Boeing, EADS to offer bids on $35B Pentagon tanker contract this week

The long-running fight over the Pentagon’s $35 billion tanker contract enters a new stage on Friday when Boeing and EADS North America submit bids to build a midair refueling tanker.

Air Force and Defense Department officials will pore over thousands of pages of technical and price data over the next four months to choose a victor in a lobbying and public-relations war the two companies and their congressional supporters have waged for much of the last decade.

ADVERTISEMENT
As they review the bids, a political fight will rage on with the midterm election as a backdrop — potentially derailing the much-coveted contract.

Air Force officials said recently that the tanker contract will be awarded in mid-November, placing the key date days after the Nov. 2 elections.

Boeing contends that the company and its 800 suppliers would support about 50,000 U.S. jobs nationwide. It argues EADS, the parent company of Airbus and a European conglomerate, will build the planes in France, Germany and Spain.

The U.S. company is also pushing a World Trade Organization (WTO) ruling last week that found European governments illegally subsidized the launch of new Airbus planes. Boeing and its supporters argue the subsidies give EADS an unfair advantage by allowing it to offer a lower price than Boeing.

Boeing is going to submit a “best value” proposal for the tanker by Friday, but the company is “still concerned about the lack of consideration of the impact of illegal subsidies,” said Dan Beck, a Boeing spokesman. He said the company supports “congressional efforts to urge the Department of Defense to consider that in their evaluation.”

EADS will submit its bid this week and is “proud to compete on the merits of our tanker,” said Guy Hicks, EADS spokesman. “By contrast, our competitor appears determined to compete instead in the political arena, in an effort to take the decision authority away from the Air Force,” Hicks added.

EADS has said it plans to assemble the tanker aircraft in Mobile, Ala. The company has strong congressional backing from Alabama and Mississippi lawmakers, the majority of them Republicans.

About 48,000 U.S. workers will build the EADS tanker across a team of more than 200 supplier companies, the company contends.

Boeing’s congressional backers are pressing to move legislation as part of the pending defense bills that would force the Pentagon to report the effect the subsidies have on the tanker competition. Pentagon officials have repeatedly said that they would not factor the WTO ruling into the tanker competition.

Sens. Patty Murray (D-Wash.) and Sam Brownback (R-Kan.), two of Boeing’s most prominent supporters, advocate amending the 2011 defense authorization bill to require the Pentagon to report on the effect subsidies would have on the tanker competition. The same language was passed as part of the House’s defense authorization bill on a 410-8 vote.

In the Senate, the amendment’s fate is far from clear. Senate Armed Services Committee Chairman Carl Levin (D-Mich.) has indicated he wants to see the bill debated and approved by the August recess. Senators have also traditionally rejected efforts to interject into Pentagon competitions and selection criteria, but the subsidy issue could energize more senators than in the past, particularly in an election year.

The House and Senate conference negotiators will also have to decide several controversial issues unrelated to the tanker, which could stall the bill’s approval for months.

Should Congress succeed in passing a final bill that contains the WTO provision before the Air Force selects the tanker winner, the Defense Department may have to issue an amendment to its request for proposals, which could significantly delay the contract award, according to industry sources.

If the Pentagon does not amend the request for proposals but takes the WTO issue into consideration, it risks a contract protest with the Government Accountability Office from competitors, who could argue the issue should have been considered as part of the official selection criteria. Meanwhile, if the Pentagon ignores the new law, Congress could take punitive action, such as cutting funding for the program.

The results of the midterm election could also play a role in the political battle over the tankers. If Republicans regain a good number of seats, their renewed congressional power could erode some of the Democratic support for Boeing and in turn help EADS’s case.

ADVERTISEMENT
Another late twist in the competition is the decision by Ukrainian company Antonov, partnered with California-based U.S. Aerospace, to bid for the tanker. The companies, however, have not participated in several steps that are part of the official bidding process, though they have asked for a 60-day extension to submit the bids. The Pentagon is not considering an extension.

The Pentagon already granted a 60-day extension to enable EADS to submit a bid for the tanker. EADS had been partnered with Northrop Grumman for the contract, but Northrop withdrew from the competition earlier this year. Boeing would have been the sole bidder for the program without the EADS solo bid.

The competitors this week will be delivering some six copies of their bids — a total of about 40,000 pages — to Wright Patterson Air Force Base in Dayton, Ohio. One copy will also be sent to Huntsville, Ala., to the Defense Contract Management Agency.