Developments in Refueling Tanker Controversy

BY Herschel Smith
6 years, 2 months ago

We have previously briefly discussed the controversy surrounding the awarding of a $40 Billion contract for a new refueling tanker to a partnership between Northrop Grumman and the European parent of Airbus, putting a critical military contract partly into the hands of a foreign company.

After this article a flood of e-mail and commentary came out about the waste that had been avoided due to selection of the low cost bidder.  Some of this commentary was sent our direction, along with some more personal e-mail arguing in the same manner.  Contact your Congressman was the hue and cry!  Don’t let Boeing undo this pristine process through their various evil political machinations.

The Captain’s Journal will not step in between any defense contractor and accountability.  But we have been involved enough with RFQs (request for quotes), bid review, contractor oversight and followup and postmortem to know how this process goes.  A good (but ethically bankrupt) contractor knows how to work over the system to his own benefit in the low bid process.  The process itself can be the worst, most deceiptful ruse in business.

Businesses are always loath not to accept the low cost bid.  Contractors know this.  Later, holes in the process begin to develop.  The specifications aren’t restrictive enough for some clever engineer – or technology transfer isn’t as complete as the customer thought it would be – or there are cost overruns – or there are schedule delays – or the people are the worst sort of rogues, behaving with the worst possible manners – or the Army of lawyers inevitably deployed for corporate force protection makes it almost impossible to hold a contractor accountable – or you have to keep going back to the contractor for re-work or followup engineering or fabrication, at your own cost.

Better companies know how to avoid these contractors, but because of the awful, grotesque and hideous Sarbanes-Oxley, have to spend the time to craft a sole source justification.  The process is quite often burdensome, and for anyone has been through it several times, childlike faith in the process evaporates in favor of bleak realism.  Belief in the bidding system as the protector of free market capitalism shows a gullibility that is exceeded only by the density of our minds.

Now comes an even better reason to question the awarding of this contract to Airbus.

The lack of ease that accompanies the decision is hardly surprising; the catalogue of horrors at EADS reads like a “how not to” primer in a business-school ethics class. The company has a long and sordid history of bribing governments to purchase their airplanes, especially when competing with U.S. aerospace firms. Former CIA Director James Woolsey has called the practice rampant, and concluded that it was an integral part of EADS’ corporate culture. A European Parliament report in 2003 confirmed these corrupt practices, and that EADS has been embroiled in bribery scandals in Canada, Belgium, and Syria.

According to a New York Times report just last October, a French financial regulator turned over evidence of insider trading by senior EADS executives to prosecutors. The executives failed to inform the public about production delays in the A-380 jumbo jet while they quietly dumped their own stock. When the delays became public, unwitting shareholders watched their holdings plummet in value. The co-CEO and co-chairman of EADS resigned under pressure, and now some EADS executives may face indictments.

Even more worrisome is the power grab by Vladimir Putin, who is buying up the depressed shares of EADS like a corporate raider. The prospect of the authoritarian Russian leader, whose political opponents are harassed and jailed while prying journalists turn up missing or murdered, having a heavy hand in EADS affairs is deeply troubling. Russia opposed the invasion of Iraq and has sought to undermine U.S. plans to deploy a missile defense system in Poland and the Czech Republic.

The most troubling aspect of the tanker contract is the danger it poses to U.S. national security. According to a report by the Center for Security Policy, EADS has been a leading proliferator of weapons and technology to some of the most hostile regimes in the world, including Iran and Venezuela. When the U.S. formally objected to EADS selling cargo and patrol planes to Venezuelan despot Hugo Chavez, EADS tried to circumvent U.S. law by stripping American-built components from the aircraft. Chavez is now building an oil refinery in Cuba to keep Castro’s failed Communist state afloat, funding terrorists seeking the violent overthrow of Colombia’s government, and recently meddled in the presidential election in Argentina with secretly smuggled cash contributions. If EADS had its way, Chavez would now be advancing his anti-American designs in the Western hemisphere with U.S. technology and components.

EADS entanglements with Venezuela make the Pentagon’s decision to waive the Berry Amendment, which prohibits the export of technology that might be developed during the building of the tanker to third parties, indefensible. Given the sophisticated radar and anti-missile capabilities of military tankers, this is no small matter. Such technology falling into the hands of state sponsor of terrorism would devastate our war fighters.

EADS entanglements with Venezuela make the Pentagon’s decision to waive the Berry Amendment, which prohibits the export of technology that might be developed during the building of the tanker to third parties, indefensible. Given the sophisticated radar and anti-missile capabilities of military tankers, this is no small matter. Such technology falling into the hands of state sponsor of terrorism would devastate our war fighters.

And such a scenario is hardly unreasonable. EADS executives recently attended an air show in Iran and were caught red-handed trying to sell helicopters with military applications. When confronted, an EADS executive said the company was not bound by the U.S. arms embargo against Iran. EADS also sold nuclear components vital to exploding a nuclear device to an Asian company that in turn sold them to an Iranian front operation.

That settles it for the Captain’s Journal.  Vladimir Putin is a liar, criminal and ex-KGB thug, and a duplicitous killer with a Napoleon complex.  Any currency flowing his direction as a result of this deal would be a catastrophe, notwithstanding the potentially horrible security concerns.  To be sure, the DoD may have to have a face-to-face with Boeing or some other contractor to reduce costs, or make the process more accountable.  But that doesn’t change our fundamental position.  Vladimir Putin can’t be held accountable in a U.S. court.  Boeing can.

We are open to serious argumentation in favor of awarding this contract to Airbus, but we haven’t seen any yet.  Informing us that they were the low cost bidder gives the Captain’s Journal a good belly laugh.  Someone has got to come up with a better argument than that.  After all – we didn’t come into town and fall off the turnip truck yesterday.  We’ve been around for a while.




You are currently reading "Developments in Refueling Tanker Controversy", entry #1079 on The Captain's Journal.

This article is filed under the category(s) Air Force,Department of Defense and was published May 7th, 2008 by Herschel Smith.

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