since the
pricing information at issue was submitted.
"During that time, economic conditions of the commercial
aircraft market have changed, and the individual postures of both
Northrop Grumman and Boeing have undoubtedly changed," he added.
(Reporting by Andrea Shalal-Esa; Editing by Phil Berlowitz)