Published: Thursday, February 25, 2010
Boeing backers like odds for tanker deal
Air Force’s final rules good for the company, state’s lawmakers say
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Chuck Schroeder / The Boeing Co.
This artist’s rendering shows a 767-based Boeing tanker refueling two F/A-18Es simultaneously. A 767 tanker is one option Boeing could offer.
After nine years of waiting, the Boeing Co. is well-positioned to win a $35 billion aerial refueling tanker contest, based on the initial assessments of lawmakers.
“I’m pleased with what I heard,” said Rep. Jay Inslee, a Democrat from Washington state, where Boeing plans to build its tankers. “As far as the specifics of the proposal, we’re very much in the game.”
On Wednesday, the U.S. Air Force released its final requirements for the tanker competition, which is expected to pit Boeing against duo Northrop Grumman and EADS. The winner will replace 179 of the Air Force’s aging KC-135 tankers. For the states where Boeing or Northrop would assemble their tankers, the contract promises thousands of new jobs amid a tough recession.
Lawmakers from Alabama, where Northrop and EADS would assemble their KC-30 tanker, immediately lashed out at the Air Force’s newly released rules and raised concerns that Northrop may drop out of the competition. Northrop’s chief executive threatened late last year to skip the contest unless the Air Force made substantial changes from the initial rules released last September. Industry observers indicated Wednesday that the Air Force’s changes were minor.
The Air Force “clearly favors” Boeing’s “smaller, less capable airframe, and I am concerned the department may not get two competitive bids in this process,” said U.S. Sen. Richard Shelby, R-Ala., in a statement.
But Defense Deputy Secretary William Lynn said he hopes Northrop will remain in the tanker competition.
“Obviously, Northrop has a choice to make. We’re hoping that, with its European partner, it chooses to be in the contest,” Lynn said. “They were very competitive before.”
This is the Air Force’s third try at replacing its Eisenhower-era tanker fleet. In its last attempt in 2008, the Air Force selected Northrop and EADS’ larger KC-30 tanker. But that award was halted when Boeing appealed and government auditors found serious flaws in the competition.
Boeing’s first bid was scrapped, and two people went to prison over an ethics scandal involving a former Air Force official hired by Boeing.
Lynn emphasized that the Air Force maintained its objective of being “crystal clear“ how the winning bidder will be selected. He dismissed criticism that the tanker competition is a “price shoot-out,” saying instead that it’s a “high value” contest. He indicated that other factors — fuel and life cycle costs — will be considered along with price.
“It is actually possible to have a higher price and win this competition,” Lynn said.
Boeing expressed disappointment at the Air Force’s refusal to take a trade dispute into consideration in the tanker contract. Boeing’s Jean Chamberlin, general manager of tanker programs, said the Northrop-EADS tanker benefited from illegal subsidies from European governments for EADS, the parent company for Boeing-rival Airbus. But Boeing applauded the Air Force for making progress in its attempt to replace its aging tankers.
Northrop officials remained tight-lipped Wednesday on whether they will bid for the tanker contract, saying only that the company has received and is reviewing the revised requirements.
A withdrawal by Northrop “would be tragic for the military and for U.S. taxpayers, and would leave an irreparable stain on the Department of Defense acquisition process,” said Sen. Jeff Sessions, R-Ala. “We know from experience that sole-source bidding leads to less capability, more costs and more fraud.”
Despite allegations by the competitors that the Air Force has favored one or the other, “the requirements are determined by the war-fighter and are clear and stable,” Lynn said. Still, the Pentagon has figured out a process in case Boeing winds up the only bidder.
Over the next 75 days, competitors and lawmakers alike will comb through the Air Force’s massive document. Sen. Patty Murray, D-Wash., said she’ll be looking over the Air Force’s requirements carefully to ensure a “fair and transparent” contest.
“Given a fair shot, Washington state’s workers will bring home this contract,” Murray said. “We have the skills, the technology, and the experience of having built the only combat-ready tanker to prove it.”
Next moves
The Boeing Co. and Northrop Grumman have until May 10 to submit their proposals.
If Northrop plans to drop out, the Air Force hopes it will do so quickly rather than drag out the process. Should Northrop drop out, the Air Force has a process to deal with Boeing as a sole bidder.
The Air Force plans to announce the winner as early as September.
About the final rules
Changes: Since releasing the draft rules, the Pentagon received 350 questions and comments from the industry, prompting the Air Force to make 230 changes to its final rules.
Trade dispute: The Defense Department won’t take into consideration trade disputes between Boeing and EADS that are in front of the World Trade Organization.
Operational costs: The Air Force will factor in the price of fuel to operate each of the competitors’ tankers over 40 years as well as the cost of any construction needed at military bases to operate each tanker.
“I’m pleased with what I heard,” said Rep. Jay Inslee, a Democrat from Washington state, where Boeing plans to build its tankers. “As far as the specifics of the proposal, we’re very much in the game.”
On Wednesday, the U.S. Air Force released its final requirements for the tanker competition, which is expected to pit Boeing against duo Northrop Grumman and EADS. The winner will replace 179 of the Air Force’s aging KC-135 tankers. For the states where Boeing or Northrop would assemble their tankers, the contract promises thousands of new jobs amid a tough recession.
Lawmakers from Alabama, where Northrop and EADS would assemble their KC-30 tanker, immediately lashed out at the Air Force’s newly released rules and raised concerns that Northrop may drop out of the competition. Northrop’s chief executive threatened late last year to skip the contest unless the Air Force made substantial changes from the initial rules released last September. Industry observers indicated Wednesday that the Air Force’s changes were minor.
The Air Force “clearly favors” Boeing’s “smaller, less capable airframe, and I am concerned the department may not get two competitive bids in this process,” said U.S. Sen. Richard Shelby, R-Ala., in a statement.
But Defense Deputy Secretary William Lynn said he hopes Northrop will remain in the tanker competition.
“Obviously, Northrop has a choice to make. We’re hoping that, with its European partner, it chooses to be in the contest,” Lynn said. “They were very competitive before.”
This is the Air Force’s third try at replacing its Eisenhower-era tanker fleet. In its last attempt in 2008, the Air Force selected Northrop and EADS’ larger KC-30 tanker. But that award was halted when Boeing appealed and government auditors found serious flaws in the competition.
Boeing’s first bid was scrapped, and two people went to prison over an ethics scandal involving a former Air Force official hired by Boeing.
Lynn emphasized that the Air Force maintained its objective of being “crystal clear“ how the winning bidder will be selected. He dismissed criticism that the tanker competition is a “price shoot-out,” saying instead that it’s a “high value” contest. He indicated that other factors — fuel and life cycle costs — will be considered along with price.
“It is actually possible to have a higher price and win this competition,” Lynn said.
Boeing expressed disappointment at the Air Force’s refusal to take a trade dispute into consideration in the tanker contract. Boeing’s Jean Chamberlin, general manager of tanker programs, said the Northrop-EADS tanker benefited from illegal subsidies from European governments for EADS, the parent company for Boeing-rival Airbus. But Boeing applauded the Air Force for making progress in its attempt to replace its aging tankers.
Northrop officials remained tight-lipped Wednesday on whether they will bid for the tanker contract, saying only that the company has received and is reviewing the revised requirements.
A withdrawal by Northrop “would be tragic for the military and for U.S. taxpayers, and would leave an irreparable stain on the Department of Defense acquisition process,” said Sen. Jeff Sessions, R-Ala. “We know from experience that sole-source bidding leads to less capability, more costs and more fraud.”
Despite allegations by the competitors that the Air Force has favored one or the other, “the requirements are determined by the war-fighter and are clear and stable,” Lynn said. Still, the Pentagon has figured out a process in case Boeing winds up the only bidder.
Over the next 75 days, competitors and lawmakers alike will comb through the Air Force’s massive document. Sen. Patty Murray, D-Wash., said she’ll be looking over the Air Force’s requirements carefully to ensure a “fair and transparent” contest.
“Given a fair shot, Washington state’s workers will bring home this contract,” Murray said. “We have the skills, the technology, and the experience of having built the only combat-ready tanker to prove it.”
Next moves
The Boeing Co. and Northrop Grumman have until May 10 to submit their proposals.
If Northrop plans to drop out, the Air Force hopes it will do so quickly rather than drag out the process. Should Northrop drop out, the Air Force has a process to deal with Boeing as a sole bidder.
The Air Force plans to announce the winner as early as September.
About the final rules
Changes: Since releasing the draft rules, the Pentagon received 350 questions and comments from the industry, prompting the Air Force to make 230 changes to its final rules.
Trade dispute: The Defense Department won’t take into consideration trade disputes between Boeing and EADS that are in front of the World Trade Organization.
Operational costs: The Air Force will factor in the price of fuel to operate each of the competitors’ tankers over 40 years as well as the cost of any construction needed at military bases to operate each tanker.
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