Boeing Gets Outsold

When the U.S Airforce selected Northrop to supply them with refueling tankers, Boeing filed a complaint with the U.S. government, saying that the evaluation was unfair.

Here are some excerpts from a recent BusinessWeek.com article about what has recently transpired (my highlights):

In a significant boost to the prospects of Boeing (BA), a U.S. government arbiter has sustained the company’s formal complaint that the U.S. Air Force unfairly chose to order 179 aerial refueling tankers from prime contractor Northrop Grumman (NOC) and its European partner EADS (EAD.PA), rather than Boeing.

The Air Force errors, according to the GAO, included failing to stick to the evaluation criteria it had announced in the original solicitation to bidders, and giving Northrop extra points for exceeding base requirements in the solicitation. That appeared to endorse Boeing complaints that the Air Force switched the requirements it was considering without telling the company. The [U.S. Airforce] lawyers wrote that the Air Force had held a “transparent and unbiased” competition for the tanker contract, immune to the whims of politics or other outside considerations. “We have upheld the Jeffersonian ideal of silencing the complaints of our citizens, whether just or unjust, solely by the force of reason,” they said.

The central complaint behind Boeing’s appeal was the aircraft chosen by the Air Force is very different—most significantly, bigger—than what the Air Force initially said it wanted. Otherwise, say Boeing executives, they would have offered a modified 777 rather than a 767, which is smaller and can carry less cargo and fuel than the winning A330-based tanker. Boeing also complained about European subsidies that the company asserts gave Northrop/EADS a cost advantage.

From a pure sales strategy perspective (I’m leaving out nationalism and other emotions), it appears that the Northrop team executed a very effective flanking strategy.  They acknowledged the buying criteria, then changed them.  I can’t predict how this will turn out in the end, but the Boeing sales team can’t be very happy.  They got seriously outsold.

What’s your opinion?