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Extended Interview: Ronald Sugar, chairman and CEO of Northrop Grumman

Ronald Sugar, chairman and CEO of Northrop Grumman, discusses securing the Air Force's contract to build a new fleet of refueling aircraft and his reaction to Boeing's appeal of the decision in this extended interview.

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    Dr. Sugar, to what extent were you involved personally in this process as the Air Force initiated what we understand to be a new and more vigorous and more regimented acquisition process for these tankers?

    RONALD SUGAR, chairman of the board and chief executive officer of Northrop Grumman Corp.: Well Kwame, this is obviously a program of enormous scale, and over the last several years we've watched the program. We had interest in the program and as we began to look at it closer and closer we realized that there was an opportunity for us here, in partnership with a provider of a basic commercial airplane.

    The two things we had to convince ourselves of before we really decided to go do this was No. 1, did we really have what we felt was a superior offering, in other words, could we provide a superior airplane, and secondly, did we really feel that it would be a fair open transparent competition because as you know there was a lot of press about that, and a lot of concerns. As we look through the process and as we conducted our internal deliberations and discussions with the Air Force, at the end of the day we did conclude that we did have what we thought was a superior offering and that we were fairly well convinced it would be a fair competition. So we decided to go ahead and proceed.


    … In a competition like this, Boeing has to be considered the odds-on favored going in. Was that the concern?


    Well, certainly the fact that there was an effort to make a sole source award to Boeing previously, … which didn't end up working out, gave us some concern and we were also not unmindful of political considerations as well. But we are an American corporation, we're a very respected American corporation. We built the B-2 bomber, the F-14 Tomcat, we have 120,000 employees here in the United States. We're very trusted by the Air Force. We felt that we had the opportunity to offer something here. We thought that this would be a case where we could actually help the Air Force with the competition. And you know, competition's a good thing. As you think about, while it's painful for the participants of course cause there's always going to be a winner and a loser, the nation gets more out of it and frankly it makes us do better work, too.


    The award was made and almost instantaneously, as you very well know, there was a process of being taken aback, it seemed, by members on Capitol Hill and by some other constituents, if you will, of Boeing. What was your reaction?


    Well first of all, Kwame, we were delighted to have the announcement. I took the call personally from the Secretary of the Air Force. They told us we had the best plane and they were very pleased that we're going to be able to move forward on this program because, you know, the Air Force very desperately needs to get on with this program. It really does have a deficiency now in terms of tanking with the aging tankers we have. The entire process was one we're not, not unexpectedly, there was a reaction.

    I would say that what rather puzzled me and first astonished me was that the reaction was apparently visceral because it appears that some would have said, let's have a fair and open competition but you can't win. And my gosh, you did win and how could that be therefore it must not have been a fair competition. So at any rate, there was a reaction and that's understandable.

    But I'll tell you, we watched this process very carefully and I think if any team would have had some reason to be concerned about how the process was conducted, it might have been us and we watched it every step of the way. We watched the interactions, the dialog, the process of specifications, the opportunity to interact with the Air Force. They were very transparent, very clear. Once they issued the RFP (Request for Proposal), everything was fixed and frozen. They did what they said they would do. At the end they were very transparent in terms of how they selected us. And so as a result of that we said, gosh this is, this is terrific. We support it. At the end of the day, we're a little bit on the sidelines here because the unsuccessful competitor is basically challenging the Air Force, and the Air Force is in a position in the GAO (Government Accountability Office) protestation now to basically defend the details of its process. And we're in some sense a bystander in this.