Northrop threatens to pull out of KC-X race - Air Force News | News from Afghanistan & Iraq - Air Force Times

Northrop threatens to pull out of KC-X race

Northrop Grumman has told Pentagon acquisition chief Ashton Carter it will not bid for a multibillion-dollar Air Force aerial tanker contract unless major changes are made to the rules governing the competition.

Pentagon officials fired back hours later, vowing to resist altering the rules to meet a competitor’s wishes and saying they have run the new competition “right down the middle.”

Northrop President and CEO Wes Bush, in a letter Tuesday to Carter, said if the Pentagon wants the company and its European partner, EADS, to compete, defense officials must make “meaningful changes” to the draft request for proposals (RfP) for the KC-X program.

“Absent a responsive set of changes in the final RfP, Northrop Grumman has determined it cannot submit a bid for the KC-X program” Bush wrote in the letter.

A Northrop spokesman said Bush complained to Carter, the military’s top weapons buyer, because Air Force tanker buyers failed to respond to Northrop’s concerns that the draft RfP was stacked in favor of Northrop’s rival, Boeing.

“It is Northrop’s expectation that DoD will modify” the RfP, said company spokesman Randy Belote. A final RfP was expected by Monday, but has not yet been issued.

The Air Force is expected to award a contract to Boeing or Northrop next summer for 179 planes. The contract could be worth $35 billion.

In a Nov. 4 letter, Bush asked that Northrop’s list of concerns — which already have been transmitted to the Pentagon — be addressed in a revamped draft RfP. The Air Force replied that the department has informed Northrop that it is sticking with the original draft.

Bush said the company is concerned that the evaluation criteria outlined in the draft RfP give a “clear preference” to a smaller plane with “limited multirole capability.” The Northrop-EADS KC-330 is larger than Boeing’s expected entrant, the KC-767. The former also offers more cargo- and passenger-hauling capacity.

The Air Force’s solicitation — written along with the Office of the Secretary of Defense (OSD) — also would place on Northrop, Bush told Carter, “contractual and financial burdens ... that we simply cannot accept.”

“This second draft RfP is fundamentally different from what the Air Force said it wanted and needed 18 months ago,” Belote said. “The requirement has not changed, but what the Air Force is asking for has changed fundamentally. How did that happen?”

In a statement issued several hours later, the Pentagon said it “regrets that Northrop Grumman and Airbus have taken themselves out of the tanker competition and hope they will return when the final RfP is issued.” EADS is the parent company of Airbus.

The DoD statement reiterated defense officials administration-bridging desire for a true competition, but added the Pentagon and Air Force “cannot compel the two airplane makers to compete.”

DoD said both Northrop-EADS have suggested RfP changes “that would favor their offering,” but added the department “will not change the war fighter requirements for the tanker to give advantage to either competitor.”

The statement repeats Obama administration officials’ months-old claim that they have orchestrated this latest attempt at buying new tankers “right down the middle.”

DoD said a final RfP likely will be released in January.

Northrop-EADS was expected to again compete against Boeing to build new flying gas stations are slated to replace the military’s aging KC-135 tankers.

The Bush administration in late February 2008 picked the Northrop-EADS plane over the favored Boeing aircraft, a contract award the latter quickly protested. The contract award was axed that June when the Government Accountability Office determined the Air Force-run competition was flawed. That followed an embarrassing failed attempt earlier this decade to lease KC-767s from Boeing.

Many defense experts, because of that scandal, have stressed the importance of two competitors squaring off for the massive contract. A sole-source contract award could be politically damaging to the military and the White House, experts said.

Northrop appears ready to take advantage of this. In the Dec. 1 letter, Bush tells the DoD acquisition chief that Northrop brass “are aware of how important it is to the credibility of the ultimate KC-X tanker award that it be arrived at competitively.”

The threat to pull out of the KC-X race will surely be seen by many in the global defense community as an attempt to force OSD and the Air Force into altering the rules and evaluation criteria spelled out in the draft RfP. Bush added that Northrop officials will soon begin notifying its 200 KC-330 supplier firms that the Northrop-EADS team will not compete for the U.S. Air Force contract.

Bush’s letter leaves the door open for a Northrop-EADS bid: “It is my hope that the department will modify its approach to this procurement in a way that will enable us to offer our product for your consideration.”