EVERETT — The U.S. Air Force’s decadelong effort to replace its aerial refueling tankers took a new twist Monday when the Boeing Co.’s rival dropped out of the competition.
Northrop Grumman’s withdrawal from the tanker contest left workers here “cautiously optimistic” about Boeing’s chance finally to win the $35 billion contract, securing thousands of jobs in the Puget Sound region for roughly two decades. It also keeps Boeing’s rival EADS, the parent of Airbus, which teamed up with Northrop on the tanker, out of the U.S. defense business for the foreseeable future.
“We won’t let up on our efforts until our workers are building the tanker,” said Connie Kelliher, spokeswoman for Boeing’s local Machinists union.
The Air Force, which has tried two previous times to award a tanker contract, released its most recent requirements in late February. Those rules “dramatically favor Boeing’s smaller refueling tanker,” Wes Bush, Northrop’s chief executive, said Monday. Northrop and partner EADS won’t submit a bid for the lucrative contract despite still believing their tanker, based on an Airbus A330 jet, is a better value for American taxpayers, Bush said.
Northrop also ruled out the possibility that it will protest the Air Force’s contest, as Boeing did during the last round of bidding.
“While we feel we have substantial grounds to support a (Government Accountability Office) or court ruling to overturn this revised source selection process, America’s service men and women have been forced to wait too long for new tankers,” Bush said.
The Air Force is trying to replace 179 of its Eisenhower-era KC-135 tankers, built by Boeing. The Air Force plans to hold two more rounds of competition later, making the entire contest worth an estimated $100 billion. Northrop’s exit from the contest doesn’t clear all of the hurdles in front of Boeing, but lawmakers from Washington called it a step in the right direction.
“We’re not ready to pop the champagne cork yet, but I think it’s a very positive development,” said Sen. Maria Cantwell, D-Wash.
Rep. Norm Dicks, D-Wash., who has long supported Boeing’s effort to build the tanker, was recently named to a key position on the House subcommittee on defense appropriations. He noted that if Northrop’s previous contract had been allowed to stand, the first dozen tankers would have been assembled by Airbus workers in Europe.
“I think our taxpayers are going to get the best deal,” Dicks said. “And it’s going to be built in Everett, Washington, by American workers.”
Northrop and EADS would have moved assembly work on their tanker to Mobile, Ala. Lawmakers from that state called the Air Force’s contest a “charade” and a “sham” on Monday. Sen. Richard Shelby, R-Ala., said the Air Force “blew it” by not making “substantive changes to level the playing field shows that once again politics trumps the needs of our military.”
Mike Dean, a Mobile County commissioner, said he hopes people along the Gulf Coast and the rest of the country will be “so disgusted” over how the Air Force has handled the contest that they will “demand, at the minimum, a dual buy.”
Defense Deputy Secretary William Lynn expressed disappointment Monday over Northrop’s decision to drop out of the contest.
“In the last … competition, Northrop Grumman competed well on both price and nonprice factors,” Lynn said in a statement. “We strongly believe that the current competition is structured fairly and that both companies could compete effectively.”
When they released their final tanker requirements late last month, Pentagon officials said they have a plan in place to handle a sole bidder. Northrop’s backers in Congress certainly will keep the focus on driving down Boeing’s price.
“In the previous round, the Air Force … determined that it would pay a unit flyaway cost of approximately $184 million per tanker for the first 68 tankers, including the nonrecurring development costs,” noted Northrop’s Bush. “With the department’s decision to procure a much smaller, less capable design, the taxpayer should certainly expect the bill to be much less.”
This time around, the Air Force is asking its tanker supplier to lock in a fixed price, allowing only an increase over time for inflation or an erratic fluctuation in the cost of materials. That leaves Boeing to walk a fine line in its pricing strategy, industry observers say. Boeing can’t overprice its tanker or Congress will balk. But priced too low, Boeing could end up the winner of a losing contract.
On Monday, Boeing said only that it remains focused on submitting a “fully responsive, transparent and competitive proposal” to the Air Force by May 10. The Air Force is expected to award the contract later this year and the agency expects the first tanker to be delivered in 2015.
Herald Writer Amy Rolph contributed to this report.
Michelle Dunlop: 425-339-3454, mdunlop@heraldnet.com.
What now?
* The Pentagon will outline its procedures for a sole bidder.
* Boeing will submit its tanker bid by May 10.
* The Air Force will award the contract, which Congress reviews.
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