Emerging markets produced great returns last year, but there were also several reminders of how risky they can be. In May and June, fears of interest rate hikes in some of the most developed nations sparked a broad-based selloff in emerging-market debt and equity. Then a military coup in Thailand sent the local stock market down 15% in December as capital controls were implemented. And the president-elect of Ecuador roiled the local debt market when he reiterated plans to “restructure”...
Northrop May Pull Refueling Tanker Bid
January 31, 2007 on 8:41 pm | In Money |
Northrop May Pull Refueling Tanker Bid Northrop Withdrawal From Lucrative Air Force Refueling Contract May Not End Tanker Controversy By BEN EVANS The Associated Press
WASHINGTON - The withdrawal by Northrop Grumman Corp. from an Air Force refueling tanker contract bid potentially worth more than $100 billion would not necessarily hand the deal to rival Boeing Co. at least not right away.
The prospect of having only one bidder Northrop Grumman is threatening to bow out on one of the most lucrative and controversial military contracts in U.S. history is already raising eyebrows on Capitol Hill.
“If Northrop really does decide not to compete, the Air Force could find its program stopped once again,” said Frank Cevasco, a defense analyst and former Pentagon acquisitions official. “There is far too much taxpayer money involved to award a sole-source contract to Boeing. In my view the Air Force is playing a dangerous game that could backfire once more.”
Still smarting from an ethics scandal that stalled the contract three years ago, the Air Force is expected to release within days its final call for bids to replace the Eisenhower-era KC-135 midair refueling tanker.
The contract has drawn interest from two major contractors, Chicago-based Boeing and an international team formed by Los Angeles-based Northrop Grumman and the European Aeronautic Defence and Space Co., majority owner of jet maker Airbus.
The initial contract for 179 planes is worth an estimated $40 billion, the Air Force says. But the winning bidder could have a leg up on more than $100 billion in work as the Air Force gradually replaces a 530-plane fleet.
Boeing would build the planes based on its familiar 767 in Washington state. The Northrop/EADS team would offer a modified version of the Airbus A330 plane, to be built in Mobile, Ala.
Lawmakers star-struck over the potential economic development impact have joined in the battle and lobbied intensely for the project.
But as the Air Force completes its bidding requirements, the Northrop/EADS team is threatening to withdraw, saying the military’s criteria favor Boeing. If the specifications don’t change to reflect the Northrop plane’s additional cargo and fuel capacity, “then we feel we would not be competitive and we would not bid,” said Northrop spokesman Randy Belote.
“It’s truly a multi-role, multifaceted capability that we’re offering, and it’s unfortunate that it’s not being given an opportunity to compete and to perhaps transform the way tankers are used in the future,” Belote said.
Accusations of bias in the tanker project have a familiar ring.
Congress killed an earlier Boeing contract for the plane in 2004 amid revelations that Boeing hired a top Air Force acquisitions official who admitted giving the company preferential treatment before leaving the military. The former Air Force official and a former Boeing executive who hired her were sentenced to prison in the case.
Even without that history, many lawmakers say it would be a mistake to grant Boeing the contract without competition.
“It would be a huge loss to our defense capability to have only one competitor for this aircraft,” said Sen. Jeff Sessions, R-Ala., whose hometown of Mobile could win 1,000 new jobs if Northrop/EADS gets the project. “There should be multiple bids so that the Air Force gets the best price, the taxpayer gets the best value and the war fighter gets the most capable aircraft.”
It’s not just Alabama lawmakers who have criticized the process. Senate Armed Services Committee members such as Democratic Chairman Carl Levin of Michigan and Sen. John McCain, R-Ariz., have insisted that the proposal draw a true competition.
Levin declined comment for this article, but he told reporters earlier this month that the Air Force “is going to have to persuade us that there’s real competition” in the search.
Air Force officials insist they have been open and clear in their proposal. They have indicated, however, that they have no intention of changing their specifications for a smaller, more basic refueling tanker.
“Ultimately it has to be based on war fighter needs what are the people out there using this equipment telling us they need,” said Air Force spokesman Don Manuszewski.
For its part, Boeing says it stands ready to build whatever plane the Air Force wants. In recent months, the company has said it may offer a tanker based on its large 777 commercial passenger jet as an alternative to its midsize 767, which Boeing has pushed for nearly five years at a cost of more than $1 billion.
“We’re going to be ready,” said Boeing’s Bill Barksdale.
Rep. Adam Smith, D-Wash., a member of the House Armed Services Committee, rejected any notion that the contract is tilted toward Boeing.
“If that’s what the Air Force says they need, that’s what the Air Force needs. This is about as clear and transparent a process as you could ask for,” he said.
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