Newsday July 09, 2008
New bids sought on $35B Air Force tanker
Bidding reopened on deal for aerial refueling plane that Northrop Grumman had won
By James Bernstein
In a highly unusual move, the Air Force will re-open a $35 billion competition to build new aerial refueling tankers, representing a major blow to Northrop Grumman Corp., which had won a competition to build the planes, Defense Secretary Robert Gates announced Wednesday.
"I've concluded the contract cannot be awarded at present" to a team of Northrop Grumman and the European Aeronautic Defence and Space Co. because of the findings of government investigators that the Air Force did not conduct the competition fairly, Gates said at a televised Pentagon news conference.
"We will request revised proposals," Gates said. Boeing, a top competitor to Northrop Grumman, had lost the contract and demanded reconsideration.
Pentagon undersecretary John Young said the Defense Department wants to complete the re-competition by the end of the year, a time frame considered by some experts to be remarkably short for such a huge contract.
In a statement, Randy Belote, a Northrop Grumman spokesman, said the company "applauds" Gates "for recognizing that the acquisition replacement refueling tankers for the Air Force should be put on a path toward quick closure."
"We are reviewing the decision to ensure the re-competition will provide both companies a fair opportunity to present the strengths of their proposal," Belote said. "The United States Air Force has already picked the best tanker, and we are confident that it will do so again."
Some of the work on the new tankers was scheduled to be done at Northrop Grumman's Bethpage facility, and the company has said it would produce several hundred new jobs on Long Island and elsewhere in the state.
The Air Force began looking in 2001 to replace its fleet of tankers, whose average age is 46 years old.
When Boeing squared off against a team of Northrop Grumman and France-based EADS, most analysts believed Boeing would win the $35 billion competition to build 179 new aerial refueling tankers for the Air Force. Boeing, the analysts said, had been building tankers for the service for more than 40 years.
The Air Force's decision Feb. 29 to award the contract to the Northrop Grumman-EADS team stunned analysts. Boeing immediately filed a protest, saying the decision was unfair because the competition appeared skewed to help the Northrop Grumman-EADS team.
On June 18, the General Accountability Office, congress' investigative arm, sided with Boeing and recommended that the Air Force re-open the competition. The GAO's recommendation is not binding.
In a 65-page report, the GAO was highly-critical of the Air Force, saying the service had made "errors" in the selection process, including conducting "misleading and unequal discussions" when discussing contract details with Boeing and Northrop Grumman-EADS.
The new competition will examine eight of Boeing's concerns out of more than 100 it had raised, Gates said.
Loren B. Thompson, an analyst for the Lexington Institute, a military policy think-tank in Northern Virginia, said the decision to re-compete is far from the norm. Several experts said that while protests are fairly routine, they could not a program of the tanker's size being re-competed.
Thompson said he also felt completing it in six months was unrealistic. "By trying to do this so fast, they may make another mistake," Thompson said of Air Force personnel.
The Air Force's decision in February sparked a plethora of criticism from Boeing supporters in Congress, who complained that jobs would be sent overseas, to France, where EADS is headquartered. EADS is the parent company of Airbus, the commercial aircraft builder that is a key Boeing competitor.
Northrop Grumman and its supporters were equally inflamed, saying the tanker plane would be constructed at a facility in Mobile, Ala., and that no U.S. jobs would be lost.
Both Boeing and Northrop Grumman periodically released a sometimes bewildering array of statistics and jobs figures to support their case.
Northrop Grumman said the contract would mean about 353 jobs in New York State, including some at the company's facility in Bethpage and others at subcontracting firms on Long Island.
But some challenge the need for the new tankers at all. John Pike, an analyst at GlobalSecurity.org, a Washington, D.C.-based military research organization, said new tankers are not necessary, and that the contract was little more than a government bailout for Boeing.
"The whole thing is a complete waste of money," said Pike, who argued that the current tanker fleet could be upgraded. "It's a giveaway."
The tanker controversy has also entered the presidential race. A few years ago, Sen John McCain, now the presumptive Republican nominee, launched a Senate probe that uncovered cozy relations between top Air Force officials and Boeing executives. A top Air Force officer and Boeing's chief financial officer ended up in prison. Most significantly, the Air Force was forced to cancel a $6 billion contract. But McCain has come under intense criticism from Boeing workers and company supporters. They accuse him of having cost Boeing the contract and its workers jobs.
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