Uncle Sam Buys an Airplane

How Lockheed Martin beat Boeing for the biggest military contract in history—and how that one contract could change the way the military builds and pays for its weapons

A few minutes before two o'clock on a Friday afternoon last fall, Dain Hancock stood up and left a packed auditorium in Fort Worth, Texas. He tried to be unobtrusive, but every eye in the room followed him. The 500 people gathered there, plus thousands more watching closed-circuit broadcasts in other cities, were employees or associates of the Lockheed Martin corporation, all waiting to hear whether their company had won the largest military contract ever awarded. The competition for this contract, to build a new airplane called the Joint Strike Fighter (JSF), had begun almost a decade before. The orders a contract would produce could provide jobs for decades, beyond the likely retirement age of everyone in the room. Pentagon representatives had agreed to telephone the heads of the competing companies just before the official announcement was made. Hancock, the president of Lockheed Martin's aeronautics division, was on his way to get the news from his boss.

Five minutes later he was back, stone-faced. He took a seat in the front row of the auditorium near Tom Burbage, a former Navy test pilot who directed the Lockheed Martin team that was competing for the contract. Burbage leaned over and asked, "What happened?" "Vance called," Hancock whispered, referring to Vance Coffman, Lockheed Martin's CEO. "We won. But don't react."

Burbage, a lanky, athletic-looking man in his fifties with a long jaw, stared ahead, expressionless. The live broadcast from the Pentagon began, and for ten minutes officials seemed to make a game out of delaying the information everyone wanted to hear: whether the JSF contract would go to the team at Lockheed Martin or to a competing team at Boeing. Finally James Roche, the Secretary of the Air Force, took the podium to announce the winner. "Both proposals were very good," he said. "Both demo programs were very good. But on the basis of strengths, weaknesses, and degrees of risk of the program, it is our conclusion ... that the Lockheed Martin team is the winner of the Joint Strike Fighter program on a best-value basis."

Before the word "Lockheed" was fully out of Roche's mouth, the audience in Fort Worth erupted and drowned out the rest of his remarks. Senator Kay Bailey Hutchison, a Republican from Texas who had come to show her support, leaped into the air and screamed. So did Kay Granger, a former mayor of Fort Worth and also a Republican, who now represented the district in Congress. Burbage was one of the few who stayed in their seats—a display of dutifulness for which he was ribbed at the company parties that went on through the weekend.

The joy in Fort Worth was matched by despair in St. Louis, in Seattle, in Washington, D.C., and in other places where Boeing employees and associates had gathered to watch the broadcast. The last time a competitor had been eliminated from the JSF contest, it had gone on to lose its corporate independence. That was in 1996, when the field of candidates shrank to two in a process known at the Pentagon as a "downselect." The renowned fighter-plane maker McDonnell Douglas, nicknamed "McAir," failed to make the cut. Within a year McAir had merged with Boeing, under terms that replaced the McDonnell Douglas name with Boeing's on the factories in St. Louis where McAir's F-4 Phantom, F-15 Eagle, and F-18 Hornet were made.

Boeing was big and diversified enough not to fear going out of business without the JSF, which will be known as the F-35. But Lockheed Martin depended more heavily on defense contracting, and had more at stake. For twenty-five years its mile-long factory in Fort Worth had kept busy producing the F-16 Falcon fighter plane for the U.S. Air Force and more than a dozen foreign militaries. The F-16 (originally made by a division of General Dynamics that is now part of the Lockheed Martin conglomerate) was nearing the end of its long and highly successful run. If Lockheed Martin could not follow it with the JSF, its officials warned, the company would be consigned to the parts business, surviving on subcontracts from Boeing and other strong manufacturers. Boeing's officials had viewed this as poormouthing—part of an attempt to build sympathy for the company and tilt the JSF decision in Lockheed Martin's favor. But the impact on both companies was clear soon after the decision was announced.

In Fort Worth, Lockheed Martin began clearing room on the factory floor for the new JSF production line. It began taking bids from suppliers and subcontractors, it made presentations to foreign governments that might eventually buy the airplane, and it hired new employees at a rate of 250 a month. In St. Louis, Boeing immediately canceled plans to build a new, modern factory for JSF production. It removed the posters and models for its version of the JSF from its buildings, and began looking for other roles for the hundreds of people on its JSF team. In Washington its lobbyists redoubled their efforts to shore up Boeing's defense work. These included supporting a controversial and successful congressional campaign to get the Air Force to lease Boeing civilian airliners for conversion to military tankers, while Missouri politicians launched a controversial and unsuccessful effort to force Lockheed Martin to share the work with Boeing and build some of the new JSFs in St. Louis. Early this year the victorious Lockheed Martin sent a team of recruiters to set up a job fair in a motel near Boeing's plant in St. Louis. The recruiters placed ads in the local papers, encouraging Boeing employees to switch teams and be part of "the future of tactical aviation!"

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James Fallows is a national correspondent for The Atlantic and has written for the magazine since the late 1970s. He has reported extensively from outside the United States and once worked as President Carter's chief speechwriter. His latest book is China Airborne. More

James Fallows is based in Washington as a national correspondent for The Atlantic. He has worked for the magazine for nearly 30 years and in that time has also lived in Seattle, Berkeley, Austin, Tokyo, Kuala Lumpur, Shanghai, and Beijing. He was raised in Redlands, California, received his undergraduate degree in American history and literature from Harvard, and received a graduate degree in economics from Oxford as a Rhodes scholar. In addition to working for The Atlantic, he has spent two years as chief White House speechwriter for Jimmy Carter, two years as the editor of US News & World Report, and six months as a program designer at Microsoft. He is an instrument-rated private pilot. He is also now the chair in U.S. media at the U.S. Studies Centre at the University of Sydney, in Australia.

Fallows has been a finalist for the National Magazine Award five times and has won once; he has also won the American Book Award for nonfiction and a N.Y. Emmy award for the documentary series Doing Business in China. He was the founding chairman of the New America Foundation. His recent books Blind Into Baghdad (2006) and Postcards From Tomorrow Square (2009) are based on his writings for The Atlantic. His latest book is China Airborne. He is married to Deborah Fallows, author of the recent book Dreaming in Chinese. They have two married sons.

Fallows welcomes and frequently quotes from reader mail sent via the "Email" button below. Unless you specify otherwise, we consider any incoming mail available for possible quotation -- but not with the sender's real name unless you explicitly state that it may be used. If you are wondering why Fallows does not use a "Comments" field below his posts, please see previous explanations here and here.

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