Pentagon promises award of $35 billion tanker contract will be 'transparent'

High-level Pentagon officials promised lawmakers Thursday that a new attempt to award a contentious midair refueling tanker contract would be “transparent.”

The $35 billion contract has been engulfed in controversy for years, with two of the largest defense contractors bidding on the right to build 179 planes and lawmakers from competing districts that stand to benefit stuck in the middle.

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Ashton Carter, the Pentagon’s acquisitions chief, promised lawmakers in closed-door discussions that the Air Force’s goal in awarding the contract is first and foremost to benefit the military and the taxpayer, according to briefing documents. He said the selection process will be “crystal-clear” and “transparent.”

“We […] and Secretary [of Defense] Robert Gates, expect to be criticized equally from all sides,” Carter said.
Deputy Secretary of Defense William Lynn and Air Force Secretary Michael Donley also attended the meetings.

Thursday’s briefing was an attempt to limit the political fallout as the Air Force readies a request for proposals (RFP) with an eye on selecting a contractor in the summer of 2010. A career senior Air Force official will have the selection authority, but that name will not be disclosed, Donley told lawmakers.

Boeing and a team of Northrop Grumman and EADS, the parent company of Airbus, have been competing for the contract for years. Their congressional supporters have been wrangling over which company deserves to win the lucrative deal. Boeing’s most vocal supporters are from Washington state and Kansas, where the company has major operations, while Northrop Grumman-EADS advocates hail from Alabama, where the team plans to assemble the new tankers.

Last year, Boeing went to the Government Accountability Office and successfully protested the Air Force’s tanker contract award to the Northrop Grumman-EADS team in February 2008.

Carter pledged the new selection strategy will make it “crystal-clear” to both competing companies what it will take to win the contract. The process will also be “transparent” so that “when a winner is chosen, everyone can understand why they won,” he said in the briefing.

The Pentagon officials stressed that the renewed competition will not be a “rerun of the last competition.” “That competition was criticized for being too subjective,” the briefing materials said.

“We very much need to succeed going forward,” Donley said at a Pentagon briefing Thursday afternoon. Lynn, Carter and Donley summarized their briefing to lawmakers at the news conference.

The two competitors will have to submit a fixed-price proposal for four engineering and manufacturing development aircraft and the first 64 aircraft in the fleet. The competitors will have to submit an upper limit on the price for the remaining 111 aircraft, Carter said in the briefing.

“Price is very important in this competition, but it will not be the only factor,” Lynn told reporters at the Pentagon briefing.

The Pentagon will take into account the “wartime effectiveness” of each plane offered and weigh that as part of the overall price. Wartime effectiveness in essence means the evaluation of how many of each plane offered would be needed to deal with the most stressful contingency, Carter explained in the briefing.

If the prices offered by the competitors come “very close,” the government will consider other features, which are not mandatory but would add value to the tanker fleet. “The war-fighter indicated that he would be willing to pay a modest premium for these added features, expected to be approximately 1 percent of the total adjusted price,” Carter said.

Overall, the two competitors will have to satisfy 373 mandatory requirements essentially stemming from the military and also prove that they can satisfy requirements in areas such as systems engineering, program management, support, technology maturity and past performance. There are an additional 93 requirements that are not mandatory, meant to allow the competitors to offer features that would ultimately add value for the military, according to Donley.

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A trade dispute between the United States and Europe over government subsidies to commercial aircraft will not factor into the selection, Pentagon officials told lawmakers. Instead, the Pentagon will extract a commitment from the competitors that any penalties will not be passed to the U.S. taxpayers.

Rep. John Murtha (D-Pa.), the chairman of the House Appropriations Defense panel, said Thursday said that the Air Force’s process to select a new fleet of midair refueling tankers appears to be “both open and less subjective.” Murtha, however, is pressing the Pentagon to buy 36 airplanes a year instead of 15, as planned now.

Meanwhile, one of Boeing’s strongest supporters in Congress vowed to closely study the draft RFP. “The Pentagon has pledged to run a fair and transparent competition, and I intend to hold them to their word. In the coming days, I will be reviewing the draft RFP in detail to ensure that it places competitors side by side in the starting gates,” said Sen. Patty Murray (D-Wash.), a Senate defense appropriator.