September 11, 2008

Decision on New Tanker Delayed

By Edward Iwata

In another win for Boeing and a setback for rival contractors, the Defense Department on Wednesday said it has shelved the long-running competition to award a prized contract to replace the Air Force's old fleet of refueling air tankers.

Now the contract will be delayed indefinitely and decided by the next administration.

Defense Secretary Robert Gates told the House Armed Services Committee that the process can't be finished by January as planned. He said a "cooling-off period" is needed because of the controversy over the contract.

Gates said that "We cannot complete a competition that would be viewed as fair and competitive in this highly charged environment."

The Air Force could spend $100 billion in the coming years to replace its tankers. In February, Northrop Grumman of Los Angeles and Europe-based EADS, the parent company of Airbus, beat Boeing to win an initial $35 billion contract for 179 tankers.

But Boeing appealed and launched a lobbying campaign that urged the government to "buy American." The U.S. Government Accountability Office sided with Boeing, saying in June that the Air Force had made "a number of significant errors" that may have swayed the bidding.

Gates conceded that the bidding for the tanker had become "enormously complex and emotional in no small part due to mistakes and missteps on the part of the Defense Department."

He also said the existing tankers could be maintained to run missions in the near future, and that funding for the current and new fleets would continue.

Boeing spokesman Dan Beck said in a statement that the Chicago aircraft maker "welcomes the Defense Department's decision," and believes the procurement should "be conducted in a thorough and open competition."

But Northrop Grumman and EADS criticized the move.

Northrop Grumman Vice President Randy Belote said the firm is "extremely disappointed" and had bid "in good faith" on the most modern and capable tanker available. He said the delay will force pilots to fly tankers from the era of President Eisenhower.

Ralph Crosby, CEO of EADS North America, called it "a major failure of the defense acquisition system" in which "the special interests of one contractor" prevailed over urgent military needs.

Boeing could have an edge in future bidding if voters elect Democratic presidential candidate Barack Obama, who espouses a "Buy America" platform, predicts Bank of America securities analyst Harry Nourse, according to Bloomberg News. (c) Copyright 2008 USA TODAY, a division of Gannett Co. Inc. <>