Boeing lost air tanker deal decisively: analyst

WASHINGTON (Reuters) - Boeing Co BA.N failed to beat Northrop Grumman Corp NOC.N in any of the key criteria in the $35 billion tanker aircraft competition won by Northrop and its European partner, according to a defense analyst with close ties to the Air Force.

A man walks past a display at the Boeing booth at the Singapore Air Show in Singapore February 19, 2008. Boeing failed to beat Northrop Grumman Corp in any of the key criteria in the $35 billion tanker aircraft competition won by Northrop and its European partner, according to a defense analyst with close ties to the Air Force. REUTERS/Vivek Prakash

“This was not a close outcome in any sense of the term,” the analyst, Loren Thompson of the Lexington Institute, told Reuters. “Northrop won decisively and completely, and Boeing simply was not competitive in the major measures.”

Thompson said in a report on Monday that Boeing matched the appeal of the Northrop bid only in the area of proposal risk. And that came only after Air Force reviewers pressed Boeing to stretch out its aggressive development schedule for a new version of its 767 jet, which in turn added cost.

In fact, the Boeing proposal was initially rated as “high-risk” because reviewers were concerned that Boeing’s proposal to build a new version of the 767, using parts from other versions, would cost more than expected.

Northrop proposed a tanker based on the Airbus A330 aircraft built by Europe's EADS EAD.PA. The Northrop-EADS team won decisively in four of the five criteria set by the Air Force: mission capability, past performance, price, and an integrated fleet assessment, according to Thompson.

“Although some observers expected that the Northrop team would offer a better price, nobody expected that they would be better in every significant regard,” Thompson told Reuters.

The Air Force plans to buy 179 tanker aircraft over the next 15 years to begin replacing its KC-135 tankers, on average 47 years old, that were built by Boeing. The tankers are designed to refuel fighter jets and other warplanes in midair, extending their range.

Air Force officials on Friday described the Northrop offering as superior but gave few details. They will provide a detailed briefing to Boeing around March 12.

Boeing has said it will review its options -- and whether it plans to file a protest -- after the review.


Thompson’s report provided more detailed information than the Air Force did on Friday, including an assessment by Air Force reviewers that buying the Boeing tanker would have resulted in a much slower tanker replacement rate.

“The reviewers concluded that if they funded the Northrop Grumman proposal, they could have 49 superior tankers operating by 2013, whereas if they funded the Boeing proposal, they would have only 19 considerably less capable planes in that year,” Thompson said.

Northop’s refueling airlift capacity was deemed superior at a range of 1,000 nautical miles and “substantially superior” at 2,000 miles, he said.

Air Force reviewers also had less confidence in Boeing’s past performance due to “poor execution” in three relevant programs, including long-delayed tanker deliveries to Japan and Italy, Thompson said.

Northrop got higher ratings due to “satisfactory” execution on six programs deemed relevant to the tanker competition.

Boeing had expected to face tough competition from Northrop on cost, but it compounded its problems by failing to adequately explain its assumptions in calculating the cost of developing a tanker, Thompson said.

“The resulting low confidence in Boeing cost projections undercut its claims of lower life-cycle costs,” he said.

Northrop also did better on a complicated computer model designed to compare how the competing planes would fare in an operational setting using a realistic wartime scenario.

The review found Northrop could accomplish specified missions with nearly two dozen fewer planes than the Boeing proposal, considered a “big advantage,” Thompson said.

Reporting by Andrea Shalal-Esa; editing by John Wallace