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‘Competition is good;’ duh
Editor's Notes
By Bob Bouyea
In the words of David Oliver, chief executive officer of EADS North America: “Competition is good.”
Most economists would agree with that and hold up statistics showing how competition helps the consumer by keeping costs of goods and services in line.
But what seems disturbing was the statement that followed his comment. He said he has to “convince” the Air Force and Congress of this. You see EADS North America is a European company that wants to sell its aircraft products to the United States military. In this case, it is looking at Charleston and three other U.S. sites in which to build a refueling tanker it hopes to sell to the Air Force.
The problem is that Congress does not like to award military contracts to foreign companies.
However, the only company in the United States that can build many of the military’s aircraft, be it refueling tankers or troop transport planes, is Boeing. Therein lies the rub because you have only one company from which to buy. And that smells like a monopoly. Situations where there is no competition are ripe for abuse, usually at taxpayers’ expense.
“When one company has a monopoly position, whatever the good intentions were at the outset, the company will inevitably get lax,” Oliver said during his press conference a few weeks ago, as his team scoured the area to determine whether Charleston is the best location for the $600 million facility that would employ roughly 1,100 people.
Recent investigations revealed questionable practices by Boeing in its dealings with the U.S. Department of Defense. Several contracts, including the refueling tanker bid, were rescinded and are going out for bid again.
Did Boeing get lax or just stupid? Or was it the Air Force?
In the wake of the terrorist attacks in 2001, Boeing was awarded a contract to lease 100 modified Boeing 767 aircraft to be used as refueling tankers. Studies completed in 2002 and 2003 indicated that this practice would cost billions more than purchasing. Critics cried foul and favoritism, saying the contract was given to Boeing to help prop up its business, which suffered from the terrorist strikes.
An investigation revealed that Boeing helped draft the Air Force bid requirements and was shown “proprietary information” from Airbus’ bid. (EADS North America is a division of Airbus.)
It was also discovered that Boeing was negotiating employment for Air Force service acquisition chief Darleen Druyun at the time of the tanker deal. Shortly thereafter, she left the Air Force for a position with Boeing. She has since been terminated from Boeing.
In another deal in 2001, the Air Force was awarded a $3 billion contract to upgrade avionics on the Air Force’s
C-130 transport planes. But during a
General Accounting Office investigation, Druyun admitted to improperly influencing Boeing contracts. She also admitted that she awarded the C-130 work out of gratitude for the company employing her daughter and son-in-law.
“You don’t get the technological benefits and price benefits (without competition), and there essentially has been no competition in this area for 50 years,” Oliver says.
Speaking of price benefits, in its 2001 bid for the tankers, Airbus’ proposal was $10 billion lower than Boeing’s.
Oliver also noted that, if his company were awarded the contract, or at least a “sizable” portion, it would import jobs and technology into the country, instead of exporting jobs and technology, a common practice among many U.S. corporations today.
Regardless if Charleston gets the EADS manufacturing plant, as the consumer (the one paying the bill), I agree with Oliver. I want my country’s leaders to make fiscally sound decisions.
Our congressional leaders (whose salary we also pay), who are fighting to continue a monopolistic relationship with Boeing, need to open their eyes and see the effect building a plant has on a community. They need to understand that American workers will still build the planes.
I understand that our government leaders want to protect U.S.-based companies, but that seems contradictory to all the free trade agreements this country has entered into during the past decade in order to open up markets in other countries for our businesses.
Does allowing foreign-owned companies to locate plants in the United States hurt U.S. manufacturers, or does it make them better? Looking at the auto industry, I would say it makes them better. Since BMW, Toyota, Mitsubishi and others have built manufacturing plants here, the quality of U.S. built cars has improved, with GM and Ford leading U.S. auto sales.
This is just one example of when competition is allowed we all win.
Competition is good.
Bob Bouyea is executive editor for the Business Journal. E-mail him at bbouyea@crbj.com.
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