Air Force to take over fuel tankers contract

Gates stressed that his own office will keep close tabs on the selection process, but also said he has faith in Air Force leadership.

“I don’t need to belabor the importance of getting this done soon and done right, and my office will continue to have a robust oversight role,” Gates said

in prepared remarks for the Air Force Association’s annual meeting. “We are committed to the integrity of the selection process, and cannot afford the kind of letdowns, parochial squabbles and corporate food-fights that have bedeviled this effort in the past.”

Pentagon leadership last year sidelined the Air Force and took control of the program. That came after Boeing successfully protested with the

Government Accountability Office the Air Force’s award of the contract to a rival team of Northrop Grumman and EADS, the parent company of Airbus.

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The initial phase of the tanker contract is valued at $35 billion, but could go up to $100 billion, as the program could be extended for decades.

The competition for building the next fleet of midair refueling aircraft has been engulfed in a political storm for several years. The renewed competition will spark a heated debate and lobbying campaign on Capitol Hill, pitting Boeing supporters against those who back Northrop Grumman and EADS.

The Air Force is expected to issue a draft request for proposals by the end of September. Gates promised that draft would also be shared with lawmakers.

Gates, in his speech to the Air Force Association, expressed full confidence in the Air Force’s new leadership.

“Indeed, the Air Force is fortunate to have a deep bench of senior flag officers, including four combatant commanders,” he said. “I depend greatly on their expert advice and strategic vision to fulfill my duties.”

Both Boeing and Northrop Grumman reacted positively to Gates’s announcement that the Air Force will resume charge of selecting the new tanker — the service’s top priority now that the Eisenhower-era tanker fleet is rapidly aging.

Both competitors indicated they are ready to compete.

“Northrop Grumman is pleased that a decision has been made and we are looking forward to competing and winning the tanker contract again,” Randy Belote, Northrop’s VP of strategic communications, said in an e-mailed statement.

Meanwhile, Boeing’s William Barksdale issued a statement that the company is “ready for the release of the draft request for a proposal.”

Boeing “will be looking for clarity in how the service’s requirements will be defined and prioritized,” he said.

Boeing this week launched a new website promoting the company’s activities and technologies related to the tanker competition. Boeing also has a Twitter page for tanker-related updates.

Boeing’s congressional supporters, meanwhile, have latched onto a preliminary and confidential Sept. 4 ruling by the World Trade Organization (WTO) in a bitter dispute between the United States and the European Union over government subsidies for Airbus’s commercial aircraft.

Boeing’s congressional supporters — mainly from Washington state and Kansas, where the company has major operations — have claimed that the WTO found Airbus received illegal loans from European governments to develop its planes and gained an unfair advantage over Boeing.

Lawmakers can request a briefing on the confidential ruling from the U.S. Trade Representative’s (USTR) office.

Sen. Patty Murray (D-Wash.), a defense appropriator, on Tuesday asked Gates in a letter to detail how he plans to handle the tanker competition in light of the WTO finding.

Murray wants to know how the WTO ruling “that the practice of launch aid to one expected competitor has harmed another expected competitor” will be taken into account.

Air Force and Pentagon leaders, including Gates, have stressed that the WTO dispute is not part of the acquisition process, and that the Pentagon makes its selections based on which company offers the best aircraft at a good price.

According to several media reports, Air Force Secretary Michael Donley said Monday that the trade dispute won’t be a factor in the Pentagon’s selection of a new tanker.

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Sen. Richard Shelby (R-Ala.), a defense appropriator and strong backer of the Northrop-EADS team, is making the case that it would be unfair for the Pentagon to factor into the bidding a preliminary ruling. A final WTO decision will likely come at the end of the year, but will only take effect after an appeals process that could draw the dispute out for several more years.

EADS said it repaid all reimbursable government loans related to the Airbus 330, including principal and interest. All reimbursable launch loans are carried on EADS’s balance sheet as liabilities and are listed in the company’s annual report. Pricing on both the Airbus and Boeing planes is determined through a complicated process that includes several market-driven factors. The Airbus 330 is the aircraft the Northrop-EADS team is offering up as the platform for the new tanker.

The European Union has filed a countersuit claiming Boeing received subsidies and tax breaks from Washington state over the past two decades, plus non-repayable benefits from military and space contracts. A preliminary ruling on that case is expected next year.