My Oh My!  Could this be a legitimate concern that should be taken into account in the decision to award the U.S. Tanker Contract?   A company’s past and present business practices and dealings perhaps should come into play when awarding huge defense contracts which concern the safety and security of the United States.  -GFS

 

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From Bloomberg.com

 

Boeing Delay on Italy, Japan Tankers May Harm Bid for U.S. Work

By Tony Capaccio and Toko Sekiguchi 

Aug. 12– Italy will penalize Boeing Co. for being three years late in delivering the first of four aerial refueling tankers.

The company is negotiating with the Italian government over the penalty’s size and composition, Cliff Hall, director of Boeing’s international tanker programs, said in an interview. Boeing paid a fine to Japan last year for being one year late on delivering the first of four tankers to that nation’s air force.

Performance on prior contracts is a factor in the U.S. military’s contest between Boeing and Northrop Grumman Corp. for a $35 billion aerial refueling tanker contract. The Pentagon hopes to award a contract by late December.

Boeing’s record on the Japanese and Italian tanker programs is “totally relevant” to its bid for the U.S. program, Scott Hamilton, an aviation consultant with Seattle-based Leeham Co., said. “This goes directly to `past performance.’ You don’t pay penalties for good performance.”

Richard Aboulafia of the Teal Group defense industry consulting firm in Fairfax, Virginia, said delays on these two programs “have prompted Boeing to play defense against charges of `underperformance’ and therefore a high risk of technical difficulties on the U.S. program.”

Boeing’s December 2002 contract with Italy promised the first tanker by November 2005. Delivery now is set for November, three years late, with the second slated for delivery in December, or 21 months late. Boeing expects the third and fourth planes to be delivered at least 16 months and 12 months late, respectively.

`Italians Were Angry’

Boeing is “working with the Italians on different options” for the penalty it must pay that could include cash and extra services, Hall said.

“It’s not really safe to say what that might be or how much. The Italians don’t move fast on these types of matters,” he said. “I expect it to be resolved next year.”

“The Italians — they were angry, but I think they are starting to see that we are making solid progress,” Hall said. “I wouldn’t call it an `excellent’ relationship yet. I would say we are mending fences.”

Factors contributing to the delay included design changes, expanded U.S. flight testing, greater-than-expected challenges to software integration, and the complexity of getting the plane ready for certification by the Federal Aviation Administration, Hall said.

Italian Embassy Press Counsel Fabrizio Bucci in an e-mail said, “We understand Boeing’s problems. We are, however, confident that they will be soon overcome and the delivery will take place shortly.”

Penalized by Japan

Boeing’s penalty from Italy will be the second incurred on its international tanker programs.

Delivering Japan’s first tanker a year late on Feb. 29 cost Boeing “well under $5 million,” Hall said. The fine was paid by Itochu Corp., Boeing’s Japanese partner in the deal, and Boeing reimbursed Itochu, Hall said.

The second aircraft was delivered in March, two days ahead of schedule; the third will be delivered to Itochu in December about two months early and the fourth about one month ahead in November 2009, he said.

“We have certainly turned the corner on this program and are performing better,” Hall said.

 

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