$35 billion aerial tanker contract will be rebid

Gates’ office – rather than the Air Force – will supervise the latest round of bidding between Boeing and the team of Northrop Grumman and Airbus parent European Aeronautic Defence and Space Co. (EADS).

John Young Jr., undersecretary of defense for acquisition, technology and logistics, will serve as “source-selection authority” in the latest round. His assignment: Appoint an advisory committee to oversee the selection of a bidder to supply the modified commercial airplane fleet that will replace the current KC-135 tankers, which have an average age of 47 years.

In June, the Government Accountability Office (GAO) outlined “significant errors” that the Air Force made in the original award in February to the Northrop consortium. The GAO said Boeing, based in Chicago, might have won the contract had the service not made miscalculations in evaluating the competing bids.

Boeing protested the February award and cited more than 100 violations of proper contracting practices in its protest; the GAO, the investigative arm of Congress, sustained eight of the 100 alleged violations in its findings.

According to GAO, some of the areas in which the Air Force mishandled or miscalculated in the original bid process included:

• Life-cycle costs of the competing tankers.
  
• Questions regarding the ability of the Northrop-EADS tanker to refuel all the Air Force’s planes.
  
• Concerns that the Air Force may have misled Boeing on certain areas of the contract requirements.

The Defense Department has ordered Northrop Grumman to stop work on its contract, and a modified request for proposal could be issued before the end of July. The tanker request will remain in “open competition” until a new contract is awarded, which Gates said he expects will happen before the end of 2008.  

‘Aggressive oversight’ needed

In response to the Defense Department’s decision to reopen the bidding, a top official with the IAM union called for “aggressive oversight of the bidding process to make sure Boeing’s tanker is evaluated on a fair, level playing field.” The IAM represents nearly 35,000 Boeing employees in Washington state, Oregon, Kansas and other locations across the country.

“We will not accept, nor should American taxpayers accept, a process or an outcome that is only slightly less rigged than the initial round of bidding,” said IAM General Vice President Rich Michalski in a prepared statement.

A lot of jobs are on the line in tanker project. Boeing has said that 9,000 jobs in Washington state and 1,000 or more in Wichita, Kan., are at stake. Meanwhile, Northrop-EADS was planning to assemble the tankers at a proposed plant in Mobile, Ala., which has not been built yet. 

As noted in an earlier GovPro.com report, the Washington, D.C.-based Economic Policy Institute (EPI) has issued an analysis of the tanker contract. The conclusion: Boeing likely would create at least twice as many U.S. jobs as Northrop Grumman/EADS under the $35 billion contract. The difference in job creation amounts to 14,000 positions, according to EPI economist Robert Scott.

The tanker deal, one of the largest in Defense Department history, is the first of three contracts worth up to $100 billion to replace nearly 600 refueling tankers over the next 30 years.