The news is that Northrop Grumman Corp. and partnering European Aeronautic Defense and Space Co.(EADS) have dropped their bid for a U.S. military aircraft contract is bad news. Boeing now remains the sole bidder for the $40bn contract after Northrop et al. dropped out, claiming that the contract specification was skewed to suit Boeing’s product. Ignoring the technicalities of the contract, which we don’t have the expertise to comment on, the fundamental point is the importance of a competitive tendering process for government procurement.  The Pentagon, like any other government department, must do its absolute utmost to ensure that competitors can challenge for its lucrative contracts -- wherever they are based.

The only way governments can ensure that they get the biggest bang for their buck is to award contracts to efficient businesses.  This deal is good for Boeing in the short-term, but it undermines the marketplace and risks Boeing’s long-term competitiveness.  Boeing’s shareholders may revel in the prospect of new contacts, but protection against competition will only tempt the company away from efficiency – bad for the company, bad for the share-holders, and ultimately, bad for the taxpayers.

The EU is predictably riled by the decision, which it sees as marginalising EADS, and has reiterated the benefits of open procurement. Fine words which we support.  It’s time to kick political decisions out of an arena that must be dominated by economics.