Air Force rebid may favor rival of Boeing

The Pentagon's announcement Wednesday that it will rebid the Air Force tanker contract was initially greeted as good news by most supporters of Boeing's bid for the $35 billion job.

But U.S. Rep. Norm Dicks, D-Bremerton, emerged from a Defense Department meeting Wednesday afternoon convinced that the Pentagon is fixing the new contest in favor of Northrop Grumman and partner European Aeronautic Defence & Space, parent of Airbus.

He said he learned from Pentagon acquisition chief John J. Young Jr., the man controlling the rebid, that the revised contract criteria will give credit to the larger Northrop-EADS plane for having more carrying capacity than Boeing's 767-based tanker.

That change could tip the balance in the contract battle decisively toward Northrop and EADS.

"We are going to have to fight this," Dicks said vehemently. "This is unacceptable. We are going to have to use every means we can to defeat this effort."

Three weeks after a stinging rebuke from congressional auditors, Secretary of Defense Robert Gates said Wednesday the Defense Department would solicit new bids from both Boeing, which complained bitterly after it lost the original competition, and the Northrop-EADS team that won the original contract in February.

He said the new competition would be completed by the end of the year and that there would be only "minimal" changes in the bidding process to respond to the Government Accountability Office (GAO) report.

In a slap at the Air Force, Gates said his office, rather than the Air Force, will handle the new contest.

"Industry, the Congress and the American people all must have confidence in the integrity of the acquisition process," Gates said. "I believe the revised process will result in the best tanker for the Air Force at the best prices for the American taxpayer."

Undersecretary of Defense Young acknowledged that either company could legally submit a completely revised bid, which could delay the selection well into next year.

"They will have full license to totally change their proposals in the modification process," he said.

No time for 777

It's unlikely, however, that with the schedule outlined for the new competition, Boeing would have the time, money and people to create a proposal based on its larger 777 airplane.

Young will head the new tanker competition even though he was involved in the earlier competition.

Boeing's complaints that Air Force officials had changed specifications and made other decisions intended to undercut the company's chances gained credibility with the report from the GAO last month.

Among the GAO's findings was that under the original criteria, the Airbus A330's ability to carry more fuel, cargo, troops and medical evacuees than the smaller 767 should not have earned extra points for Northrop-EADS.

The report concluded that the Air Force made a number of "prejudicial errors," including mistakes in calculating the so-called life-cycle costs of the two planes and uncertainty over whether the winning plane could refuel all of the Air Force's aircraft.

The auditors also found that the Air Force held "misleading and unreasonable" discussions with Boeing.

Murray "very wary"

Sen. Patty Murray, D-Wash, said she remained "very wary" of the process.

"I have followed the bouncing ball now for eight years and the ball is still bouncing. I am going to stay in the Pentagon's face."

Boeing said it welcomed the decision to reopen the competition, but that it, too, was reserving judgment.

Northrop said it was convinced it would win the new competition.

Dicks said he concluded from his Pentagon meeting with Young that the Pentagon is going to officially change the rules in favor of the Airbus plane before it reruns the competition.

"This is a major change ... . They want to make an adjustment to favor Northrop Grumman," said Dicks. "They had to figure out some way to try to justify their preconceived notions."

Asked why the Air Force and the Pentagon shouldn't be allowed to adjust the criteria after such a long period of study, Dicks said the 767 can deliver all the fuel needed and the Air Force will end up paying for an extra capability it doesn't need.

"You don't want a bigger airplane," he insisted. "It's not necessary."

Young further incensed Dicks when the congressman asked that the new contract criteria be adjusted to include a 40-year analysis of total program fuel costs, as opposed to the 25-year analysis that is in the current plan.

The Boeing plane, being smaller, doesn't use as much fuel, and Dicks believes such an analysis would heavily favor the 767.

Dicks cited fuel-consumption numbers indicating that 179 A330s over 40 years would cost the Air Force $35 billion more in fuel than 179 of the Boeing 767s.

But Young said no to Dicks's requested adjustment.

Dicks said he told Young to "bring your helmet" to a House Armed Services Committee hearing set for today.

Although the Pentagon said it wants to complete the rerun competition by December — with the Bush administration still in charge — Dicks clearly thinks political objections from Boeing's allies in Congress can prevent that from happening.

"I think ultimately the decision probably is going to be made by the next administration," said Dicks. "Because there's going to be a lot of hullabaloo about this."

The contract could ultimately be worth more than $100 billion as the Air Force replaces its fleet of 600 or so Eisenhower-era tankers. The initial contract will be for 179 planes.

Everett, Wichita

The Boeing tanker would use a 767 airframe built at its plant in Everett, and converted into a military tanker at a Wichita, Kan., facility. About 9,000 jobs in Washington state and 1,000 or so in Wichita are at stake, according to Boeing.

The Northrop-EADS tanker would use an Airbus A330 airframe. The A330s are currently assembled in Toulouse, France, using French, German, English and Spanish parts.

Northrop-EADS eventually plans to assemble the tankers at a new plant in Mobile, Ala., but groundbreaking has been postponed.

Gates and others emphasized that while Boeing raised more than 100 issues in its protest, the GAO identified only seven the Air Force had mishandled.

They included the competing tankers' life-cycle costs, questions about whether the Northrop-EADS tanker could refuel all the Air Force's planes and allegations that the Air Force may have misled Boeing on certain aspects of the contract requirements.

"We will address all of these in the new solicitation," Gates said.

Compiled from reports by Seattle Times aerospace reporter Dominic Gates and McClatchy Newspapers