News Analysis : It Was More Than Its Plane That Won Pact for Lockheed

The days when the Air Force would buy a jet fighter only because it was the hottest ride in the sky have gone to the history books.

That was the clear message that the Air Force sent the aerospace industry Tuesday in selecting Lockheed for the $72-billion advanced tactical fighter program. Future decisions, the Defense Department seemed to say, will be based on a balanced evaluation in which performance is just one factor.

If the Pentagon once turned a blind eye to misdeeds or errors committed by defense contractors--the kinds of problems thathave dogged Los Angeles-based Northrop, which lost the fighter program to Lockheed--today that sort of baggage is likely to rear its ugly head when an important program is being awarded.

Why? In an era of dwindling defense budgets, experts said Wednesday, the Pentagon can ill afford to even risk a debacle in which a contractor cannot perform or experiences an upward cost spiral.

The Pentagon today wants to avert such risks and thereby avoid losing a program altogether, even if it means paying less attention to the pure capability of a weapon. Just months ago, the Pentagon chose to cancel, outright, the Navy’s A-12 attack jet program after its costs burst wildly out of control.

“If you are not able to execute a program without having problems and cost overruns, you are going to run into a buzz saw in Congress,” said Paul Nisbet, an aerospace analyst at Prudential-Bache Securities. “Northrop has been under the gun for years. The Pentagon does not want to spend its political hay by running against the grain.”

When Air Force Secretary Donald Rice announced his selection of Lockheed to build the advanced tactical fighter, he specifically declined to say whether he regarded Lockheed’s F-22 as a hotter, more technically capable performer than the competing Northrop aircraft.

“We ended up with two aircraft, each one of which could meet the Air Force’s technical specifications and technical requirements,” Rice said during Tuesday’s announcement.

If high-ranking Air Force generals believed that Lockheed’s or Northrop’s airplane was more exciting, they weren’t telling.

Maj. Gen. Josep W. Ralston, head of tactical fighter requirements for the Air Force, said Tuesday: “The thing I like about (the Lockheed proposal) is that the Air Force has confidence that the contractor team . . . can deliver at the cost the Air Force estimated.”

Lockheed Chairman Daniel Tellep said in an interview Wednesday that he wasn’t surprised by the emphasis placed on non-technical issues. He agreed that the Air Force decision was a cautious mix not dominated by concerns about technical capability.

“Raw technical performance is just one of many factors these days,” Tellep said. “As a result, we get more balanced decisions. I would think Rice faced a dozen or more factors in making this decision.”

Indeed, it is not clear that even had one aircraft emerged as a clearly superior performer that the Air Force’s choice would have been swayed.

In interviews before Tuesday’s announcement, executives of both Lockheed and Northrop said that the way the planes were graded on a range of technical factors--such as top speed, cruising speed, agility, stealth and avionics--it was not clear that either plane could run away with the competition. Once the planes met certain Air Force technical requirements, it appeared, the decision between them would largely be based on other elements.

By wide acclaim, Northrop’s aircraft, with its sleek lines, had the cosmetic edge, looking the more advanced of the two aircraft. That factor would surely have made it the envy of air force pilots around the world.

“If it were a beauty contest, Northrop may have won,” said Al Piccirillo, the former Air Force program manager for the fighter program. “Some people were saying, ‘Gee, Northrop has the more futuristic looking plane.’ But it wasn’t a beauty contest.”

Indeed, Rice identified two factors as playing a role in the decision: cost and the firms’ past performance on contracts.

Those undoubtedly put Northrop at a marked disadvantage.

Northrop has been battered in public for four difficult years, the subject of half a dozen hostile congressional committee hearings and a number of critical Pentagon audits and reviews of virtually all of its programs, including the B-2 bomber.

Northrop Chairman Kent Kresa said in an interview Wednesday that he did not want to speculate about what factors may have played into the Air Force decision. But he defended Northrop’s record. While the firm has made mistakes, Kresa said, it has performed well on the B-2 and moved to the forefront of the aerospace industry in its technical capability.

Nonetheless, Northrop was indicted on some of the most serious charges ever leveled on a defense contractor: falsifying tests on a nuclear weapon guidance system. It also lost the contract to produce the MX missile guidance system, after years of delays in delivering the units to the Air Force. Its problems on the Tacit Rainbow missile led to the Air Force dropping the project.

“Some people don’t understand that Northrop’s credibility on Capitol Hill is on empty right now,” said a staff member of the House Energy and Commerce Committee, which has led the assault on the firm. “Their efforts to portray the company as a new and improved Northrop did not sell.”

Rep. John Conyers (D-Mich.), whose House Government Operations Committee held an acrimonious hearing on Northrop last year, said Wednesday that the firm’s record could not be ignored.

“I don’t know how the Air Force decided which contractors would build the ATF, but I can only assume that there was some long-overdue consideration of Northrop’s dismal track record of test fraud, contract suspension and fines.”

In terms of cost, Rice said the price tag on Lockheed’s proposal was clearly lower than Northrop’s, though he declined to disclose the two firms’ bids.

If employment levels on the program are any indicator, Lockheed’s bid was substantially lower.

Lockheed Chairman Tellep said his firm, along with partners General Dynamics and Boeing, will employ about 6,500 workers in the $14-billion development phase of the program. By comparison, Northrop Chairman Kresa said his firm alone would employ 6,000 workers on the development phase, not including the additional thousands that its partner, McDonnell Douglas, would have hired.

Asked about the disparity, Northrop officials questioned whether the figures were directly comparable and said they could not immediately reconcile the difference.