Number of Contenders Potentially Shrinking Further
Speculation is rife in defence industry circles regarding the potential outcome of the bidding process for the US Advanced Pilot Training programme, known as T-X, potentially worth up to $16 billion.
In late January, Raytheon and Leonardo said that they will not jointly bid the T-100 (a variant of the Leonardo M-346 MASTER jet trainer) for the programme has thrown the bidding community into some disarray. (see news item here). Neither company made any comment regarding the substantive reasons for the withdrawal, but informed observers believe the fundamental stumbling block was a potential inability to compete on price.
The result, according to speculation in the last few days, is that the competition may come down to a two-horse race, with Boeing and Lockheed Martin competing fiercely for the largest – and most valuable – training aircraft contract for the foreseeable future.
Mönch Comment
If Boeing and Lockheed Martin end up being the only contenders for T-X, there is a strong possibility that price may become the single most important discriminating factor. Both companies are anxious to keep production lines open over extended periods and winning the contract may become more important as a core strategy than making an acceptable level of margin.
If the supposition that the Raytheon/Leonardo withdrawal was the result of an inability to agree on a competitive price point is correct, then other potential bidders may also be going through a similar thought process. Northrop Grumman’s potential solution has great merit on the surface, but it is doubtful whether it will be as price competitive as the two major bidders’ offers could be. Just now on 1 February, Northrop Grumman, partnered with BAE Systems, L-3, and Northrop Grumman subsidiary Scaled Composites, has pulled out of the T-X programme, becoming the second company to drop from the competition in a matter of weeks. Neither Sierra Nevada Corp. nor Textron have yet confirmed whether they will submit bids for T-X, but the same rubric applies to their potential solutions too.
Price – given every defence customer’s resource limitations and desires – is an important component of so large an undertaking. But is it necessarily THE supremely important consideration? The Air Force needs – and deserves – a solution for the requirement that offers the very best mix available of capability, effects-oriented training and long-term sustainability. At the very least that demands that contractors be encouraged to submit carefully crafted and compelling bids based on technology, capability development, innovative solution building and value for money. The cost of bidding for a programme like T-X runs into millions of dollars: how many potentially winning solutions might just not be bid as a result of companies determining those costs are not justified by a realistic prospect of a win?
Speculation? Certainly. But a legitimate concern that raises difficult questions for the US Air Force and the bidding community to resolve.
