As Air Force tweaks tanker bid, 767 likely leads

Published 5:37 pm Monday, January 11, 2010

EVERETT — The Boeing Co. will have to wait a little longer to learn the U.S. Air Force’s wishes for its aerial refueling tanker.

Last week, a Pentagon spokesman told reporters in Washington, D.C., that the final request for proposals to replace the Air Force’s KC-135 tanker fleet will be out in a few weeks. Spokesman Geoff Morrell said that the agency was making corrections to mistakes made in the preliminary draft and “altering the acquisition strategy a bit,” Morrell told Reuters.

The spokesman’s comments prompted questions about whether the Pentagon will make adjustments in order to keep Northrop Grumman and its partner EADS in the competition against the Boeing Co.

Late last year, Northrop’s new chief executive sent a letter to the Pentagon saying that his company would not bid for the roughly $35 billion contract unless “meaningful changes” are made to the final draft. Northrop’s Wes Bush, who officially took over as chief executive this year, said the company thought the Air Force’s proposal favored Boeing’s smaller aircraft, a tanker based on its 767 commercial jet. And Bush voiced concerns over the Pentagon’s fixed pricing approach for a lengthy contract.

Northrop had made a similar threat during the Air Force’s last attempt to award the tanker contract. The Air Force picked the Northrop-EADS tanker but had to call off the contract after government auditors found flaws with the competition.

Lexington Institute analyst Loren B. Thompson suggested in December that Northrop wasn’t making an idle threat. Bush isn’t as big of fan of the tanker contest as outgoing Northrop CEO Ron Sugar, wrote Thompson.

And Bush “thinks the terms the government is offering don’t add up to a good opportunity for Northrop, and he is quite willing to walk away,” Thompson wrote.

On his first workday as the new CEO, Bush announced he is moving Northrop’s headquarters to Washington, D.C., from Los Angeles. The move puts Northrop closer to one of its top customers — the U.S. government.

In a statement released Thursday, Boeing said it doesn’t expect the Air Force to make significant changes to its tanker rules.

“But we do expect America’s Air Force to consider both comments and questions as they seek to improve their critical acquisition document,” read Boeing’s statement.

Boeing could offer the Air Force a tanker based either on its 767 or its 777 commercial jet. The company said it will wait until the Air Force’s final rules are public before making a decision.

However, local analyst Scott Hamilton, with Leeham Co., believes the 767 is Boeing’s best bet. Boeing’s KC-777 is a developmental airplane. The Air Force is discouraging contractors from offering such aircraft.

Boeing has experience with a 767 tanker. The company has contracts with Japan and Italy to deliver four KC-767s each. However, Boeing has had trouble with both countries’ tankers and is behind schedule in deliveries.

Boeing has delivered the first three KC-767s to Japan. The fourth will be delivered soon, company spokesman Bill Barksdale wrote in an e-mail. The company hasn’t delivered the Italian tankers yet.

“For the Italian KC-767 tankers, our focus is on completing the flight test program, and addressing all resultant findings,” Barksdale wrote. “We are still not forecasting any dates concerning these remaining milestones.”

Michelle Dunlop: 425-339-3454, mdunlop@heraldnet.com.