The Defense Department’s release of Northrop Grumman/EADS pricing data from its 2008 KC-X refueling tanker competition win to the loser, Boeing, broke rules governing such disclosures, Northrop officials assert, and their company is considering a variety of options, including legal action.

The sharing of the company’s proposed price for the four development aircraft, as well as the first 64 production units, was “not in accordance with regulations,” says Randy Belote, Northrop’s spokesman. Northrop won a $1.5 billion development contract for its Airbus A330-200-based tanker proposal in February 2008, but after a protest from Boeing, procurement missteps came to light and the Pentagon decided to terminate that contract and hold another competition. Termination talks are still ongoing.

Losing bidders are regularly allowed so-called debriefs in federal competitions. The Pentagon has said the release of pricing data was “in accordance with regulation and, more importantly, that it created no competitive disadvantage because the data in question are inaccurate, outdated and not germane to this source-selection strategy.”

The Pentagon sought Boeing’s permission to release its pricing data to Northrop Grumman in turn, but Boeing declined, according to a Sept. 23 letter from the Pentagon’s general counsel to Northrop’s general counsel (Aerospace DAILY, Oct. 26).

Northrop Grumman is considering how to remedy what it considers a competitive disadvantage: the draft request for proposals (RFP) for KC-X released last month places heavy emphasis on price and does not add extra credit for the attributes of a larger A330-200 aircraft. These could include additional fuel offload at range or cargo and passenger capacity.

“We have several options at our disposal … Discussions all the way through FOIA, the Freedom Of Information [Act], through action — legal action,” Belote told reporters during an Oct. 28 press conference at the National Press Club in Washington. “Our primary interest is working with this customer to try to resolve this issue as soon as possible.”

The Defense Department plans to release a final RFP for the estimated $35 billion, 179-aircraft KC-X program next month. Until then, both contractors are providing feedback on the draft.

Boeing officials say Northrop is “attacking” the U.S. Air Force. “In the past, this competition to replace America’s critical fleet of air refueling tankers has been fought very publicly. Our preference is to allow the process to play out rather than work the requirements through the media.”

This approach is a shift for Boeing, which took its protest public last year, ultimately leading to a new competition.

During the briefing, Mitchell Waldman, vice president for business development at Northrop, suggested one way to proceed would be for the government to revert to the RFP that governed the last competition, but fix elements in that source selection that went wrong and prompted the contract termination. And, the company officials mentioned dual sourcing as an option — a somewhat popular idea on Capitol Hill but one that has been staunchly rejected by the Pentagon as too expensive.

Another complaint raised by Waldman is that the draft RFP places equal value on nonessential functions, such as sink and toilet water flow rates, and essential qualities such as fuel offload or past performance. “If everything is important, is anything important?” Waldman said. “In this competition, risk is essentially pass/fail.”

He adds that Northrop also objects to the use of a fixed-price contract for both development and production units as well. In the earlier competition, Northrop’s contract for development was structured under a cost-plus construct.

The draft RFP lays out 373 mandatory pass/fail requirements. One industry official said Northrop’s A330-based design already addressed about 80 percent of those, but the remainder would require development work. “A portion of these requirements are not on our aircraft today,” Waldman said during the briefing.

Boeing’s team also is likely to require development work to meet these requirements, although company officials have not said whether they plan to base their proposal on the 767 or 777. One area of uncertainty is how the Boeing team will address the requirement for fuel offload at 1,200 gallons per minute without conducting additional development work on its existing KC-767 boom design.

Photo: Northrop Grumman