By Roxana Tiron - 02/24/10 07:03 PM EST
Alabama lawmakers on Wednesday voiced strong pessimism over Northrop Grumman’s chances of winning a contentious Air Force refueling aircraft contract, questioning the fairness of the bidding process.
“This is a disappointment,” Sen. Jeff Sessions (R-Ala.), a senior defense authorizer, said after emerging from a briefing with senior Pentagon and Air Force officials. “I am really worried at this point” that Northrop Grumman would not compete for the contract, he said. “I am going to urge them to compete, and I hope that they feel like they can.”
Northrop Grumman and Boeing have been going head to head for several years to win the lucrative contract. The two companies and their congressional supporters have been locked in an intense public-relations and lobbying battle.
In December, after reviewing a draft request for proposals, Northrop Grumman threatened to pull out of the competition unless significant changes were made to the final request for bids. Northrop Grumman officials argued that the bidding process was stacked against the company.
Northrop, teamed with EADS North America, would assemble the new aircraft in Mobile, Ala., while Boeing has major operations in Washington state and Kansas. EADS is the parent company of Airbus, Boeing’s rival on the commercial aircraft market.
But Sessions said he saw no fundamental changes to the bidding criteria. He said that the way the request for proposals is structured, it would still favor a smaller airplane — the 767 Boeing is expected to offer is much smaller than the Airbus 330 that the Northrop team was planning.
Sessions charged that the Pentagon was not entering into a fair selection process.
“The integrity of the Department of Defense is at stake,” Sessions said.
Rep. Mike Rogers (R-Ala.) said the Pentagon briefing did not “really calm” his concerns that the Pentagon addressed the problems raised by Northrop Grumman.
“I do not think it looks promising” for Northrop to win the contract, Rogers said. “I am not optimistic.”
He said his biggest concern is that the Pentagon has closed out any prospect of buying planes from both companies.
Lynn told lawmakers the Pentagon made 230 changes from the draft request for proposals, but “retained the overall structure of the requirements.” The most significant change in the final bidding request is the pricing strategy for the tankers, in effect to adjust for inflation.
Acquisition chief Carter said the first two lots will be bought at a firm fixed price, while the remaining lots will use a “not to exceed” structure and economic price adjustment provisions to protect “both taxpayers and industry.”
“What is not changed is that we are being objective and crystal-clear about how the winning offeror will be selected,” Lynn said, according to the briefing documents provided to lawmakers.
“This is a best-value competition. ... So a bidder could actually have a higher proposed price and still win,” Lynn said.
Air Force Secretary Michael Donley said at a Pentagon press briefing Wednesday that both Northrop Grumman-EADS and Boeing are in a position to win the competition. The companies “can meet the mandatory requirements that we’ve laid out,” he said.
Lynn said that it is the Defense Department’s “preference” that it receive bids from both Northrop and Boeing. “We have written this [the bidding request] as a competition,” he said.
Sen. Patty Murray (D-Wash.), a defense appropriator, said that apart from the pricing structure, the Pentagon made “minor” changes to the final request for proposal.
“They are moving aggressively forward,” Murray told The Hill.
Rep. Todd Tiahrt (R-Kan.), who also attended the briefing with Pentagon officials, said the Air Force “tried to be very responsive to both parties.” Tiahrt said the Air Force did a “pretty good job of tightening up the requirements” for a mid-sized refueling tanker — an indication that Boeing could be well-positioned in the competition.
Tiahrt said he was displeased the Pentagon decided not to take into account an interim World Trade Organization ruling on subsidies Airbus received from European governments.
The rollout of the request for proposals coincides with a large congressional visit by Boeing’s supplier companies for the tanker aircraft. Representatives from 101 companies across 30 states are visiting 160 congressional offices on Wednesday to advocate for Boeing in the tanker competition.
Sen. John McCain (R-Ariz.), the ranking member of the Senate Armed Services Committee, said after the briefing that, so far, the Pentagon’s selection process appears to be fair.
“It is the beginning of a long process. We are going to monitor it carefully,” McCain said.
McCain was instrumental in thwarting a leasing deal between the Air Force and Boeing almost a decade ago. That deal landed two Boeing officials in prison for corruption. As a result, the Pentagon opened up the contract to competition, spurring Northrop Grumman and EADS to vie for the lucrative award. Northrop Grumman won the contract in 2008, but Boeing successfully protested the award with the Government Accountability Office. Consequently, the Pentagon leadership decided to start a new competition.
Once the final request for proposals is issued, the companies have 75 days (an extension from the usual 60) to respond and submit their bids. The Pentagon will announce its decision on the winner 120 days after that.
Northrop Grumman and Boeing were scheduled to receive briefings from the Pentagon on Wednesday.
Randy Belote, Northrop’s vice president for communications, said in a statement that “Northrop Grumman will analyze the RFP [request for proposal] and defer further public comments until its review of the document has been completed.”
Boeing issued a statement hailing the open dialogue with the Air Force on the bidding process, but expressed disappointment that the request for proposals does not take into account the World Trade Organization dispute. The Air Force also does not address "how fuel and military-construction costs over the life of the tankers will be factored into consideration of the competing bids," said Jean Chamberlin, vice president of Boeing's tanker program.
This story was updated at 9 p.m.