Air Force changed tanker contract to aid rival, Boeing says in filing protest

McClatchy NewspapersMarch 11, 2008 

WASHINGTON — The Air Force made last-minute changes in the competition for a $35 billion aerial-refueling tanker contract to ensure that a team using a European-built plane would compete, top Boeing Co. officials said Tuesday as the company challenged the deal.

Air Force Secretary Michael Wynne, facing tough questioning on Capitol Hill, defended the contract awarded to Northrop Grumman and European Aerospace Defense and Space Co., saying the competition was fair, open and complied with all federal procurement regulations. EADS is the parent company of Airbus, Boeing's chief rival in the commercial airline industry.

Wynne asked members of the House Appropriations defense subcommittee to keep open minds even as several suggested that the tanker contract be scrapped and a new competition held.

"I urge you to go back and start over," said Rep. Norm Dicks, D-Wash. "You made a big mistake. You didn't do this right."

Northrop-EADS nearly doubled its estimate Tuesday of direct and indirect jobs that the contract would create. The companies now say that 48,000 jobs will be created in the United States. Earlier, they'd said 25,000.

Officials of Northrop-EADS said the earlier estimate was conservative and that the latest information from its suppliers indicated that even more jobs would be created. The new estimate comes as there's a growing uproar in Congress over the contract.

During the contract competition, Boeing said its tanker program would create or protect more than 40,000 jobs. Even if it loses the competition, it's indicated that there probably will be no layoffs in the Everett, Wash., facility where its 767s are built.

Job estimates are nearly impossible to confirm. The numbers have become increasingly politicized as congressional critics of the tanker contract charge that the Air Force will be sending jobs overseas, as Northrop-EADS will use an Airbus A330 for its tanker.

A330s typically are assembled in Toulouse, France, using parts manufactured in France, Germany, Spain and Great Britain. Northrop-EADS plans to build a plant in Mobile, Ala., where its tankers will be assembled.

The Boeing 767 tanker would be built in Everett with refueling equipment added and final flight testing conducted in Wichita, Kan.

The contract calls for initially replacing 179 of the Air Force's Eisenhower-era KC-135 tankers. The deal eventually could be worth $100 billion, as nearly 600 tankers will be replaced.

In filing the protest, Boeing Vice President Mark McGraw said the competition was "seriously flawed and resulted in the selection of the wrong airplane for the war fighter."

The protest was filed with the Government Accountability Office, which has 100 days to rule on it.

McGraw said the Air Force indicated to Boeing that the competition was extremely close.

Boeing's proposal met all the requirements the Air Force laid out while providing "significantly" lower operating and support costs and lower production risks, McGraw said. Moreover, he said, the 767 would have been able to fly into more remote international airfields than the A330.

McGraw said the Air Force made changes in its final request for proposals and in a model used to evaluate the bids that made the larger A330 more attractive. Throughout the process, McGraw said, the Air Force indicated that it wanted a medium-sized tanker, and that's why Boeing offered the 767 rather than its larger 777.

"We got no indication from the customer we weren't proposing the right-sized tanker," McGraw said, adding that the Air Force explained that it "did the changes to keep Northrop in the competition."

In announcing the contract award, Air Force officials said Northrop-EADS bested Boeing in almost every evaluation category, and that its tanker could carry more fuel, cargo and passengers.

"While the contract is under protest I can't really comment, but I think you will find it was a fair and open competition," Wynne testified Tuesday.

Wynne said that federal procurement laws put constraints on what the military could consider in awarding a contract. The Air Force wasn't allowed to review possible impacts on jobs and the nation's industrial defense base, he said, nor whether the government subsidies that Airbus received in developing the A330 gave it an unfair advantage.

McClatchy Newspapers 2008

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