Boeing threatens not to bid on tanker contract

McClatchy NewspapersAugust 22, 2008 

WASHINGTON — Boeing's chief executive, James McNerney, told a top Pentagon official this week that his company might not compete for a $35 billion contract to build Air Force refueling tankers unless it gets an additional four months to prepare a bid.

Accompanied by James Albaugh, head of Boeing's defense unit, McNerney met face to face with Deputy Defense Secretary Gordon England for a half-hour on Thursday at the Pentagon, Rep. Norm Dicks, D-Wash., said Friday. Industry and defense sources confirmed the meeting. England is the department's second ranking official, behind only Defense Secretary Robert Gates.

The meeting came as the Defense Department prepared to issue a final request for proposals next week on the tanker contract. Boeing said a version released several weeks ago favored a European aerospace company and its American partner.

A team composed of Northrop Grumman and the European Aeronautic Defense and Space Co. won the initial competition, but Boeing protested and the Pentagon decided to seek new bids on a fast-track schedule. Bids are due in early October and the contract is scheduled to be awarded by the end of the year.

"Basically they told England there had been so many changes in the request for proposal that they couldn't compete," Dicks said of the message McNerney and Albaugh delivered to the Pentagon. "I think they feel they didn't have any choice."

Dicks said it normally takes a year for a company to develop a bid on a project like the tanker.

Boeing said the draft request for proposals in the new competition favored the larger tanker offered by Northrop-EADS based on a Airbus A330 airframe currently assembled in France. Northrop-EADS has announced plans to eventually build a plant in Mobile, Ala., for final assembly of the tanker. EADS is the parent company of Airbus, Boeing's bitter rival in the commercial airplane market.

The current time schedule for the new competition is so tight that Boeing said it wouldn't be able to offer a bigger tanker. Its current offering is based on a 767 airframe built in Everett, Wash., and converted to tankers in Wichita, Kan. Boeing could offer a larger tanker, perhaps based on a 777, but the company said it would take six months to put a new bid together.

"Make no mistake, this is a different competition for a different airplane, and Boeing needs sufficient time to prepare a competitive proposal," said Dan Beck, a Boeing spokesman. "If we don't get more time, there is little option but for us not to bid."

Beck said the initial competition called for a medium-size tanker to replace the Air Force's current fleet of medium-size Eisenhower-era KC-135s. Beck said the new competition favored a bigger plane that carries more fuel.

Beck would not confirm that McNerney and Albaugh had met with England. The Pentagon also declined comment.

"We are currently in a dialogue regarding the draft request for proposals with both Boeing and Northrop," the Defense Department said in a statement. "It would be inappropriate to discuss any of the details of those talks."

In a statement, Northrop-EADS said it would be a mistake to extend the competition, saying it would be "harmful to the warfighter" and result in a "direct escalation" of costs.

Dicks said he has had extensive conversations with Pentagon officials about the tanker contract as have Kansas' senators, Republicans Sam Brownback and Pat Roberts, and Rep. Todd Tiahrt, R-Kan.

"I am concerned the Department of Defense's 'bigger is better' mentality poses substantial costs to the taxpayers without clearly defined benefits to the warfighter," Brownback said in a statement. "Nevertheless, if DOD proceeds with a request for proposal that favors a larger tanker, it must provide adequate time for competitors to offer bids."

McClatchy Newspapers 2008

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