Boeing, Northrop Fight to Intensify

Posted June 18, 2008 at 6:14pm

The Government Accountability Office ruling Wednesday on a high-stakes Defense Department dispute between the Boeing Co. and Northrop Grumman will do nothing to end the two companies’ intense lobbying efforts over a lucrative Air Force contract for an aerial refueling tanker plane.

Lobbyists and defense industry insiders said the GAO decision, which stated that the DOD should give Boeing another chance to win, would only intensify the two giants’ advocacy efforts.

“Both sides are going to work it hard, not only the lobbying angle but the public relations angle and advertising,” said one defense industry source who is not affiliated with either company.

The efforts will likely mirror the full-court press both companies’ lobbying teams have been doing since the deal was contested in February. Both companies held several meetings with Congressional state delegations trying to rally support.

Significantly, Northrop was unable to find much support within Congress to take up its cause, but it is likely that members of the Mississippi and Alabama delegations will play defense for Northrop on Capitol Hill. Northrop has plants in both states.

“I think [Boeing] did a great job of defining this debate,” said one lobbyist with knowledge of the transaction, who doesn’t work for Boeing. “They defined this debate as being the company that was more American and [Northrop] as these foreign evildoers.”

Boeing, which has substantial support in Congress, asked the GAO to examine the Air Force’s process after the service decided in late February to award a contract to Northrop and its partner, EADS, a European company. The GAO said that the Air Force made “significant errors” in the process and that those errors may have affected the outcome. The GAO recommended that the military give Boeing another chance.

The decision was cheered not only by Boeing’s hefty roster of lobbyists but also by its Hill champions, including Sen. Patty Murray (D-Wash.) and Rep. Norm Dicks (D-Wash.), who are both appropriators. Some of Boeing’s Congressional supporters had threatened to halt funding for the tanker program if Boeing were cut out of the process.

“I am not surprised that the GAO identified significant errors in the selection process,” Murray said in a statement. “The Air Force bought a tanker that doesn’t meet their needs and has been waging a PR campaign ever since. I look forward to a thorough and honest response by the Air Force to the GAO ruling. But my concerns have always gone beyond the issues within the scope of a GAO decision. The GAO did not, and could not, consider the key policy issues this contract raises — such as illegal subsidies.”

An official statement from Northrop said, “We respect the GAO’s work in analyzing the Air Force’s tanker acquisition process. We continue to believe that Northrop Grumman offered the most modern and capable tanker for our men and women in uniform. We will review the GAO findings before commenting further.”

One Northrop Grumman lobbyist, who would not be quoted by name, said that when it comes to Congress, in the coming days and weeks, “obviously, you want to keep your champions and undecided Members informed.” But, this lobbyist added, “the game’s going to switch over to the Pentagon.”

The lobbyist added that the GAO report did not comment on the substance of the Boeing and Northrop tanker bids but instead on the process. “We’re going to make our case that there’s still a great need to have this tanker and have it soon,” the Northrop lobbyist said.

Both sides have maintained huge and growing rosters of outside lobbyists, and both companies spent a small fortune on lobbying in the first quarter of this year. Northrop reported spending $3.3 million in federal lobbying, while Boeing reported spending $2.8 million. Those figures include money spent on lobbying other matters, as well.

Northrop’s outside team includes Barbour Griffith & Rogers, the Breaux-Lott Leadership Group, Brown and Co., and Elmendorf Strategies, according to lobbying reports filed with Congress.

Boeing’s contract K Street team includes Van Scoyoc Associates, Denny Miller Associates, the Gephardt Group, Gibson Dunn & Crutcher, and Heather Podesta + Partners, among others.

Anna Palmer contributed to this report.