6 keys to how Boeing won the tanker contract

The Boeing Co.’s quest to win the air tanker contract lasted three rounds, covered a decade and required navigation through legal, economic and political obstacles.

Remember, the aerospace giant won the initial contract then had it taken away when an investigation found Boeing employees and t

he Department of Defense had been in cahoots.

The venerable airplane builder lost the next round to a consortium of U.S. and French aerospace firms. Boeing successfully challenged the award to force a third round — or “recompete” as the U.S. Air Force tabbed it.

On Thursday, Air Forc

e officials declared Boeing the “clear winner” in what everybody in the company and Washington state hope ends the competition for the $30 billion contract to build the next generation of tankers used to refuel military planes in mid-air.

Here are six keys that likely factored in some way in the final decision.

1. A successful appeal

On Feb. 28, 2008, the U.S. Air Force awarded the team of Northrop Grumman Corp. and EADS North America a contract to build a fleet of tankers to replace ones built by Boeing in the era of President Dwight Eisenhower.

In the ensuing days, Boeing pored through the decision as politicians privately urged hesitant-if-not-reluctant company execs to challenge the award issued.

The firm appealed in March and three months later the Government Accountability Office reported an array of flaws in the process, prompting the Air Force to tear up the deal and try again.

2. Favorable contract requirements

Northrop/EADS significantly underbid Boeing in the contested second round. And it gained an advantage as the initial solicitation for bids contained language favoring a larger-sized aircraft capable of carrying more fuel.

But in August 2008, the Pentagon revised its request for proposal in a way which proved pivotal for Boeing. It required bidders to estimate the costs associated with their tankers over a 40-year life span rather than 25 years as previously requested.

Boeing’s 767 will be cheaper to operate and, most notably, burn far less fuel than Airbus’ bigger and heavier A330. This makes a huge difference in what the Air Force could be paying over the “life-cycle” of each tanker. Boeing reportedly estimated the amount at $36 billion, which is enough to buy another batch of tankers.

3. Faster assembly

One thing Boeing did on its own to boost its chances was redesign its work space for assembling 767 aircraft.

Production now goes on in a different part of the Everett facility. Floor space is 44 percent less and there are fewer tool rooms yet planes are getting finished faster. The current rate of two planes per month meets the Air Force requirement laid out in the bid specs. Airbus couldn’t match that rate on American soil as it needed to first build a factory in Alabama before it could start work on any tankers.

4. American soil

Washington lawmakers beat the drum of nationalism loudly throughout this round of competition, portraying the decision as a choice between us and them, the United States and France.

They stoked the fires in 2009 after the World Trade Organization ruled French-owned Airbus received illegal subsidies from European governments. When Northrop pulled out of its partnership with EADS in March 2010, it spotlighted the contest as a foreign firm taking on an icon of American manufacturing.

From a competitive standpoint, the break-up boded well for the more cost-conscious EADS. And the Air Force’s refusal to consider subsidies as a factor in the award seemed another good sign for EADS.

But the state’s lawmakers never relented in speaking out about the danger to national security of allowing a foreign-owned company build a critical component of America’s defense. They created an atmosphere which Pentagon policy makers couldn’t escape. Whether it affected their deliberations may never be known with certainty.

5. Need for jobs

A recession followed by a slow economic recovery is forcing President Barack Obama and Congress to cut spending and create jobs.

This decision should allow the president to breathe a bit easier as Boeing apparently offered a less costly tanker on which construction could begin sooner using American workers.

It was going to be a very thorny political issue if the contract went to Airbus and initially generated more jobs overseas than in the United States.

This week, Air Force officials will meet separately with Boeing and Airbus officials to explain exactly how the decision came about. You can bet Airbus will be scrubbing the details for any sign of such political concern entering the process.

6. Powerful allies

Members of the state’s congressional delegation were unyielding in their efforts to sell the world on Boeing’s bid being the best — even though they never saw it.

None pressed harder than Democratic Sen. Patty Murray who seemed determined to carry Boeing across the finish line on her own. This solidifies her ties with workers and should put her in good stead with executives for whom she had harsh words when they opted to put a second 787 production line in South Carolina.

Of course, had it gone the other way, she’d have been blamed. Lucky for her, re-election is six years away.

Every one else in the delegation can put a star on their resume. Next year you can bet Sen. Maria Cantwell, D-Wash., will be touting this in her re-election campaign and Rep. Jay Inslee, D-Wash., will as well in his bid for another term in Congress or a new job as governor.

The Air Force’s selection of Boeing likely avoids a protracted debate with Congress. Inslee and Cantwell were poised to block funding unless subsidies received by Airbus were taken into account in some fashion. A tiff like that would have delayed the tanker replacement program yet again.

Herald writer Michelle Dunlop contributed to this report.

Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.

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