More controversy looms as Air Force re-bids tanker contract

McClatchy NewspapersFebruary 21, 2010 

WASHINGTON — When the Air Force formally requests bids as early as this week for a $35 billion contract for new aerial refueling tankers, it may be the beginning of the end of the nearly decade-long effort to replace its fleet of Cold War-era planes.

Then again, it may not. When it comes to tankers, nothing is certain.

So far, the search for a new tanker has been marred by scandal, political intrigue, lobbying by the leaders of France, Germany and Great Britain and the cutthroat competition between two of the world's major aerospace companies, Boeing and Airbus.

In the latest twist, an Alabama senator has blocked confirmation of three nominees to top Pentagon posts in a last-ditch effort to pressure the White House into restarting the competition.

Sen. Richard Shelby, R-Ala., placed the holds on the appointees even as Boeing's European rival has said it won't bid unless the "request for proposals" is changed.

If the Europeans don't bid, Pentagon officials have signaled that the Air Force might "sole source" the contract and give it to Boeing. The contract could be one of the Pentagon's largest, ultimately worth an estimated $100 billion.

There are no signs that the Air Force has made major changes in the competition, which appears to favor the medium-size tanker Boeing is offering over the larger tanker from the team of Northrop Grumman and the European Aeronautic Defense and Space Co. EADS is the parent company of Airbus, Boeing's chief rival in the commercial airliner market.

"Both companies have been told there will be only minor adjustments," said Loren Thompson, a defense analyst at the Lexington Institute, a national-security research center in northern Virginia.

If the Air Force won't give the Northrop-EADS tanker extra credit for flying farther and carrying more fuel, then it will come down to price, and a smaller plane is usually cheaper than a bigger one, he said.

"They can't win," Thompson said, adding that Northrop-EADS already has spent $200 million on its effort to secure the contract and probably would be unwilling to spend more on a losing cause.

Shelby's decision to put holds on the Pentagon nominees was "outrageous but emblematic of how the walls are closing in on Northrop," Thompson said.

Boeing plans on using its 767 model for the tankers' airframe. The 767s are assembled at the company's Everett, Wash., plant and would be converted into tankers at a facility in Wichita, Kan. At stake are about 9,000 jobs in Washington state and 1,000 in Kansas.

The Northrop-EADS tankers would use an Airbus A330 airframe. The initial handful of Northrop-EADS tankers would be assembled at the Airbus factory in Toulouse, France. After that, they'd be built at an assembly plant in Mobile, Ala. EADS announced several years ago that it would build the Mobile plant, but construction hasn't begun.

In placing holds on the Pentagon appointees, Shelby spokesman Jonathan Graffeo said in a statement that the Pentagon must understand the need for "significant and substantive" changes in the competition.

Congressional Democrats and Republicans who have Boeing plants in their states criticized Shelby's action.

"I am surprised at his willingness to go so far in blocking these important appointees," said Sen. Patty Murray, D-Wash., who's worked with Shelby on the Senate Appropriations Committee.

Sen. Sam Brownback, R-Kan., said every senator had the right to put holds on nominees, though it was appropriate in some circumstance and not in others.

"I am happy to allow the Air Force to write its own aircraft specifications without political pressure, and the process should not be held up if someone chooses not to participate," Brownback said.

Rep. Todd Tiahrt, R-Kan., said he didn't begrudge Shelby for doing what his constituents elected him to do.

"But the Air Force shouldn't listen," Tiahrt said. "If there is any undue pressure, I want to know about it."

Originally, Congress had approved a deal in which the Air Force would lease Boeing tankers. That arrangement fell apart, however, amid a Pentagon procurement scandal in which a top Air Force official and Boeing's chief financial officer received jail time. Boeing's chief executive resigned weeks later.

The Air Force then decided on a formal competition for the tanker contract.

Northrop-EADS won the initial competition in 2008, but Boeing challenged the award. Government auditors overturned the decision, saying the Air Force had changed the contract criteria without giving Boeing a chance to adjust its bid.

Two other recent developments could make it more difficult for Northrop-EADS to win the contract, Thompson said. A new team at the White House knows that it would be roundly criticized if the tanker contract were awarded to a European company in the midst of an economic recovery. Also, the powerful congressman who favored a split buy between Boeing and Northrop-EADS has died.

Rep. Norm Dicks, D-Wash., a strong supporter of the Boeing tanker, probably will replace the late Rep. John Murtha, D-Pa., as the chairman of the House Appropriations Committee's defense subcommittee.

Northrop-EADS has said repeatedly that it won't bid without "meaningful changes" in the competition, though the team made the same threat in the earlier competition and then went ahead and bid.

"They have threatened to take their ball and go home before," Murray said.

If Boeing were the only bidder, the Pentagon could just negotiate a tanker contract directly with the company.

"Obviously, we would like a competition for it, and we hope that both companies will agree to participate," Defense Secretary Robert Gates told the House Armed Services Committee earlier this month. "But should that not prove to be the case, we ... have to move forward. It's been delayed too long. We need to get this thing started."

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