Leeham News and Analysis

Congressional move ill-advised

A move in the US House to adopt legislation to overturn the USAF tanker award to Boeing is ill-advised on a number of levels.

According to a story in The Seattle Post-Intelligencer,  Boeing supporters in the House, incensed over the award by the Air Force to Northrop Grumman and Airbus parent EADS selecting their A330-based KC-30 for the KC-45A tanker, are thinking about adopting legislation to block the award. The details, according to the news story:

1. Prohibit the award of a US government contract to any company found by the US government to be receiving illegal subsidies;
2. Direct the USAF to reconsider the competing tanker proposals and “factor in subsidies;”
3. Direct the USAF to reopen the bidding and allow Boeing to propose a tanker based on the 777;
4. Cancel the NGC contract outright.

There are so many things wrong with this approach.

1. The World Trade Organization hasn’t ruled on the US complaint, so the USA’s interpretation of what constitutes “illegal” subsidies may or may not hold up before the international body charged with adjudicating these things. Apparently this minor legal detail doesn’t matter to the members of Congress who are behind this one. Furthermore, following the same concept, the EU has “found” Boeing to  be receiving “illegal” subsidies (also a complaint before the WTO). If Congress adopts this clause, then the EU would be perfectly justified in retaliating against Boeing by adopting a similar rule. Bad idea all the way around.
2. We’ve written on this one before. The USAF has no expertise to factor in anything about the subsidies. It needs to stay away from this topic.
3. Boeing had the option to offer a “KC-777” alone or in tandem with the KC-767. Boeing says it was discouraged from doing so, but as far as we know hasn’t presented written evidence to support this, at least publicly. Presumably this element is detailed in the protest filed with the Government Accountability Office. If so, then the GAO can determine whether the USAF improperly steered Boeing away from offering the KC-777 and equally presumably, this might be grounds to send the competition back to the drawing board (so-to-speak). Congress doesn’t need to be involved on this element.
4. This is the worst possible interference in Congressional meddling. It sends a message to any foreign defense company, and any domestic company partnering with a foreign company, that it’s a waste of time to compete for Defense business. As we wrote March 22, Britain’s BAE Systems was the sixth largest DOD contractor in 2006. What kind of message would this Congressional action send to BAE? Boeing partnered with Italy’s Alenia to offer the C27J twin-engine turbo prop for light cargo operations. It so happens the Alenia airplane won this contract. The Congressional action proposed on canceling the Northrop deal has all sorts of horror-ramifications.

Let the GAO deal with this, like the law allows. If the GAO upholds Boeing’s protest, so be it. But if the GAO rejects the protest, Boeing and its supporters need to let this one go. In fact, Boeing would be better off calling off the dogs on this Congressional fight. Boeing might win the battle but lose the war. The EU won’t sit back idly if Congress interferes, and Boeing will be the one to pay the penalty, not some member of Congress with a few district jobs to protect.

As we previously said, Boeing would be far better off to devote its engineering resources to fixing the 787 program and developing the Blended Wing Body for the KC-Y competition scheduled for 2020. A KC-BWB, and subsequent commercial applications of the BWB, would be far more advanced than the KC-30 or anything else Airbus has to offer, and superior to the KC-777. Go for this gold, and the advanced technology that comes with it. Don’t stick with an airplane originally designed in the late 1970s-early 1980s. Think ahead. Be bold.

Blended Wing Body test model. Source: Boeing