The verdict is in. Boeing (NYSE BA) wins.
In what the New York Times described as "a surprise twist in a long-running saga" (and yes, I suppose it came as a surprise to some people), the U.S. Air Force awarded Boeing the contract to build 179 new aerial refueling tankers. The KC-X contract is expected to be worth $30 billion initially, and if filled out as expected over time, it could ultimately yield in excess of $100 billion in revenues for the aerospace titan.
Clearly, this is a great day for Boeing, and for its partners on the KC-X bid, Spirit AeroSystems
"First thing we do, let's [call] all the lawyers"
If you're EADS -- the loser in this contest -- the answer seems obvious: Ring up the lawyers. Challenge the decision. Sue.
After all, that's the way this game has been played in the past. With $100 billion potentially at stake, the temptation to appeal the Air Force's decision must be enormous. Problem is, if you read between the lines of the Pentagon's award announcement, it seems to me that this may be exactly the wrong move for EADS to make.
Remember: It's been more than a year since the Pentagon laid down the law to its defense contractors, warning them against making "frivolous" challenges to its contract awards. And yesterday, the Pentagon sent clear signals that an appeal of the KC-X award would be considered just that -- frivolous. While Air Force Secretary Michael Donley implicitly praised EADS's offering when he said both parties "acquitt[ed] themselves well," in the end, Deputy Defense Secretary William Lynn thought the decision wasn't even close. Boeing's plane "was the clear winner" on both "price" and "war-fighting capabilities." And just in case that wasn't clear enough, Lynn made his message even clearer:
The decision "does not provide grounds for protest."
Responding to the award, and Pentagon's heavy hint, EADS's spokesman declined to threaten an immediate protest. Rather, he said EADS will "look forward to discussing with the Air Force how it arrived at this conclusion" at a meeting slated for February 28. After that, EADS has 10 days in which to decide whether to challenge the award.
So ... Boeing wins for today. Let's see how long that lasts.
Last time we polled Fools on the KC-X question, you called it right, correctly predicting by a vote of 667 to 107 that Boeing would win the contract.
Care to make it double or nothing?
Spirit AeroSystems Holdings is a Motley Fool Hidden Gems recommendation. The Fool owns shares of Northrop Grumman.
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