Air Force reopens tanker bidding, but will Boeing have competition?

McClatchy NewspapersFebruary 24, 2010 

WASHINGTON — The Air Force launched a new competition Wednesday for a contract to begin replacing the nation's aging fleet of aerial tankers, but it's not clear whether Northrop Grumman and its European partner will bid against Boeing for the $35 billion deal.

The initial contract is for 179 new tankers, but the deal eventually could be worth $100 billion as the Air Force replaces its fleet of about 600 Cold War-era tankers in what could be one of the largest Pentagon purchases ever.

There apparently were few major changes from an earlier "request for proposals" that drew sharp criticism from the Northrop Grumman-European Aeronautic Defense and Space Co. team and its supporters on Capitol Hill.

Northrop and EADS officials Wednesday didn't indicate what they were planning to do, but Northrop officials earlier said that the company wouldn't bid unless significant changes were made to the request for bids.

"What today's release means is they most likely will not bid," said Loren Thompson, a defense analyst for the Lexington Institute, a national security policy research institute in northern Virginia.

"Northrop Grumman will analyze the request for proposals and defer further public comment until its review of the document has been completed," said Randy Belote, a spokesman for the Los Angeles-based company.

Chicago-based Boeing said it was reviewing the voluminous document.

Pentagon officials said they were "playing it right down the middle" and were satisfied that the competition wouldn't favor either side.

If Northrop-EADS doesn't bid, the Air Force could award a sole source contract to Boeing, but Deputy Defense Secretary William Lynn said the focus is on a competition with multiple bidders.

"Obviously Northrop Grumman and its European partner have a choice to make," Lynn said. "We think it is in their interest to bid."

Northrop-EADS had complained that the earlier version of the request for bids favored the smaller Boeing 767, even though its plane could carry more fuel, cargo and passengers.

Boeing countered that its medium-sized tanker was what the Air Force originally requested, and the current KC-10 tanker is big enough to handle any additional requirements.

Thompson said while the Northrop-EADS tanker can carry more fuel and fly farther, the Boeing tanker burns less fuel and can land in more places without requiring extensive modification of runways, hangars and ramp space.

The bids are due in 75 days, and the Air Force plans to award the contract in mid-September. Either side could challenge the provisions of the request for bids, but Air Force officials said such an appeal wouldn't delay the competition.

On Capitol Hill, Boeing supporters were satisfied with the rules for the competition.

"It is fair and balanced," said Sen. Patty Murray, D-Wash., following a briefing.

Northrop-EADS backers weren't hopeful.

"They didn't calm my concerns," said Rep. Mike Rogers, R-Ala.

So far, the competition has been marked by a major Pentagon procurement scandal and political intrigue and fueled by an intense rivalry between two of the world's major aerospace companies — Boeing and Airbus. EADS is the parent company of Airbus.

Boeing is expected to offer a tanker based on a 767 frame built at its Everett, Wash., plant and modified for military use in Wichita, Kan. At stake are about 9,000 jobs in Washington state and 1,000 or so in Kansas.

Sen. Maria Cantwell, D-Wash., said she's received assurances from top Boeing officials that the 767s will continue to be built in Everett, not at a new plant under construction in North Charleston, S.C., that will build the 787 Dreamliner.

Northrop-EADS would use an Airbus A-330 airframe. Its initial tankers would be built at the Airbus factory in Toulouse, France. The company has promised to build a new facility in Mobile, Ala., but several years after announcing it, construction has yet to begin.

Rep. Todd Tiahrt, R-Kan., said he was disappointed the request for bids failed to take into account a decision from the World Trade Organization that Airbus had received illegal subsidies from European governments for the A-330 and other planes.

"The Air Force is stiff-arming that decision," Tiahrt said.

Sen. Pat Roberts, R-Kan., said he was confident that Boeing and "other bidders can compete on a more level playing field."

At a briefing for reporters, Pentagon and Air Force officials said the request for bids included 372 minimum requirements that had to be met. Since the draft was released late last year, there have been 230 mostly technical changes.

The major change, which both Boeing and Northrop-EADS requested, will allow inflation to be factored into the fixed-price contract.

Lynn again ruled out the possibility of splitting the tanker buy between Boeing and Northrop-EADS. "We have evaluated it and think it will cost the taxpayers more," he said.

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McClatchy Newspapers 2010

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