Thursday, 31 July 2008

The Saga around the Pentagon Air Refuelling Tanker

The government awards a $23bn contract for the provision of high-tech defence equipment by sole-sourcing to a single indigenous company. Then it emerges that the government Air Force procurement Officer and a Senior Executive at the defence firm had violated conflict-of-interest regulations, and both get convicted.

Following convictions, parliament scraps the deal and forces the Air Force to proceed to an open tender. In addition, parliament requests that the Ministry of Defence should not issue sole-source contracts in future.

An new, open tender is launched, and a foreign firm eventually wins the contract. The Air Force confirms the overwhelming technical capability of the foreign product, but the indigenous firm cries foul, and there is an uproar in the country - including parliament, which had recommended the open tender - about the implication of such a large contract in the hands of a foreign firm. The wrangling goes on for a few months, until then the MoD annuls the award to the foreign firm and calls for fresh tenders. In its justification, it states that the Government's Accountability Office (GAO) had audited the tender evaluation process at the MoD and found breaches of due process. The indigenous commpany rejoices at it its victory, and ratchets the lobbying for its equipment.

Sounds like some corrupt developing country? This is the United States. Maybe the comparism is not quite fair, because in a corrupt developing country, parliament would not get very far in annuling the original sole-source award in the first place. But critics and sceptics of the procurement practices of the Pentagon are many, and their "gasps" as this current process were loud, according to the LA Times (Charles Horner, US Air Force General, ret., LA Times, July 23 2008).

In 2004, the US Air force estimated that it would need about 400 new aircraft to replace its aging fleet of airborne refuelling tankers, worth an estimated $100bn. Its procurement strategy was to use a long-standing sole-source agreement with Boeing, and call off the new aircraft in stages. In defending its cancellation of the sole-source, the Pentagon cited not only the conflict of interest issues, but also higher costs for the government due to lack of competition.

In March 2008, the Pentagon awarded the contract - with the scope increased to $34bn - to EADS, parent of Airbus and a European aerospace group, based in France and part-owned by the French and British governments. The award caused heated debates in the US congress (which had recommended an open tender). According to the Seattle PI: 'House Speaker Nancy Pelosi said in a statement that the award to the EADS team "raises serious questions that Congress must examine thoroughly." ' (

Some observers commented that the award, which followed a visit by the French president to the US - his first since being elected into office, was a sign of warming diplomatic relations with Europe. But military experts were more pragmatic: they saw the award as a shift in the military focus of the US towards the Pacific. opoerating in the Pacific would require longer range aircraft with increased carrying capacity, and the EADS carrier can provide these comfortably.

Meanwhile, the Boeing aircraft are more suited for "traditional European, southwest Asia, South American and Middle Eastern missions that demand smaller, less-developed runways, as well as minimum footprint for accelerated through-put on less-developed forward airbases, and high-cycle rates for intense aerial combat. By contrast, the Pacific -- nearly 156 million square kilometers, according to the CIA's World FactBook -- embodies the "tyranny of distance" that U.S. forces face in trying to respond or deploy to worldwide events." (

In June 20008, the Pentagon announced that it had annuled the elections after an audit by the Government due process watch-dog found some irregularities. Boeing and EADS are currently preparing new bids, and the saga goes on.

Brown's Future

The Leadership crisis at the heart of Britain's ruling Labour Party has taken yet another intriguing turn when David Milliband, Foreign Minister, key Cabinet member and strong ally of the ousted former PM Tony Blair, called for a "change in the government’s style and policy", and refused to rule out a bid for the Party Leadership (Financial Times).

Allies of Mr. Brown hit back at what they called the "disloyal" and "self-serving" minister, raising the tone in the increasingly bitter in-fighting that has dogged Mr Brown's government since Tony Blair was forced out of Office.