EVERETT — The Boeing Co. will get another shot at a lucrative tanker contract but could face an uphill battle if the Pentagon favors a larger aircraft than its Everett-built 767.
“I am concerned that the department is trying to find a new way to justify selecting the larger Airbus tanker again, even though there is no current operational requirement for a larger refueling tanker,” Rep. Norm Dicks, D-Wash., said late Wednesday.
Defense Secretary Robert Gates announced Wednesday morning that the Air Force would accept revised proposals for a $35 billion aerial refueling contract initially awarded to Northrop Grumman and EADS over Boeing. Gates’ office will oversee the renewed competition after the Air Force botched the initial process. The Defense Secretary hopes to name a winner by year’s end.
Dicks said he learned from Undersecretary John Young, the Pentagon official responsible for conducting a new competition, that the criteria for the new tanker will favor a larger tanker from the outset, assigning additional credit to a bigger plane in the revised request for proposals that will be circulated this summer. Government auditors criticized the Air Force for awarding Northrop and EADS extra credit for their larger KC-30 despite saying no such credit would be awarded.
Boeing said it welcomed Gates’ decision not to proceed with the Northrop and EADS award but was concerned that the revised bid request “may include changes that significantly alter the selection criteria as set forth in the original solicitation.”
Even if the Air Force indicates it wants a larger tanker, Boeing is unlikely to offer a tanker based off its commercial 777 jet, said Scott Hamilton, an analyst with Leeham Co. The 777 leans more toward the “large” aircraft category than the “medium” size the Air Force has said it wants. But the 767, which is classified as a medium plane, may come up short in meeting the Air Force’s requirements.
“It’s all going to come down to just what does the Air Force want,” Hamilton said. “If they just want a tanker, the KC-30 is too big. If they want a multi-role aircraft, the KC-30 is the better tanker.”
Northrop’s Randy Belote, vice president of communications, agreed with Gates’ plan to bring the tanker contract to a “quick closure.”
“The United States Air Force has already picked the best tanker, and we are confident that it will do so again,” Belote said.
The Air Force shocked the aerospace community when it picked Northrop and EADS, the parent company of Airbus, for the lucrative contract on Feb. 29. Boeing’s supporters in Congress immediately demanded answers from the agency while the Chicago-based company in mid-March filed a protest with the Government Accountability Office, citing irregularities in the process.
Last month, the GAO sided with Boeing while noting the Air Force made a number of “significant” errors that could have cost Boeing the contract. The government auditors suggested then that the Air Force reopen the competition. However, the GAO has no authority over the Air Force.
Just before the GAO presented its ruling, Secretary Gates fired two top Air Force officials over nuclear mishaps. Gates promised Wednesday that the re-bid will take into account the eight points the GAO made in its ruling. To ensure a fair process after many mishaps, Gates has handed the limited re-bid over to Undersecretary Young rather than relying on Air Force acquisitions personnel.
“Industry, Congress and the American people — all must have confidence in the process,” Gates said.
At least some members of Congress already were losing confidence late Wednesday. Sen. Patty Murray, D-Wash., said she would be monitoring the Pentagon’s progress to ensure it accounted for fuel, military construction and life cycle costs of the proposed tankers — criteria the Air Force missed the first time around.
“When it comes to the Air Force’s tanker procurement process, the devil is in the details,” she said.
Lawmakers in Alabama, where Northrop and EADS would build their KC-30, applauded Gates’ decision.
“The Northrop Grumman plane was judged the best equipment in round one — I have every confidence it will remain the top choice after the GAO procedural concerns are resolved,” said Rep. Jo Bonner, R-Ala., in a statement. “It is simply a more modern, more capable aircraft that can be delivered to our military sooner.”
The Air Force calls the tanker contract one of its top priorities. The deal — one of the largest in Pentagon history — is the first of three contracts worth up to $100 billion to replace nearly 600 refueling tankers over the next 30 years. The Pentagon hopes to begin receiving new tankers, to replace 179 Eisenhower-era KC-135 Stratotankers, in 2013.
The Pentagon made its first move to replace the tankers in 2001. Its call on Wednesday to re-bid the contract and have a decision by the end of 2008 struck some analysts as improbable.
Richard Aboulafia, a defense analyst for the Virginia-based Teal Group, said it would be unprecedented to finish a revised contract as quickly as the Pentagon has outlined. He expects the process to stretch into the next administration.
Even with a fresh start, the company that loses the second contract will be able to protest the award, causing further delays, Aboulafia said.
Republican presidential candidate Sen. John McCain, R-Ariz., had a hand in blocking an early tanker award to Boeing after learning of unethical conduct by the company and Air Force.
“I am hopeful that the secretary’s plan to buy new tankers will result in the timely fielding of this important capability for all the services at the best value to the taxpayer,” McCain said in a statement Wednesday.
Nick Shapiro, a campaign spokesman for Sen. Barack Obama of Illinois, said the presumptive Democratic presidential nominee commended the Pentagon’s decision and called for a “fair and transparent” process in awarding the contract.
Under Secretary Young and members of the GAO will testify Thursday in front of the House Armed Services committee on the tanker contract.
Reporter Michelle Dunlop: 425-339-3454 or mdunlop@heraldnet.com.
The Associated Press contributed to this report.
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