EADS won't protest the Air Force's decision to award the KC-X tanker contract to Boeing.
—John A. Tirpak and Amy McCullough
The Air Force ran an "extremely professional" and "scrupulous" competition, said Ralph Crosby, EADS North America chairman, during a press conference in Washington, D.C., to discuss the company's decision. USAF officials did "everything they said they would" during the source-selection process," leaving "nothing to hang a protest on," he said.
"The Air Force looks forward to the long-awaited recapitalization of its air refueling fleet," service spokesman Lt. Col. Todd Vician said in a statement released after the company's announcement. He added, "This source selection involved two world-class companies, with long-standing relationships with the department that we expect will continue."
Boeing's tanker spokesman Bill Barksdale, in a statement issued after EADS' event, said: "We understand the importance of this effort to our customer and the country and stand ready, along with our nationwide team of suppliers, to go to work on the new KC-46A program."
During the press conference Crosby revealed—based on an hour-long debrief from the Air Force last week—that the price difference between the companies' bids was 10 percent. Boeing bid $20.6 billion and EADS $22.6 billion on initial development and initial production of their respective KC-46A and KC-45 tankers, he said. However, while he and EADS CEO Sean O'Keefe congratulated Boeing on its win, they did little during the press conference to conceal their skepticism that Boeing will be able to perform.
In fact, Crosby said Boeing had made "an extremely lowball offer in order to achieve their strategic objectives" both in the military and commercial fields of competition. He expressed doubt that Boeing will be able to deliver all 18 aircraft by 2017 as called for in the initial $3.5 billion contract with the Air Force. This is the case, he said, because Boeing will not have its first flight-test-worthy KC-46A ready until 2015. On the other hand, Crosby said EADS would have flown its USAF-representative aircraft in 2013 or 2014.
The onus is now on the Defense Department to get Boeing to deliver on what it has promised, and to ensure that there are "consequences" for the company if it does not, said Crosby. If Boeing were to win the contract and then demand higher prices, the taxpayer and combat forces would be "cheated," Crosby asserted.
He also revealed that EADS' estimated cost for engineering and manufacturing development on the KC-45—which the company would have modestly revised from the existing design—was $3.5 billion, while Boeing bid $4.4 billion for EMD on its design, which has not flown.
If Boeing's "very, very, very aggressive bid" fails to meet requirements, EADS will be standing "ready with a fully-developed and operational system," said Crosby.
Barksdale, in Boeing's subsequent statement, did not respond to the charges of low-balling, stating simply that the company is "proud" that the Air Force selected it "to produce the most advanced, capable, and efficient" tanker "at the best value for the taxpayers."
The next Daily Report will be Tuesday, Feb. 19, due to the Presidents Day holiday.
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