Bidding War For Air Force Tanker Contract Heats Up

An A330 multirole tanker aircraft i i

hide captionAn A330 multirole tanker aircraft, the same aircraft that is the basis of the Northrop Grumman KC-45, refuels an F-16 fighter using its boom system. Northrop Grumman is threatening to pull out of the competition for a $35 billion Air Force contract because it says the Pentagon has changed its rules to favor Boeing's aircraft.

Courtesy EADS North America
An A330 multirole tanker aircraft

An A330 multirole tanker aircraft, the same aircraft that is the basis of the Northrop Grumman KC-45, refuels an F-16 fighter using its boom system. Northrop Grumman is threatening to pull out of the competition for a $35 billion Air Force contract because it says the Pentagon has changed its rules to favor Boeing's aircraft.

Courtesy EADS North America

For almost a decade, the Air Force has tried to replace its aging fleet of tankers that refuel warplanes in midair. But the bidding process has been mired in controversy and politics. Now, defense contractor Northrop Grumman is threatening to pull out of the competition altogether.

Los Angeles-based Northrop Grumman teamed with Airbus to assemble the tankers in Mobile, Ala. The firms have been embroiled in a fierce competition with Boeing for the lucrative contract. Boeing would make the refueling planes in Washington state. At stake is a $35 billion contract that could be worth up to $100 billion over time.

Pointing Fingers

But Northrop says the Pentagon has changed its rules to favor Boeing's aircraft.

"If the Pentagon is clearly asking for a smaller tanker, as we believe that they are, the question that Northrop Grumman is asking itself is, 'Why should we compete?' The answer is we cannot compete," says Northrop spokesman Randy Belote.

This is the third time the military has tried to replace the Eisenhower-era tankers. A 2004 deal with Boeing collapsed amid an ethics scandal. And last year, the Pentagon canceled a contract with Northrop Grumman after Boeing challenged it.

Some defense analysts say Northrop is now posturing to pressure the Pentagon for more favorable terms.

It's a tactic used before, says Boeing spokesman William Barksdale. He says Boeing also has some concerns.

"We feel like we want to go through the process behind the scenes, and not play this out publicly, where we're threatening to go ahead and not bid unless we're catered to," he says.

But Northrop supporters in Alabama believe Boeing is the firm being catered to, because the new rules are so different from the last round.

"They muscle their way into defense contracts, and this is really another muscle job, as far as we're concerned," says Mobile, Ala., Mayor Sam Jones. "In Alabama, all we ask for is a level playing field. And now the playing field has been changed. And they know we can compete on a level playing field — that's why the playing field has changed all of a sudden."

'Nobody Should Be Whining'

The dispute is getting attention on Capitol Hill. Alabama Republican Sen. Jeff Sessions put Defense Secretary Robert Gates on the spot during a Senate Armed Services hearing on Afghanistan last week.

"Do you believe that competition is important in this aircraft for the Defense Department and the warfighter?" Sessions asked.

An illustration of Boeing's combat-ready KC-7A7 family of tankers. i i

hide captionAn illustration of Boeing's combat-ready KC-7A7 family of tankers. Boeing and some defense analysts say Northrop Grumman is posturing to pressure the Pentagon for more favorable terms.

Illustration by Chuck Schroeder/The Boeing Co.
An illustration of Boeing's combat-ready KC-7A7 family of tankers.

An illustration of Boeing's combat-ready KC-7A7 family of tankers. Boeing and some defense analysts say Northrop Grumman is posturing to pressure the Pentagon for more favorable terms.

Illustration by Chuck Schroeder/The Boeing Co.

Gates replied that the competition has been fair and evenhanded and is ongoing. "We believe that both of the principal competitors are highly qualified, and we would like to see competition continue in this process," he said.

Sen. John McCain (R-AZ) has written a letter questioning the new requirements. And Rep. John Murtha (D-PA), the top defense appropriator in the House, favors splitting the contract so that both firms could build their version of the refueling plane. But the bipartisan Senate tanker caucus says the Air Force should move ahead with Boeing, even if Northrop Grumman pulls out.

Washington state Democratic Sen. Patty Murray agrees. "We have to keep moving forward," she says. "And nobody should be whining and taking their ball and going home."

Politicized Competition

Murray and other Boeing supporters say this fight is about saving American jobs — even though Northrop and Airbus plan to make their tankers on the Gulf Coast.

"I have stood on the line in Everett, Wash., where we have thousands of workers who go to work every day to build these planes," Murray says. "I would challenge anybody to tell me that they've stood on a line in Alabama and seen anybody building anything."

Former Southern Christian Leadership Conference President Charles Steele has written the Congressional Black Caucus, arguing that the government should consider the Mobile area's large black population when awarding the tanker contract.

Politics is always at play when it comes to defense contracts, but military analyst Loren Thompson says he's never seen a competition quite as politicized as this one.

Thompson is with the Lexington Institute, a think tank that receives money from both Boeing and Northrop Grumman. He says the prolonged tanker battle is an example of how politics can introduce risky delays in the nation's defense acquisitions.

"The tankers the Air Force uses for aerial refueling on average are already 50 years old. And yet it's probably going to take 20 or 30 years to replace all the tankers we have," he says. "So the arithmetic is starting to get a little worrisome."

The Pentagon is expected to put out its latest tanker requirements next month.

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