Report: Boeing will overrun its initial tanker budget

Published 1:16 pm Friday, June 24, 2011

The Boeing Co. expects to spend about $300 million more to build the first 14 Air Force tankers than what’s budgeted, reports Bloomberg News.

But it will be Boeing, not taxpayers, who will have to pick up the tab given this is a fixed-price contract. Boeing and the government agreed to a price tag of $4.9 billion to develop those initial tankers.

Earlier this year, the Air Force picked Boeing over Europe’s EADS for a contract to replace 179 of its Eisenhower-era KC-135 tankers. Boeing will build tankers based off its Everett-built 767 jet.

According to Bloomberg:

After the contract was awarded, Boeing revealed “that it proposed a ceiling price that is less than its actual projected cost to execute the contract,” according to an Air Force statement from spokesman Lieutenant Colonel Jack Miller. “There is no legal barrier that prohibits pursuing a below-cost proposal strategy and Boeing’s met all rules.”

After the Air Force named Boeing the winner, EADS officials questioned the Chicago-based jet maker’s pricing.

After calling Boeing’s bid “lowball,” EADS North America chairman Ralph Crosby suggested Boeing had other motives, rather than a high-profit margin, for its bid.

“I’m of the view that what our competitor offered might have a single focus, which was to keep their competitor off the U.S. shores,” Crosby said.

Boeing is expected to deliver 14 tankers by Sept. 30, 2017.