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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Friday, August 17, 2007 Tanker decision will wait Herald Staff and Associated Press An industry analyst says the U.S. Air Force is leery after an ethics scandal caused it to cancel a Boeing contract three years ago. The U.S. Air Force has confirmed it will award a much-anticipated multibillion-dollar tanker refueling contract no sooner than the end of the year, extending talks with bidders beyond the October deadline Wall Street anticipated. Either the Boeing Co. or Northrop Grumman Corp. will emerge as the winner of the $40 billion Air Force deal to replace 179 aerial refueling tankers. News of the delay initially came out last week during Boeing's rally for its KC-767 tanker in Everett. Details on the delayed time table for the contract emerged this week. One industry analyst said the extension of talks signals extra caution by the service because of a controversy that engulfed the tanker program several years ago. The program has been on hold for three years after Boeing lost the contract to lease 100 aerial refueling planes amid an ethics scandal that resulted in prison terms for a former Boeing official and a former high-ranking Air Force official. There has been a "cloud of scandal hanging over the Air Force's acquisition community," said Loren Thompson, a defense analyst with the Lexington Institute based in Virginia. "They obviously need to do something with the tanker competition that will vindicate their skills as a weapons buyer." An Air Force spokesman said the decision will not be made until December in order to allow more time to review the strengths and weaknesses of each bidder's proposal. "The timeliness of the industry responses will directly influence how quickly we reach a contract award," the spokesman said. A three-month delay should have little adverse effect for either Northrop or Boeing, according to Richard Aboulafia, a defense analyst for Teal Group Corp. Both competitors could actually benefit from the additional time to make their cases, he said. The new tankers, considered to be one of the Air Force's highest priority programs, will replace the service's aging fleet of KC-135 Stratotankers, which has been in service for more than 50 years. For its part, Boeing has managed to keep its Everett-built 767 commercial jet line afloat since the initial bidding process began. The company says it has won enough commercial orders to keep the line running until 2012. If Boeing wins the contract, the company would build the KC-767 in Everett and send it to Kansas for military systems installation. Senior Air Force officials say the program is critical for U.S. military and coalition fighters to enable forces to go anywhere, anytime without having to rely on refueling bases. "The Air Force is being very good at following the process and they want it to get it right," Boeing spokesman William Barksdale said. But defense analysts suggest the Air Force is spending more time sifting through contract terms and cost estimates to avoid potential disputes once the deal has been inked. For the past year, the Air Force has been caught in the middle of a $15 billion dispute with Lockheed Martin Corp. and Sikorsky Aircraft, a unit of United Technologies Corp., over the department's decision to award a helicopter deal to Boeing Co. Both losing bidders initially argued that the Air Force was not clear on its requirements.

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