Blogging for $35 billion – Expensive Tankers

So you lose a $35 billion deal to a competitor that you have been keeping away from your major customer for years. What do you do?

Well if you are Boeing, the customer is the US Government (Airforce), the competitor is Airbus and the product is refueling tankers, then you start a blog.

and launch an advertising campaign.

and protest the tender process.

While Boeing can depend on getting some support from local Americans that want the local provider versus the “French” Airbus, in reality the situation is a lot more nuanced. Both competitors are really global companies now – Boeing has outsourced much of its manufacturing to Asia, while Airbus will set up manufacturing in the USA for this deal.

Boeing are risking a lot by officially protesting this decision. If they lose then their reputation is damaged, and if they win then the buyers and users will forever remember that they are getting the second pick. There’s a smell of sour grapes to the whole affair, but perhaps Boeing is being smart by letting the US Government buyers know that they will make it tough for anyone that chooses a foreign competitor.

The comments on the blog are interesting – ranging from the barely articulate to the surprisingly informed.  Here’s one:

Bill Parson (Colorado Springs):

I write to express disappointment at Boeing’s decision to protest.

1. The Air Force asked for a tanker between 300,000 and 1 million pounds gross weight.

2. The Air Force in it’s RPF stated that they would award to the contractor who “met or exceeded the requirements.”

3. The Air Force in its RFP stated this was a capabilities-based, best value competition

4. Northrop Grumman offered more for the same price.

5. Why did Boeing tout:
- Made in America
- Jobs
- Fuel Savings
- Size

None of these were AF requirements?

….

and here’s another:

Paul Jernberg (Michigan):
I too am dismayed by the recent Air Force bid competition. Again the USAF appears to be buying something bigger than what they need or started out looking for (KC30) they also changed the rules of the competition in mid-stream. I also do not understand how/why Northrop was allowed to design the program that the USAF used to make their decision. I think maybe Mr. McCain should start an investigation into wrong doing by Northrop in this case.

I have spoken with the staff of our State Senator, MR. Levin (chairman of the arms committee), they have assured me that he is watching the GAO review very closely and will step in to do what is necessary if he feels the GAO does not respond in the appropriate manner.

Do not give up the fight, this is much too important.

Paul

Kudos to Boeing for putting up the blog and allowing comments to flourish.  Dangerous, but well done to open the conversation.

There is plenty of other commentary online – including pro-Boeing Tanker War Blog run by DC insiders and lobbyists,  Wired’s Danger Room has a great post and the WSJ has an article – which mentions the history that the Boeing blogs conveniently forget to mention:

The decision sparked outrage among Boeing’s supporters in Congress, as well as criticism for Republican presidential candidate Sen. John McCain, who led the fight to scuttle a previous deal that would have given Boeing the contract without a competition. That deal was doomed in part because it was later learned that a Boeing official had engaged in illegal employment negotiations with an Air Force procurement official who played a role in setting up the contract. 

Most of the financial commentary seems to indicate that Boeing has no chance – but like everything in DC, this is political, and anything can happen.

About Lance Wiggs

@lancewiggs
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