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NG Nets Huge Tanker Win

Is Boeing losing its grip on crucial portions of its domestic market? That is the broader question being asked in the wake of a stunning contract loss for the American aerospace giant.

The reason for the uncertainty is that Northrop Grumman has won the nine-year $3.8 billion contract to maintain the KC-10 fleet -- which Boeing built and had maintained since 1998.

"This is the second major contract loss that Boeing has incurred in an area -- aerial refueling -- where it owned the domestic market. While the earlier loss of the KC-X [tanker] contract was overturned on protest, the new award to Northrop will inevitably lead observers to question whether Boeing has lost its edge in the lucrative tanker market. The loss of contractor logistics support for the existing KC-10 is doubly devastating, because Boeing thought it was doing a good job on the existing support contract, awarded in 1998. Frankly, I'm mystified why this turned out the way it did," said Loren Thompson, defense analyst at the Lexington Institute and a defense consultant. In his weekly analytic piece, Thompson ticks off some of Boeing's recent losses: "Over the last two years, the Air Force has selected Northrop over Boeing to provide a next-generation tanker; supported termination of Boeing's C-17 cargo plane; moved to end Boeing's role in modernizing electronics on the C-130 cargo plane..." [I would add to that list one of the biggest acquisition screw-ups in modern military history, Boeing's handling of the Future Imagery Architecture, a highly classified series of reconnaissance satellites which were cancelled in September 2005.]

I emailed one of the men who knows the most about tanker competitions, Mike Wynne, former Air Force Secretary, for his read on this astonishing contract award.

"This win will bolster the Northrop team; but I would not count Boeing out. Both of these companies bring enormous talent to the game. So beyond this, the Northrop EADS team must not lose any of their edge, and Boeing is now top full of all the reasons they lost, and must regain why they will win," he said.

It seems to me that if any award would likely to lead to a protest, this one would, especially given the deep and abiding mistrust and antagonism between Northrop and Boeing. The humiliation of losing this KC-10 contract must be bitter for Boeing's employees.

Here is what Boeing spokesman Scott Day had to say: “The Boeing Company is disappointed. We presented a competitive proposal that leveraged Boeing’s tremendous experience from over 80 years of building and maintaining tankers as well as inventing boom technology. We provide global readiness to the KC-10 fleet 24 hours a day, seven days a week, and we have done so since 1998, returning KC-10s to the warfighter on time, without exception, more than 750 times. Our team is proud to bring proven performance and experience to the warfighter. We now need to review the Air Force’s selection decision and process before deciding on our next course of action.”

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