Boeing on the defense: Tanker contract protest raises questions about globalization
Sidney Hill, Jr., executive editor -- Manufacturing Business Technology, 3/19/2008
When Boeing filed its formal protest of the U.S. Air Force’s decision to award a $40 billion contract to build refueling tankers to a competing bidder, the Chicago-based aircraft maker also raised a profound question: Do U.S.-based corporations want to compete in a global marketplace, or do they merely want to reap the spoils of globalization?This question arose because the winning bidder was a team consisting of California-based Northrop Grumman and European Aeronautic Defence & Space Co (EADS), the parent company of Airbus, which is Boeing’s biggest rival in the commercial aircraft sector.
Numerous Boeing supporters—including several members of Congress and both Democrat candidates for the presidency—have suggested it was wrong for the Air Force to award this contract to a foreign entity.
It’s hard to argue that EADS, an English company, represents a national security risk. So, the primary rallying cry has been the potential loss of American jobs. There’s a fallacy in that argument as well, since Northrop Grumman is actually the lead contractor on the EADS team. And the team plans to build a plant in Alabama that will serve as the final assembly facility for the tankers.
In total, Northrop Grumman claims this contract could generate as many as 48,000 jobs in 49 states. There would be roughly 1,500 workers at the Alabama assembly plant.
On March 11, Boeing asked the Government Accountability Office (GAO) to review the Air Force’s decision. The GAO has said it will issue a ruling by June 19.
Although the evidence Boeing presented to the GAO includes a claim that the Northrop Grumman-EADS team was able to compile a slightly less costly bid because EADS benefits from European Union subsidies, Boeing has framed its argument primarily around issues related to how the Air Force worded its bid and whether the Air Force strayed from the stated requirements in ways that gave the Northrop Grumman-EADS team an unfair advantage.
Boeing argues, for instance, that the Air Force changed the initial requirement for how much space a single tanker could occupy on an airfield to accommodate the larger Northrop-Grumman-EADS aircraft, which would be a modified version of an Airbus A330 jetliner. Boeing’s proposal called for modifying its 767 jetliner.
There are two reasons why it makes sense for Boeing to frame its objections around the technicalities of the bidding process rather than focusing on a “foreign” company’s presence on the winning team:
• There are enough people in Congress—including lawmakers from the states of Washington and Kansas, where Boeing has significant operations—chanting that mantra.
• Such an argument might boomerang on Boeing in its future pursuits of business in Europe or elsewhere around the globe.
Quite frankly, arguing against a global corporate partnership would just sound silly coming from a company that has touted international nature of the supply chain it forged to produce its latest flagship product—the 787 Dreamliner. Just last fall, a Boeing production executive spoke to MBT with pride about infrastructure it had created to coordinate the efforts of 132 partners from numerous countries—including Japan, Australia, and Italy. These partners are now shipping parts to a plant in Everett, Wash., where the 787 is assembled.
That’s exactly the plan Northrop-Grumman and EADS laid out for building the Air Force tankers. So here’s a question for anyone arguing against EADS’ participation in the Air Force tanker contract: If Boeing somehow manages to prevail in its protest, would it be barred from working with any of its “foreign” partners on this project? And does that make good business in today’s economy?
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