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Northrop may sue over tanker price release

Senior Northrop Grumman officials said Wednesday they might pursue legal action over the Air Force’s 2008 disclosure to Boeing of the price Northrop and EADS pitched the service during the Pentagon’s last attempt to buy new aerial tankers. The officials also questioned a draft KC-X solicitation, charging it sets up a “price shootout” that could end with the service “paying more for less capability.”

The air service’s release of the Northrop-EADS pricing data has been at the center of the latest KC-X competition for several months.

The trans-Atlantic partners charge Boeing’s knowledge of both the price they proposed during the last tanker race and the price that emerged after being adjusted according to several criteria by the Air Force’s source selection team gives Boeing a big advantage.

Northrop and EADS were awarded a 179-plane, $35 billion KC-X contract in February 2008. Boeing quickly protested, and federal auditors found flaws with the process used to pick the Northrop-EADS plane.

The disclosure of both sets of prices puts Northrop-EADS “at a significant disadvantage” this time around, chief Northrop spokesman Randy Belote told reporters during a briefing Wednesday in Washington.

DoD officials say the information provided Boeing was disclosed in accordance with Pentagon acquisition regulations. And there was no harm done to this competition because price data from the 2008 race is outdated and no longer germane, defense officials say.

At one point during the briefing, Northrop officials said federal acquisition regulations merely allow the losing bidder to see the winner’s adjusted post-proposal evaluation price.

The initial bid price, Belote said, “is confidential ... and exempt from disclosure under the Freedom of Information Act.”

When pressed numerous times by reporters about possible legal action to resolve the price data dispute, Northrop officials would not rule that out.

Belote and Mitch Walden, a senior Northrop official, repeatedly said legal action was one of a number of options Northrop-EADS officials could take.

Using the Freedom of Information Act process to seek access to comparable Boeing pricing data is another option. Or Air Force and Boeing officials could come to some agreement under which the data would be made available — the Chicago-based defense giant recently declined to hand it over when asked by Pentagon officials if it would do so.

Belote said “it would be of great interest for us to see” the Boeing bid price information — especially since Northrop brass have concluded this tanker competition is “essentially a price-based source selection.”

Northrop officials also criticized the draft request for proposals (RfP), saying it appears at odds with what the eventual operators of the flying gas stations want.

Rather than setting up a competition that will give the air service the best plane at the best price, Walden said the draft RfP describes a race that will be a “price shootout.”

If the proposed source-selection process holds, Walden said the competitors will simply engage in “a race for the bottom,” aiming to enter the Pentagon’s evaluation process with the lowest possible price.

After studying the draft RfP for more than a month, Walden said Northrop brass have concluded the Pentagon will weigh nearly 400 “mandatory requirements” equally. That means things like toilet water flow and certain airframe protection specifications will have equal weight, which he called a departure from traditional major DoD competitions.

Walden also said Northrop officials were surprised that no key performance parameters are highlighted in the draft RfP.

A pie chart he presented showed how the service gave greater and lesser importance to certain specs last time. The pie featured pieces of varying sizes.

Another pie chart showed how the nearly 400 required specs would be evaluated this time. That pie was split into about 400 slices of equal size.

He said this has Northrop officials asking: “If everything is equally important, is anything truly important?” Northrop officials have studied the draft RfP and other Pentagon tanker documents — including a U.S. Air Mobility Command tanker white paper issued the same day as the draft solicitation — and concluded the war-fighting arm of the Air Force wants the same kind of “multimission” aircraft it did last time around.

The difference, he said, is the new emphasis on price.

“There is a gap between what the draft RfP requires” and the set of requirements used for the last competition, Walden said.

Walden said the Government Accountability Office, in upholding Boeing’s 2008 protest, merely told the Air Force to clean up eight process flaws. What emerged more than a year later, he said, “is something fundamentally different than what we saw before.

“This is a mathematical approach to buying new tankers,” Walden said, adding his view is that the proposed selection framework “is so easy a calculator could do it.”

Air Force and Pentagon officials have said the competition seeks the best-value plane, not the one with the leaner price tag.