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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Friday, June 13, 2008 Boeing: Air Force miscalculated tanker costs Herald staff and Associated Press EVERETT -- The Air Force has admitted it picked the pricier tanker for a $35 billion deal supplying the agency with refueling tankers, the leading contract competitors said Thursday. The U.S. Air Force shocked industry observers when it awarded the tanker contract to Northrop Grumman and EADS. Losing bidder the Boeing Co. suggested the process was flawed and protested the decision with the Government Accountability Office. With a decision expected by Thursday, documents submitted to the GAO have leaked this week. Both Boeing and Northrop note the Air Force erred in how it calculated the cost of the proposed tankers. While Northrop characterized the errors as "minor," Boeing and its supporters say the pricing miscalculation suggests an unfair competition. Sen. Patty Murray, D-Wash., has been at the forefront of the charge to overturn the contract. Boeing would assemble its KC-767 tanker in Everett. Military applications would be completed in Kansas. "This process was flawed from the outset and this is further evidence that we need serious answers from the Pentagon before moving forward," Murray said in a press statement. "I am glad that the Air Force has taken some responsibility for this error, but Congress and the American taxpayer need a full accounting of the decision, not a slow drip of information." An Air Force spokeswoman had no immediate comment. Murray and others have taken exception to the fact that Northrop's tanker is based on an Airbus A330 commercial jet. European Aeronautics Defence and Space Co. is the parent company of Airbus. The duo say they will assemble their KC-30 tanker in Mobile, Ala., while Boeing supporters say the two will ship U.S. jobs overseas. When announcing the award in February, the Air Force said the larger size of the Northrop-EADS plane helped tip the balance in its favor since that tanker would be able to haul more fuel, cargo and troops. Boeing contends the larger tanker will cost the Air Force more to operate since it will be less fuel efficient, and will require the military to strengthen runways and expand hangars. According to both Boeing and Northrop, the Air Force initially put the cost to operate the tanker over its lifespan at $108.01 billion for the Northrop plane, compared with more than $108.04 billion for the Boeing tanker. Boeing now claims the Air Force miscalculated those costs, although it would not release revised numbers. Northrop maintained that its tanker still provides "the most capability at the best overall value." The Air Force is not bound by the GAO decision. But any finding of error with the competition is certain to give ammunition to Boeing's supporters in Congress as they seek to block or overturn it. "We have been saying for months now that errors had to be present in this contract award," said Rep. Todd Tiahrt, R-Kan. "This is strong evidence that the tanker contract should be recompeted." Boeing had won a similar contract a few years ago. The Air Force rebid the competition when unethical actions came to light, sending both Boeing and Pentagon officials to prison. The tanker contract is the first of three Air Force deals worth as much as $100 billion to replace its entire fleet of nearly 600 aerial refueling tankers over the next 30 years. Shares of Boeing rose 81 cents to $74.12 Thursday. Shares of Los Angeles-based Northrop Grumman rose 7 cents to $71.53. Reporter Michelle Dunlop: 425-339-3454 or mdunlop@heraldnet.com.

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