Post KC-X, Europeans Strategize For Pentagon
A string of procurement choices by the Pentagon—including an American KC-X platform, a stunted buy of Italian airlifters and a defunct Italian Marine One airframe—exemplify how difficult it can be for foreign designs to earn the right to fly in U.S. livery.
Foreign contractors may be quietly chagrined, but still appear resolved not to walk away from the potential of selling goods to the largest single buyer of military hardware on the globe. The Pentagon’s fitful buying practices and procurement missteps have, however, taken their toll on what appeared a few years ago to be an imminent push by European contractors onto U.S. soil after EADS won the Army Light Utility Helicopter, the EH-101 was chosen to transport the president, and the C-27J tactical transport was selected.
But, the landscape has drastically changed. Several opportunities were lost—or some say derailed: the C-27J has been truncated, the EH-101 contract annulled and the EADS win in the KC-X refueler overturned. Some Europeans see a pattern, arguing the U.S. has resorted to protectionism.
For foreign executives, the huge U.S. market remains attractive. But they face a new reality challenging their goals amid flattening Pentagon budgets and against the political backdrop of high unemployment numbers in America.
“There is no policy line connecting these dots,” Ashton Carter, Pentagon procurement chief, tells Aviation Week. “We have had to make tough decisions to cancel a lot of poorly performing programs. And, there have been just as many or more that had an American company as its prime contractor as had a non-heritage company as its prime.” David Berteau, director of the Defense-Industrial Initiatives Group for the Center for Strategic and International Studies, agrees. “You’d be hard-pressed to say that there is a conspiracy theory,” he says. “The results [of these decisions] may look like a pattern, but the process that you use to get to these results isn’t a pattern at all.”
The U.S. procurement process has fallen under greater public scrutiny in recent years, diminishing the chance that politics can influence source selections. “You can’t really hide those kinds of shenanigans in the kind of environment we operate in,” he says. Air Force Chief of Staff Gen. Norton Schwartz notes that any bias toward or against a particular company cannot weave its way into a “pristine” process.
The Pentagon’s latest decision to end its refueler relationship with EADS and select, instead, a rival KC-135 replacement from Boeing (the 767-based KC?46A) is the largest such failed attempt by a contractor pushing a European design for the U.S. military. The KC-X contract is valued at more than $30 billion, according to EADS, which proposed an A330-based design. Also at stake was a strategic goal by EADS to establish a final assembly facility for A330s and potentially other commercial airliners, in Boeing’s back yard, on U.S. soil, if it won KC-X.
Schwartz rejects the suggestion that EADS was simply a foil that forced Boeing to sharpen its pencil and lower its price. “This is about the best deal, pure an simple,” he says of Boeing’s win. He acknowledges that the final selection of the 767-based tanker grew out of an environment where “we maybe didn’t have all of the cost discipline that we should have had. That is going to become an increasingly distant memory.”
“The basis on which the tanker decision was made was spelled out in the [request for proposals] last year,” Carter says. “We followed the rules and the decision process described in that RFP, which was released and written before we knew who the bidders would be.”
EADS CEO Louis Gallois is putting a brave face on the turn of events after the recompete that some say favored Boeing from the outset. The bidding has led to a positive relationship with the Pentagon and Congress, he notes, adding that the company was treated fairly.
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