July 17, 2015

Washington, D.C., July 15

And The Winner Is…

Any day now, the Air Force will award the Long-Range Strike Bomber contract, worth well in excess of $50 billion. Two industry teams—a Boeing-led partnership, including Lockheed Martin, and another led by Northrop Grumman—are competing for the work. The choice could well shape the military aviation landscape in the US for decades to come.

The teams are technically well-matched. Both have styled themselves as the bomber company. Boeing makes that claim based on its history with the B-17 and B-29 in World War II, the B-47 in the Korean War era, and the B-52 from the 1950s on, as well as its experience with the B-1, built by its “heritage” company, Rockwell International. Northrop Grumman built the B-2, the most recent American bomber, and the only one built with stealth technology as its driving design feature. Given that the B-52, B-1, and B-2 are all serving today, each with a robust program of upgrades in the pipeline, both teams can claim to be the “incumbent.”

Chief of Staff Gen. Mark A. Welsh III, who won’t get a vote on the selection, said in April he had visited both design shops before proposals were submitted and was “impressed” and “confident” they were each on the right track. Both teams have long experience in building and maintaining stealthy military airplanes. Technical proposals are just one part of the LRS-B decision, however.

Price, of course, plays a huge role in the choice. Since program launch in 2010, USAF leaders insist that, to keep the project on track and on budget, no changes have been made in LRS-B requirements. Air Force acquisition chief William A. LaPlante has said the requirements are understood well enough by industry that the production contract can be fixed-price. The Air Force insists it will only pay $550 million a copy for the LRS-B, in 2010 dollars, and that the offerors should trade away nice-to-have but noncritical features to hit that mark.

Other factors include the government’s confidence in each of the competitors—based on past performance in other projects—as well as each team’s manufacturing capabilities, their financial ability to invest in the program and weather its inevitable ups and downs, and how many other big-ticket projects they have going, competing for management attention.

Will the health of the industrial base also play a role? When asked by Air Force Magazine how much the industrial base will figure into the LRS-B pick, Pentagon acquisition, technology, and logistics chief Frank Kendall insisted, “It’ll be decided on the merits.” However, many industry experts have suggested the LRS-B win will drive consolidation, with the loser either exiting the business or buying other companies to remain competitive.

LaPlante has shrugged off these fears, however, insisting that the upcoming T-X trainer competition, another to recapitalize the E-8 JSTARS fleet, and a number of other, secret projects will provide ample opportunities for the team that goes home empty-handed from the new bomber competition.

So, who will win? Both entrants know the requirements, both have deep experience in building stealthy aircraft, and both are fully capable of offering an acceptable technical solution. Here, presented alphabetically, the key other reasons why, given comparable technical and price proposals, theoretically each team offers an unbeatable proposal.

Why Boeing Will Win

If you wanted to build a “dream team” to develop and produce the LRS-B, the Boeing/Lockheed Martin partnership would be it.

Boeing is one of the largest aircraft manufacturers in the world, with a global supply base and vast experience at controlling costs on large-scale projects. It is highly skilled at integrating programs with tens of thousands of moving parts, and is a world innovator in materials and manufacturing sciences. It knows how to tap the world industrial base to find the best manufacturing skills and the best price. It also has a longstanding “bomber culture” stemming from its successes with the B-52 and B-1.

Lockheed Martin is almost synonymous with the terms “stealth” and “secret.” Its Skunk Works division is largely responsible for the specialized technologies that made the F-117 and F-22 work so well in combat. Boeing and Lockheed Martin (and General Dynamics) collaborated on the F-22, with Lockheed Martin building most of the jet, including its stealth edges, while Boeing built the wings and aft fuselage.

The two companies are the main suppliers of the Air Force’s existing combat air forces, having also built (themselves and their “heritage” companies acquired in mergers) the F-15, F-16, B-52, and B-1. Boeing and Lockheed Martin are also the prime contractors and integrators on the KC-46 tanker and F-35 fighter; the two largest and most complex programs in the Air Force’s acquisition plans, together accounting for some 1,942 future USAF aircraft. Industry officials say they think the LRS-B may be able to use large amounts of software generated for the F-35’s sensor integration and mission systems; thus saving substantial money through reuse.

The F-35 program, after a bumpy start, has—since its 2010 rebaselining—stuck to its budget, and Lockheed Martin expects that the fifth generation jet will retail at about the same price as fourth generation jets as early as 2018.

Lockheed Martin is also steeped in classified airplane skills; the Skunk Works having been involved in numerous known and undisclosed secret projects. The most recent of these is the RQ-170 Sentinel, about which USAF will say almost nothing, but which is credited with the stealth surveillance that brought about the 2011 killing of Osama bin Laden. Pentagon leaders have credited the “Skunk Works model”—of innovation, small teams, reuse of existing technology, and clearly defined goals—as the basis for Pentagon R&D efforts in the coming years. Boeing’s own “Phantom Works” will also contribute cutting-edge technology to the LRS-B.

Lockheed Martin also builds the C-130J, a stalwart of tactical airlift since the 1950s, routinely upgraded since, and is also upgrading the C-5 Galaxy with new engines and systems. In the field, these upgrades have drastically improved the C-5’s performance. For the Navy, Boeing makes the F/A-18 Super Hornet strike fighter and EA-18G Growler electronic warfare jets, as well as the brand-new P-8A Poseidon patrol craft. The Hornet family is delivering on time and at budget.

Northrop Grumman, on the other hand, has only delivered a handful of all-up production airplanes—RQ-4 Global Hawks—in the last few years, focused mainly on building pieces of airplanes for other companies and performing electronics upgrades or conversions.

It’s worth noting that Lockheed Martin defeated Northrop Grumman the last time they competed in a comparable program. Lockheed Martin’s F-22 beat Northrop Grumman’s F-23 in the Advanced Tactical Fighter program in 1991. Though the F-23 was deemed technically acceptable, Donald B. Rice, Secretary of the Air Force at the time, said he thought Lockheed Martin had a better plan for managing the program; specifically for dealing with developmental setbacks.

Besides bringing large programs to fruition, Boeing and Lockheed Martin are sitting on quite a lot of cash—five times the revenue of Northrop Grumman—enabling them to go shopping for other companies and giving them the flexibility to invest their own funds in the LRS-B. Pentagon leaders have said for several years that they expect companies to invest in the LRS-B and put their own hides on the line; Boeing and Lockheed Martin can do this far more easily than can Northrop Grumman, whose sales have been declining.

Given their broad experience in large-scale programs, the relevance of their recent experience and success in fighting down costs, Boeing and Lockheed Martin seem a good bet for the LRS-B win.

Why Northrop Grumman Will Win

Northrop Grumman clearly has the chops to build the bomber. The B-2 was no mean technical feat, launched at a time when some of its critical enabling capabilities were rated at a Technology Readiness Level of 4 or 5. (The Air Force is demanding a minimum TRL of 6 for LRS-B technologies).

When the B-2 program was truncated in the late 1990s at only 20 (later 21) airplanes, Congress made a provision to keep funding Northrop Grumman’s knowledge of how to make the B-2 even better, and preserve the ability to manufacture another large stealth bomber in the future. Consequently, there have been numerous updates to the B-2’s stealth features, evolving away from the arduous tape-and-caulk methods to streamlined systems that work better and are easier to maintain. The B-2’s mission systems are now entering what some call a “mid-life update” involving new technology, and Northrop Grumman has a detailed plan to keep the bomber capable and relevant until 2058; nearly two decades beyond its early service life predictions. Northrop Grumman is state-of-the-art when it comes to modern stealth bombers.

The Air Force suggests LRS-B may be “optionally manned” in the future. In the last two years, Northrop Grumman’s X-47B stealth concept jet has taken off from and landed on an aircraft carrier fully autonomously, and performed aerial refueling on its own, as well. Its Global Hawk intelligence, surveillance, and reconnaissance aircraft fly automatic routes every day, aided by humans only in the takeoff and landing phase, with mere monitoring in between. Though Global Hawk has come close to termination a couple of times due to cost, the Air Force admits Northrop Grumman has made great strides in getting costs under control.

Northrop Grumman also has solid, industry-leading skills in radar and electronic warfare, which the Air Force recently acknowledged will be a key part of the LRS-B’s mission. In fact, if Boeing were to win the LRS-B, it might well have to buy these mission systems from Northrop Grumman. Much of the F-35’s mission suite is built by Northrop Grumman—including the centerpiece radar—as well as the fighter’s 360-degree-view Distributed Aperture System and communications-navigations gear. The company also builds a substantial part of the F-35 airframe as Lockheed Martin’s industrial partner.

The Air Force has all but acknowledged that Northrop Grumman is the contractor behind a stealthy, long-range robotic ISR platform purportedly called the RQ-180, now in service, and there’s strong evidence that Northrop built a proof-of-concept aircraft in preparation for USAF’s last attempt at a B-2 successor, the Next Generation Bomber, terminated by Gates in 2009. The company’s acquisition of Scaled Composites, another aerospace company, boosted its already robust ability to rapidly prototype novel aircraft concepts, which apparently is being done: Northrop Grumman’s balance sheet reveals considerable revenue from unnamed, classified government projects.

Though Boeing has downplayed the risk involved in building the KC-46 tanker, a seemingly novice error in the design of wiring harnesses has put the project at least eight months behind. That mistake also cut deeper into the company’s profits on development, which it took on as a loss leader to be a player in what it sees as a decades-long tanker market. And, while Lockheed Martin has reduced costs and made good on the F-35 since its program “rebaselining” in 2010, the company clearly didn’t anticipate the risks in development, which went $12 billion over budget before the Pentagon started to apply corrective action. How the Pentagon grades “past performance” on these two crown jewel programs may well be the critical factor in deciding who gets to work on the LRS-B.

The three programs the Air Force considers “existential” to its ability to do its mission are the KC-46 tanker, the F-35 strike fighter, and the LRS-B, and it maintains that it will cut or shuffle any other acquisition projects to get them. Boeing already has the tanker program; Lockheed Martin has the F-35. Would the Air Force really put all its Fabergé eggs in their basket? Pentagon leaders say that as the number of new programs shrink, they want to preserve competition as much as possible, with as many credible offerors as possible. Based on that thinking, Northrop Grumman will get the LRS-B.

It’s not just a matter of who needs the work. If budgetary push comes to shove, would Boeing and Lockheed Martin put their full backing behind the LRS-B, which is still in the concept stage, or behind the tanker and F-35, which are well into production? Lockheed Martin yanked its support for the F-22 when Defense Secretary Robert M. Gates, who wanted to kill the Raptor, threatened the F-35 in retaliation. The air immediately rushed out of the campaign to keep the F-22 going in Washington, D.C.

All those factors taken in concert, Northrop Grumman has good reason to believe the empty space in its Palmdale, Calif., facility will soon fill up with LRS-B work.