It’s most likely a wise decision with Boeing being the clear favorite and there being very little profit potential over the life of the contract:

In announcing its withdrawal, Northrop said that the government’s requirements did not recognize the value of the larger refueling platform it had proposed and instead favored Boeing’s proposal to build a smaller tanker using a prototype of its 767 aircraft.

Wes Bush, chief executive of Los Angeles-based Northrop, said that under those conditions, it no longer made financial sense to stay in the competition.

“We have a fiduciary responsibility to our shareholders to prudently invest our corporate resources,” he said. “Investing further resources to submit a bid would not be acting responsibly.”

Deputy Secretary of Defense William Lynn said in a statement that the Pentagon was “disappointed” that Northrop had pulled out of the competition, noting that it “competed well on both price” and other factors. “We strongly believe that the current competition is structured fairly and that both companies could compete effectively,” Lynn said.

Wes Bush has indicated that the company will walk away – without protest:

“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.”

Seattle PI has a really interesting roundup of reactions from a number of impacted elected officials.

Related:
Boeing Pitches NewGen Tanker in Air Force KC-X Competition

Lawmakers on Capitol Hill recently raised some concerns about the development of the F-35 Joint Strike Fighter. Commandant of the Marine Corps, General James Conway, assured them that it was on schedule. Sgt Todd Hunter reports from Washington.

The NewGen Tanker will be based on the Boeing 767 airframe but the flight deck will be upgraded to include the electronic options found on the the 787 Dreamliner:

ST. LOUIS, March 4, 2010 – The Boeing Company [NYSE: BA] today announced that it will offer the Boeing NewGen Tanker in the competition to supply the U.S. Air Force with a multi-mission aerial refueling aircraft that will meet all the warfighter’s mission requirements for the next several decades.

Dennis Muilenburg, president and CEO of Boeing Defense, Space & Security, said the Boeing NewGen Tanker will satisfy all mandatory Air Force requirements and offer an American-made tanker that will be capable, survivable, and combat-ready at the lowest cost to the taxpayer.

“Having supplied tankers to the Air Force for the past 60 years, Boeing has drawn on its unmatched aerial-refueling experience to thoroughly review and evaluate the KC-X solicitation issued by the Air Force,” Muilenburg said. “We respect and understand the KC-X requirements, and appreciate the importance of this program for the United States and its warfighters. We intend to bid for the honor to work with our Air Force customer to replace the existing fleet of KC-135 aircraft with a new-generation, multi-role tanker in a fair and transparent acquisition process.”

Boeing studied the mission requirements closely to determine the optimal airframe size that would deliver the most capability for the lowest cost to own and operate. The result was the NewGen Tanker, a widebody, multi-mission aircraft based on the proven Boeing 767 commercial aircraft, updated with the latest and most advanced technology and capable of fulfilling the Air Force’s needs for transport of fuel, cargo, passengers and patients.

The multi-mission aircraft is named NewGen because it includes several state-of-the-art systems to meet the demanding mission requirements of the future. They include:

- A digital flight deck featuring electronic displays taken directly from the most advanced commercial airliner in existence – the Boeing 787 Dreamliner – that show all flight attitude, navigation, engine indication and crew-alerting information on screens 75 percent larger than on a commercial Airbus A330.

- A new-generation fly-by-wire boom with an expanded refueling envelope and increased fuel offload rate. It will meet the Air Force requirement and simplify refueling operations to reduce workload for the aircrew and improve safety and reliability. Boeing is the only team in the KC-X competition that has invented, manufactured and delivered combat-tested aerial refueling booms.

- The Boeing NewGen Tanker will be controlled by the aircrew, which has unrestricted access to the full flight envelope for threat avoidance at any time, rather than allowing computer software to limit combat maneuverability.

The NewGen Tanker will meet all of the Air Force’s 372 requirements – including a production rate at whatever level the Air Force determines – with a low-risk approach to manufacturing that relies on existing Boeing facilities in Washington state and Kansas as well as U.S. suppliers throughout the nation, with decades of experience delivering dependable military tanker and derivative aircraft.

“The NewGen Tanker will draw on the experience and talents of an integrated U.S. Tanker Team, including the best of our Boeing defense and commercial businesses and our nationwide supplier network,” said Jim Albaugh, president and CEO of Boeing Commercial Airplanes. “It’s a proven team and existing infrastructure that is ready to deliver these NewGen Tankers on Day One.”

More cost-effective to own and operate than the larger, heavier Airbus airplane, the Boeing NewGen Tanker will save American taxpayers more than $10 billion in fuel costs over its 40-year service life because it burns 24 percent less fuel. The Boeing NewGen Tanker program also will support substantially more jobs in the United States than an Airbus A330 tanker that is designed and largely manufactured in Europe.

Boeing has been designing, building, modifying and supporting tankers for decades. Those tankers include the KC-135 that will be replaced in the KC-X competition, and the KC-10 fleet. The company also has delivered four KC-767Js to the Japan Air Self-Defense Force and is on contract to deliver four KC-767s to the Italian Air Force. Three of the four Italian tankers are in flight test, with the fourth airplane in production.

The Air Force released its final KC-X Request for Proposal on Feb. 24. Boeing will deliver its proposal by May 10, within the 75-day period set forth in the terms of the solicitation. The Air Force is expected to announce its decision later this year.

To watch Boeing’s KC-X offering announcement video and experience an interactive virtual tour of the Boeing NewGen Tanker, visit www.UnitedStatesTanker.com. This Web site provides the latest information regarding The Boeing Company’s offer for the KC-X tanker competition.

A unit of The Boeing Company, Boeing Defense, Space & Security is one of the world’s largest defense, space and security businesses specializing in innovative and capabilities-driven customer solutions, and the world’s largest and most versatile manufacturer of military aircraft. Headquartered in St. Louis, Boeing Defense, Space & Security is a $34 billion business with 68,000 employees worldwide.

Boeing has launched a pretty cool flash-based tour of the new tanker along with a dedicated Twitter feed.

The event, focused on homeland security research initiatives, will be broadcast live for those who can’t attend:

There is one webcast for all general sessions and keynote speakers that will be broadcast each day, March 10-12. You may choose to view the webcast all three days or any time during the three day event when general sessions and keynotes are taking place. The general sessions and keynotes are outlined in the webcast agenda.

The webcast for breakout sessions is separate from the webcast for general sessions and keynotes. Video of the presenters will not be available for the breakout session panels, but audio and multimedia presentations will be webcast live.

A draft agenda is available. Register now at the conference website.

A new addition to the Blogs of War blogroll:

The Cyber Loop is a group of carefully selected strategists who have banded together to further the development of strategic thought in the cyberspace domain. The Cyber Loop is not chartered by the government, military or any private organization.

The genesis for the Loop project was the realization that compared to other domains (land, sea, air and space) , not enough strategic thought is being applied to cyberspace, the newest domain of where conflict may arise, other than by a relatively small group of individuals. Much of the discussions about cyberspace still revolve around tactical and operational-level issues.

The goal of the Loop is to develop a community of high-caliber thinkers to further the development of strategic thought on the cyberspace domain. Several General Officers, Ambassadors, senior Federal government officials, members of academia and members of industry are active members of the Loop.

Check it out.