Boeing questions Air Force decision on tanker contract

McClatchy NewspapersMarch 4, 2008 

WASHINGTON — The Boeing Co. on Tuesday questioned the Air Force's awarding a $40 billion contract for aerial-refueling tankers to a team of defense contractors who'll use a European plane.

In its most comprehensive statement since the contract was awarded last Friday to Northrop Grumman and the European Aeronautic Defense and Space Co., Boeing said that it had based its proposal on the criteria the Air Force issued, which called for a medium-size tanker rather than the larger plane offered by EADS-Northrop Grumman.

"We bid aggressively with specific focus on providing operational tanker capacity at low risk and the lowest life-cycle cost," said Mark McGraw, the vice president of Boeing's tanker program.

From initial reports, McGraw said, the Boeing bid appeared to be lower priced, especially when so-called life-cycle costs, such as the cost of operating and maintaining the tankers, were factored in.

McGraw said he also couldn't understand why the Boeing tanker was considered a more risky acquisition when his company had been building tankers for 75 years, while Northrop Grumman and EADS were working together for the first time on an airplane "they've never built before, under multiple management structures, across cultural, language and geographic divides."

"We do not understand how Boeing could be determined the higher-risk offering," he said. "Initial reports also indicate there may well have been factors beyond those stated in the (request for proposals from the Air Force) or weighted differently than we understood they would be used to make the decision."

McGraw gave no indication whether Boeing would appeal the Air Force's decision.

Lawmakers on Capitol Hill prepared for two hearings Wednesday during which Air Force officials are expected to be questioned about the tanker contract.

The Air Force's top acquisitions officer, Sue Payton, will testify before the House Appropriations defense subcommittee. Washington state Rep. Norm Dicks is a senior Democrat on the subcommittee, and Rep. Todd Tiahrt, R-Kan., is also a member. The bulk of the work on the Boeing tanker would have been done in Washington state and Kansas.

"We have a lot of questions, and we want to let the Air Force know we think they made the wrong decision," Dicks said. "We want this plane built by an American company. This is a crown jewel of technology and we are going to give it to the French."

On the Senate side, Air Force Secretary Mike Wynne will testify before the Armed Services Committee.

The EADS-Northrop Grumman tanker will be based on an Airbus A330, which entered service in 1993. EADS is the parent company of Airbus, which is Boeing's chief competitor in the global commercial airplane market. A330s are built in Toulouse, France, and the tanker version will be assembled in Mobile, Ala. Germany makes the plane's fuselage, Britain the wings, Spain the tail and France the nose. Its General Electric engines are made in Cincinnati.

EADS-Northrop officials have said that U.S. companies would provide 60 percent of their tankers' materials and labor. EADS-Northrop has never built a tanker but has orders from Australia, the United Kingdom, the United Arab Emirates and Saudi Arabia.

The Boeing 767 tanker, based on an airplane that entered service in 1982, would be made in Everett, Wash., with the refueling equipment added and flight testing conducted in Wichita, Kan. All the tankers in the Air Force's current fleet are Boeing-built.

With the C-17, F-15, F/A-18 and T-45 aircraft nearing the end of production, the tanker was seen as Boeing's last major military plane program.

Lawmakers on Tuesday were considering a number of ways to block the tanker contract, including slowing or stopping funding, requiring that a set percentage of any defense contract go to U.S. firms and demanding an independent cost assessment of the EADS-Northrop bid.

Another possibility is barring the awarding of such contracts to foreign companies that have received government subsidies that are under review by the World Trade Organization. Boeing long has complained that Airbus receives billions of dollars in government subsidies that are illegal under international trading rules. The United States has accused Airbus of receiving government "launch subsidies" in a case before the WTO that could ignite a trade war with Europe.

McClatchy Newspapers 2008

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