A leading aerospace analyst believes the Air Force’s preference for lowest price in the T-X trainer program is discouraging potential bidders from competing.
“The Air Force is really running this competition as a price shootout,” Teal Group Vice President of Analysis Richard Aboulafia said Wednesday in an email. Lowest price wins, he said, “as long as the competitor meets the performance parameters.”
For the second time in one week, a potential T-X contractor announced it would not submit a bid. On Wednesday, it was the Northrop Grumman [NOC]-BAE Systems team that dropped from the competition. L-3 Technologies [LLL] was also part of the Northrop Grumman-BAE Systems Team. L-3 spokeswoman Jennifer Barton deferred comment to Northrop Grumman when asked if L-3 would pursue another teaming arrangement. The Raytheon [RTN]-Leonardo team last Friday announced it was withdrawing.
Aboulafia said the two likely contenders remaining have either minimal up-front costs, like Lockheed Martin [LMT]-Korea Aerospace Industries (KAI), or in the instance of Boeing [BA], a parent who is really eager to win this contract, even at a loss. Saab is teaming with Boeing for T-X. Raytheon isn’t a military airframe developer at all, Aboulafia said, and the Leonardo M-346 is a high-cost aircraft built by a prime contractor with relatively high costs.
By contrast, Aboulafia said Northrop Grumman wasn’t desperate to win an airframe after their B-21 bomber victory and has considerable upfront costs. Northrop Grumman said Wednesday in a statement it would not be in the best interest of the companies and their shareholders to pursue T-X.
Another potential bidder dropping out for T-X doesn’t faze the Air Force. Service spokeswoman Ann Stefanek said Wednesday in a statement that the Air Force continues to believe there will be a robust competition for the Advanced Pilot Trainer, also known as T-X, and it continues to look forward to the results of the ongoing source selection. She declined further comment.
With these two teams dropping out, the remaining bidders are Boeing-Saab and Lockheed Martin-KAI. Sierra Nevada Corp. (SNC) has been rumored to be interested. The company didn’t return a request for comment Wednesday. Textron [TXT] has also been rumored to be bidding with its Scorpion aircraft. The company did not respond to a request for comment.
Another leading analyst, Byron Callan of Capital Alpha Partners, said in an investor’s note that the narrowing field favors Boeing and Saab, though this will remain a hard-fought competition. Boeing and Saab are proposing a clean sheet design (Defense Daily, Sept. 16) while Lockheed Martin and KAI are offering KAI’s T-50 trainer. The team is emphasizing the offering’s F-16 heritage (Defense Daily, Sept. 19).
The Air Force in late December issued its $16.3 billion request for proposal that includes all aspects of the system, including engineering and manufacturing development (EMD), low rate initial production (LRIP), full rate production (FRP) and sustainment transition support. T-X will replace the T-38 trainer, which has been in service since 1961.
The solicitation lays the groundwork for delivery of the first five test aircraft. There are also contract options for the first two LRIP lots and FRP of lots three through 11 for a total of 350 aircraft. Provisions are also included for ground support systems such as training systems, mission planning and processing systems, support equipment and spares (Defense Daily, Dec. 30).