Key lawmaker wants Boeing and Northrop to share $35B contract

The chairman of a key congressional panel overseeing the Air Force wants to split a controversial contract for refueling tankers between rivals Boeing and Northrop Grumman.

Rep. Neil Abercrombie (D-Hawaii), the chairman of the Armed Services Air and Land Forces sub-panel, said that consensus is developing, at least in the House, that the Air Force should award contracts to both Boeing and a team of Northrop Grumman and EADS North America.

“My view is very simple: Let’s split the buy,” Abercrombie told a defense conference at the National Press Club on Wednesday. “This is trying to make a decision that is in the strategic interest of the nation and at the same time accommodates both the political and economic interests of the nation. That is a pretty good outcome. That’s going to be my recommendation.”

Abercrombie is on the same page with another key House lawmaker, Rep. John Murtha (D-Pa.), the chairman of the House Appropriations Defense panel, who in recent weeks has been advocating for splitting the contract.

Abercrombie intimated that lawmakers are looking to find a “conclusion” as soon as possible to an almost decade-long saga surrounding the replacement of Eisenhower-era tankers.

While the two lawmakers could get more support for their idea in the House, they could face an uphill battle in the Senate from defense authorizers and appropriators, particularly from Boeing supporters who want to see the aerospace giant take home the entire $35 billion contract.

Sen. Patty Murray (D-Wash.), a key defense appropriator and Boeing supporter, does not supporting splitting the contract. Sen. Daniel Inouye (D-Hawaii), the chairman of the Appropriations Committee, has not expressed an opinion, but Abercrombie said he approached the fellow Hawaiian with the idea.

Boeing supporters are still smarting over the fact that the Air Force initially awarded the contract to the Northrop Grumman team. Boeing successfully protested the contract with the Government Accountability Office, but Defense Secretary Robert Gates punted a repeat competition to the Obama administration — which he continues to represent at the Pentagon.

The tanker issue created a political and lobbying maelstrom on Capitol Hill, and lawmakers are starting to consider a split-buy as the only feasible way to temper the situation, despite opposition from the Pentagon. It argues splitting the contract could cost over $2 billion more than just offering one contract.

Under a split contract, lawmakers would direct spending to two assembly lines — one for Boeing in Washington state and one for the Northrop Grumman-EADS North America team in Mobile, Ala.

The tanker contract, worth at least $35 billion, will be one of the biggest awards for the defense industry at a time when the Obama administration is talking about reducing spending and cutting some weapons programs. Having both Boeing and Northrop Grumman build tankers would require not only two separate assembly lines but also two spare-parts inventories, two different way of training crews and two different requirements to maintain the aircraft.

Abercrombie said he is ready to justify funding for two separate contracts because the old tankers are aging rapidly and require more money for upkeep. Replacing the tankers is the Air Force’s stated No. 1 priority.

“How do we justify the costs of saying we needed to have a tanker seven or nine years ago and the explosion in cost since then by not doing it? The cost should be commensurate with meeting the need,” Abercrombie told reporters.

Abercrombie said both contractors acted in “good faith” in their bid to win the tanker contract.

In the Senate, John McCain (R-Ariz.), Obama’s one-time rival and the ranking member of the Armed Services Committee, opposes splitting the contract on policy grounds, arguing that competition is good for contracts. Splitting the contract would be a political decision, he said.  McCain was instrumental in thwarting a corrupt lease deal for tankers between Boeing and the Air Force several years ago.

Sen. Carl Levin (D-Mich.), the panel’s chairman, has not expressed his views on a split-buy. His committee staff is gathering information on all possible options related to the tanker.

Defense Secretary Gates told lawmakers in January that he will ensure there is competition for the tanker contract.

“The key is a competitive bid meeting technical requirements and the best deal for the taxpayer,” Gates said. At the time, he also told lawmakers that he wanted to start a new tanker selection process in early spring with a contract announcement “soon after the first of next year.”

However, some key positions in the Air Force and Pentagon still need to be filled, which could delay the process.

The tanker issue will most likely light up the defense authorization and appropriations process for fiscal 2010, which lawmakers are slated to take up soon after Obama delivers the detailed defense budget to Capitol Hill at the end of April.