This is a little peach of a story. As I run around reporting on static between U.S. and European defense constractors, here's a nice piece in the New York Times and the BBC about NATO awarding a contract for 4 billion euros to a trans-Atlantic consortium, led by EADS and Northrup Grumman. Perhaps this will usher in a new dawn of joint procurement for the alliance, the Times reports.
Cooperation throughout Europe is something we've heard, European companies wanting in on juicy U.S. defense contracts, but is this really a new cooperation across the Atlantic?
There was another bidder, also a trans-Atlantic consortium.
New York Times - New Unity on Contracts Seen in NATO
BBC - EADS wins 'eye in sky' contract
April 16, 2004
New Unity on Contracts Seen in NATO
By KATRIN BENHOLD
ARIS, April 15 - With NATO member states just days away from awarding a military contract for 4 billion euros to a trans-Atlantic consortium of aerospace companies, a new era of joint procurement may be dawning for the alliance, defense experts said on Thursday.
A group of six companies, led by the European Aeronautic Defense and Space Company, known as EADS, and Northrop Grumman of the United States, looks set to win the contract, worth $4.8 billion, to build a mixed fleet of manned and unmanned surveillance aircraft for the alliance by 2010, said a NATO official close to the selection process.
Since procurement experts at NATO's Brussels headquarters put their support behind the EADS-Northrop consortium, officials in national capitals are expected to approve that decision "within days,'' the official said.
"It seems to be a genuine multinational procurement decision, and that is quite a significant step for cooperation in this area," said Steven Everts, a military expert at the Center for European Reform, a research group in London. "There is an acceleration of the desire to cooperate more closely within the E.U. and across the Atlantic.''
Against a backdrop of violence in Iraq and heightened concerns that terrorists may be aiming at Europe after the Madrid train bombings, pragmatism may be gaining the upper hand over the political procurement decisions of the past, analysts said. While some major European governments continue to disagree with the United States on a wide range of issues, including the war in Iraq and the Israeli-Palestinian conflict, the willingness to deepen their cooperation within NATO may herald a renewed commitment to the alliance.
James Appathurai, a spokesman for NATO, called the decision "historic,'' confirming a report on Thursday in The Financial Times.
"This is only the second time in NATO's history that members join forces in procurement on this scale,'' he said. The first time, he said, was the Awacs surveillance system developed in the 1960's.
"The decision was reached pragmatically on the basis of price, capability and scheduling considerations - not necessarily three factors that have determined procurement decisions in the past,'' Mr. Appathurai said.
Governments have preferred to keep national control of procurement, both to determine the exact nature of a project and to award contracts to the titans of a country's military industry.
As a result, military capacities within the European Union, where most countries also belong to NATO, have often been duplicated.
The idea for a joint fleet of air-to-ground surveillance aircraft has been considered for about a decade at NATO, Mr. Appathurai said. Recent progress on the matter "reflects a realization on the part of NATO nations that our troops are out there in the field, and they need this type of cooperation,'' he said.
This evolving pragmatism is rooted at least in part in financial reality. With technology becoming more sophisticated and expensive, collective procurement makes financial sense, analysts said. In addition, recent sluggishness in the global economy has depleted national coffers, leaving less room for governments to bolster military budgets.
"Pooling is the way to go,'' Mr. Everts of the Center for European Reform said. "It's good news for taxpayers and also good news for political cooperation that common sense has won.''
The EADS-Northrop consortium includes Galileo Avionica of Italy, General Dynamics Canada, Indra of Spain, and Thales of France. In addition, more than 80 other companies from NATO countries support the joint proposal, which would provide a mixed fleet of manned A320 Airbus planes and unmanned Global Hawk planes.
According to Alexander Reinhardt, an EADS spokesman, the price for an A320 is about 50 million euros, or $59.8 million, though a modified version for intelligence purposes might vary in price. The Global Hawk aircraft that Northrop has been building for the United States Air Force costs about $30 million, James Stratford, a spokesman for the company, said.
A competing consortium, led by Raytheon of the United States and including Siemens of Germany and Marconi of Britain, has complained that NATO's procurement officials took too little time to examine the two proposals, which were submitted four months ago. Mr. Appathurai of NATO rejected the complaint.
BBC
EADS wins 'eye in sky' contract
A consortium led by European aerospace company EADS has won a contract to supply a multi-billion-dollar surveillance system to Nato.
The alliance said it aimed to sign a contract for the "eye in the sky" programme - which is expected to enter service in 2010 - by spring next year.
Under the deal, the group will supply Nato with a system that uses aircraft, unmanned drones and ground systems.
The deal is though to be worth up to four billion euros ($4.9bn, £2.7bn).
Nato said the new equipment "will be essential enabling capability for the Nato Response Force and will provide... an invaluable Eye in the Sky".
It added that the system would gather information about what was happening on the ground during peacetime, crisis or war.
EADS Airbus A321 planes will be among those provided as part of the surveillance system.
Good news
Northrop Grumman, General Dynamics Canada, French defence firm Thales, Spain's Indra and Italy's Galileo Avionica were among the companies in the winning EADS-led consortium.
A spokesman for EADS - the European Aeronautic Defence and Space Company - in Munich said: "We are pleased with this decision."
He declined to give financial details but said further information would be released next week.
US rival Raytheon had led another consortium bidding for the contract. That included Siemens and Alenia Marconi Systems - a joint venture between the UK's BAE Systems and Italy's Finmeccanica.
The contract is further good news for EADS - home of the Airbus passenger jets - which has recently pulled ahead of US rival Boeing for the first time in its 30-year history.
Last month, the firm revealed it had returned to the black in 2003, unveiling net profits of 152m euros ($188m; £102m) for the year, driven by a late surge in deliveries.
EADS, along with other aerospace companies, had suffered in the wake of the 11 September 2001 US terrorist attacks and was driven into the red in 2002.
Posted by Andrew Becker at April 20, 2004 01:05 PM