Published: Wednesday, March 19, 2008
Air Force skewed tanker deal, Boeing claims
By Michelle Dunlop, Herald Writer
EVERETT -- In its effort to keep a competition going, the U.S. Air Force ultimately slanted a $35 billion tanker bid against the Boeing Co., the company said Tuesday.
"The Air Force's efforts to preserve Northrop Grumman/EADS' ability to bid skewed the acquisition process in several ways," Boeing officials wrote in a protest of the decision made public Tuesday.
Mark McGraw, who leads Boeing's tanker program, acknowledged the company faces an uphill battle with the protest it filed last week with the Government Accountability Office. The GAO has until mid-June to rule on Boeing's efforts to overturn the Air Force's decision.
Besides being misleading about its preference for tanker size, the Air Force incorrectly evaluated Boeing's KC-767 tanker, McGraw said. As a result, Boeing claims, the Air Force gave Boeing an inflated risk rating, incorrectly adding $5.2 billion to the price of the KC-767.
"Absent the Air Force's errors ... Boeing almost certainly would have been awarded the KC-X Tanker Contract," Boeing said in its protest.
The Air Force's decision, announced Feb. 29, shocked most industry observers, who pegged Boeing for the contract. The Chicago-based aerospace company had won a similar deal to lease aerial refueling KC-767 tankers to the government a few years ago. However, the contract was dissolved when it was discovered Boeing had tilted the deal its way by offering jobs to a Pentagon weapons buyer and her family.
Northrop and EADS, parent company of Airbus, offered up their KC-30 tanker when the Air Force rebid the contract. But the duo threatened to withdraw from the contest early in 2007 if they suspected the Air Force already favored Boeing.
The Air Force has maintained throughout the award process that it ran a "fair and open" competition. Boeing's McGraw disagreed.
"I think there were changes made to keep Northrop in the competition," McGraw said.
Boeing has alleged the Air Force wanted a larger aircraft, like the KC-30, but didn't indicate that in either its requirements or in discussions with the company.
"We never perceived that bigger was going to be viewed as better until the decision, in effect, had been made," McGraw said.
In its protest summary, Boeing said the Air Force rejected the cost information that Boeing provided for its commercial 767 jet, on which the KC-767 tanker is based. Pentagon officials dismissed the pricing as "marketing materials" with some "graphs with lines on them." The Air Force "drastically increased Boeing's estimated costs in several areas, to the tune of about $5.2 billion," Boeing officials wrote.
Boeing and its congressional supporters claim the Northrop-EADS tanker was funded through illegal subsidies given to Airbus, which help lower the price of the KC-30.
Northrop and EADS will build their KC-30 tanker in different ways and locations at various stages of development, eventually assembling the tanker in Mobile, Ala. Boeing would assemble its KC-767 in Everett with finishing work taking place in Wichita, Kan., a plan that Boeing views as less risky than its competitor's.
The Air Force also didn't give much weight to Boeing's past performance despite the fact that "Boeing is the only company in the world that has delivered a commercial derivative tanker equipped with an operational aerial refueling boom," the company wrote.
Instead, the Air Force focused on some of Boeing's more recent, but troubled, programs, such as its 767-based tanker for Japan and Italy. Boeing had hoped the Air Force would view these stumbles as "lessons learned without having to pay for it," McGraw said Tuesday.
Northrop Grumman's Paul Meyer, manager of the company's refueling tanker program, said Tuesday he doesn't understand Boeing's claims since both companies had adequate opportunity to comment on and help shape several versions of the Air Force's request for proposal. He added that his competitor's attacks on the Air Force acquisition process come as a surprise.
The debate over the tanker contract isn't likely to die down soon. Boeing has turned to several of its existing lobbying firms, including Denny Miller Associates and Gephardt Group, to press its case. And Northrop has hired former Sens. Trent Lott, R-Miss., and John Breaux, D-La., to keep the contract where the Air Force first put it on Feb. 29.
Boeing's stock rose $1.04 to close at $76.53 on Tuesday. Northrop's shares were also up -- 49 cents -- to close at $79.79.
The Associated Press contributed to this report.
Reporter Michelle Dunlop: 425-339-3454 or mdunlop@heraldnet.com.
|
|Contact Us
|Advertiser Services
|Home Delivery
|Newsstand Locations
|Classifieds
|Feedback
|About the Company
|Work@the Herald
|Site Map