Northrop Grumman’s Statement
Statement From Northrop Grumman on U.S. Air Force Aerial
Refueling Tanker Program
WASHINGTON, D.C. - March 8, 2010 - The following is a statement from
Wes Bush, Chief Executive Officer and President of Northrop Grumman
Corporation (NYSE:NOC), concerning the U.S. Air Force aerial refueling
tanker program.
“After a comprehensive analysis of the final RFP, Northrop Grumman has
determined that it will not submit a bid to the Department of Defense
for the KC-X program. We reached this conclusion based on the structure
of the source selection methodology defined in the RFP, which clearly
favors Boeing’s smaller refueling tanker and does not provide adequate
value recognition of the added capability of a larger tanker,
precluding us from any competitive opportunity.
“Northrop Grumman fully respects the Department’s responsibility to
determine the military requirements for the new tanker. In the previous
competition, Northrop Grumman was selected by the Air Force as offering
the most capable tanker for the warfighter at the best value for the
taxpayer. However, the Northrop Grumman and EADS team is very
disappointed that the revised source selection methodology now
dramatically favors Boeing’s smaller refueling tanker. We agree that
the fundamental military requirements for the new tanker have not
changed since the last competition, but the Department’s new evaluation
methodology now clearly favors the smaller tanker.
“We continue to believe that Northrop Grumman’s tanker represents the
best value for the military and taxpayer—a belief supported by the
selection of the A330 tanker design over the Boeing design in the last
five consecutive tanker competitions around the globe. Regrettably,
this means that the U.S. Air Force will be operating a less capable
tanker than many of our Allies in this vital mission area.
“Our prior selection by the Air Force, our firm belief that we provide
the best value offering, and the hard work and commitment of the many
individuals and communities on our team over many years made this a
difficult decision for our company. But we have a fiduciary
responsibility to our shareholders to prudently invest our corporate
resources, as do our more than 200 tanker team suppliers across the
United States. Investing further resources to submit a bid would not be
acting responsibly.
“We have decided that Northrop Grumman will not protest. While we feel
we have substantial grounds to support a GAO or court ruling to
overturn this revised source selection process, America’s service men
and women have been forced to wait too long for new tankers. We feel a
deep responsibility to their safety and to their ability to fulfill the
missions our nation calls upon them to perform. Taking actions that
would further delay the introduction of this urgent capability would
also not be acting responsibly.
“We recognize that our decision likely creates a sole-source outcome
for Boeing. We call on the Department to keep in mind the economic
conclusions of the prior round of bidding as it takes actions to
protect the taxpayer when defining the sole-source procurement
contract. In the previous round, the Air Force, through a rigorous
assessment of our proposal, determined that it would pay a unit flyaway
cost of approximately $184 million per tanker for the first 68 tankers,
including the non-recurring development costs. With the Department’s
decision to procure a much smaller, less capable design, the taxpayer
should certainly expect the bill to be much less.”
Northrop Grumman Corporation is a leading global security company whose
120,000 employees provide innovative systems, products, and solutions
in aerospace, electronics, information systems, shipbuilding and
technical services to government and commercial customers worldwide.
