The reasons Boeing lost while Northrop Grumman won point a revealing light on a long-established U.S. Department of Defense procurement process that has malfunctioned far more often in recent years than it ought to -- with increasingly costly and serious results for the U.S. taxpayer and for U.S. national defense.
Many of the causes for Boeing's defeat were rooted in the company's long-established successes and in some of its most spectacular failures in recent years in other fields. But the controversy also heightened the growing global contrast between the way the major corporations of the U.S. high-tech and defense sectors do business and the very different business model that prevails across the Atlantic in the European Union.
The Boeing Co. Tuesday lodged a protest with the Government Accountability Office over the U.S. Air Force's decision to contract for a new medium-range air tanker to Northrop Grumman and its European partner, the French and German-controlled EADS, for their KC-45A rather than Boeing's KC-767.
The $35 billion decision to buy 179 aircraft -- expected to grow to a $100 billion commitment to buy 600 in all -- came as a bombshell to Boeing and has rocked the U.S. aerospace industry. Congressmen and senators on either side of the aisle are up in arms over it.
Boeing said the U.S. Air Force didn't note its experience when awarding a tanker contract to EADS and Northrop Grumman.
"Not only did this flawed decision deny the government the manufacturing benefits of Boeing's unique in-line production capability, subjecting the Air Force to higher risk, but it also resulted in a distortion of the price at which Boeing actually offered to produce tankers," the company said.
"In evaluating past performance, the Air Force ignored the fact that Boeing -- with 75 years of success in producing tankers -- is the only company in the world that has produced a commercial-derivative tanker equipped with an operational aerial-refueling boom. Rather than consider recent performance assessments that should have enhanced Boeing's position, the Air Force focused on relatively insignificant details on 'somewhat relevant' Northrop/EADS programs to the disadvantage of Boeing's experience," the company said.
"Boeing offered an aircraft that provided the best value and performance for the stated mission at the lowest risk and lowest life cycle cost," said Mark McGraw, vice president and program manager, Boeing Tanker Programs.
"We did bring our A-game to this competition. Regrettably, irregularities in the process resulted in an inconsistent and prejudicial application of procurement practices and the selection of a higher-risk, higher-cost airplane that's less suitable for the mission as defined by the Air Force's own Request For Proposal. We are only asking that the rules of fair competition be followed," McGraw said.
However, Northrop Grumman said Monday it won the U.S. Air Force's new air tanker contract in a fair fight.
Next: Northrop Grumman makes its case