Major Contracts Await In 2010

Last Updated Jan 4, 2010 5:56 AM EST

As the new decade begins several major contracts across the world of defense wait to be finalized and awarded. Many of these involve the acquisition of modern fighters to upgrade existing forces of older Russian, European and American aircraft. At the same time there are pressures on the U.S. and English budgets due to operations in Iraq and Afghanistan that may limit what those two countries are able to do with new equipment and programs.

In the United States the Department of Defense and Air Force are expected to put out the final RFP for the KC-X new tanker program. This will be the third attempt to buy a new, modern tanker to replace parts of the aging KC-135 fleet that currently provides the mainstay of the U.S. aerial refueling fleet. Boeing (BA) and Northrop Grumman (NOC) with its partner EADS (EADS.P), who will provide Airbus aircraft, have been sparring with each other, the Air Force and Congress during the period of the draft RFP these last few months.

Boeing had been awarded a lease back in the early 2000's but this was overturned by Congress as non-competitive along with some issues with corruption between Air Force and Boeing officials. In 2008 the Air Force awarded the competitive contract to Northrop Grumman and EADS only to have it overturned on protest. Now another attempt to get this finally completed in 2010 is ahead. At the last major plot turn Northrop had threatened not to submit a proposal as they felt the draft RFP favored a smaller, cheaper aircraft in Boeing's favor. Until the actual final RFP is put out there will be no confirmation if Northrop will go through with their threat. If they do not compete the program will be at a standstill again.

In India a competition is underway to buy several advance fighters. Russian, European and U.S. countries have submitted proposals. The first step is a fly off to determine with of the submissions by MiG, SAAB, Rafael, Eurofighter, Boeing and Lockheed Martin (LMT) meet the initial requirements. Then there will be another round of evaluations leading to award. This contract is a major goal for SAAB, Rafael and Boeing as they see little market for their product domestically or elsewhere since most of the U.S. allies are going to buy F-35 JSF aircraft to replace their older F-16 aircraft.

In Brazil many of the same companies are trying to sell their aircraft as well for many of the same reasons. Both SAAB with the Gripen and Boeing with their F-18 have made strong pitches. Recent buys of Eurocopter products by Brazil help Rafael feel that they might have a leg up. Again this contract is important to as their is a possible stagnation in domestic orders and there are fewer overseas opportunities in the near future. SAAB, Rafael and Boeing want to keep production lines open and active as long as possible.

In Europe the A400M partners have to decide what they are going to do with that contract. The aircraft has begun its test program two years late and EADS is demanding more money to complete the orders. The buyers need to ascertain if the aircraft is worth the extra money. A decision will have to be made soon.

All three of these contracts will be worth billions of dollars to the winner. The KC-X has the potential of being for over three hundred aircraft and over a hundred billion. The winners also will get return from maintenance, support and modifications. These contracts may last for decades and provide a steady revenue stream. That is why they are so important to the bidders. At the same time the buyers are receiving major upgrades to their capabilities through the acquisition of modern, high performance aircraft. These will fly for twenty to forty years which is well into the mid-century. The buyers need to make the most cost effective, value based decision.

  • Matthew Potter

    Matthew Potter is a resident of Huntsville, Ala., where he works supporting U.S. Army aviation programs. After serving in the U.S. Navy, he began work as a defense contractor in Washington D.C. specializing in program management and budget development and execution. In the last 15 years Matthew has worked for several companies, large and small, involved in all aspects of government contracting and procurement. He holds two degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, DefenseProcurementNews.com.