Lucky Lockheed

New life for the C-5N

Executives at the Burbank, Calif., headquarters of Lockheed Corp. were all smiles last week, while at rival McDonnell Douglas Corp. in St. Louis the gloom was thick enough to slice with a propeller. The reason: word had leaked out that the Pentagon was recommending the $4.6 billion purchase of 50 of the giant Lockheed C-5Ns as cargo airlifters for the nation's rapid deployment force. The decision was an unexpected one, since only last August chiefs of the Air Force, Army and Marines had unanimously recommended that a new plane designed by McDonnell Douglas, the C-17, be chosen over Lockheed's C-5N and all other candidates.

In an angry statement, McDonnell Douglas called Defense's decision to shelve the new plane "a mockery of the competitive procurement process," and hinted at a legal challenge. The company further claimed that selection of Lockheed's existing plane, after Lockheed lost the competitive bidding for the project, "is simply contrary to the Government's own established procurement practices." McDonnell Douglas spokesmen were quick to recall the troubled history of the plane, which was burdened by developmental cost overruns of $2 billion, plus another $1.3 billion for replacement of the plane's overstressed wings.

Quicker delivery times and lower initial costs were the reasons cited by Pentagon planners for urging the military to reconsider the C-5N. The existing plane is less expensive to manufacture than the proposed C-17, though the new craft was designed to operate at lower costs. To add to the attractiveness of its proposal, Lockheed offered to build the planes for the Government at a fixed price, without reimbursement for any cost overruns. Lockheed also promised to pay penalties to the Government if maintenance costs of the planes exceed company guarantees.

Stung by the public attack by McDonnell Douglas, Defense Department officials insisted last week that their choice of the Lockheed C-5N, which still must be approved by President Reagan, did not violate the competitive bidding process. Secretary of the Air Force Verne Orr advised McDonnell Douglas last August that, although it had been named prime contractor for the C-17, the military had made no actual commitment to build the airplane. McDonnell Douglas can look forward to a consolation prize. The Pentagon is expected to order 44 McDonnell Douglas KC-10A military tankers, which the company sells to the Government at $49 million apiece.

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