A Resurgent Dogfight Over Tanker

Posted June 20, 2008 at 5:39pm

Lawmakers and lobbyists are seizing on the recent firings of top Air Force officials and a new highly critical Government Accountability Office report to steer a multibillion-dollar tanker aircraft contract to the Pentagon’s largest weapons builder, Boeing Co.

Topping off a month that began with the Air Force military and civilian leaders being forced to resign by Pentagon leaders, the GAO last week found “significant errors” in the Air Force’s recent $35 billion award for nearly 200 new refueling aircraft.

Under that deal, Northrop Grumman and its overseas partner, European Aeronautic Defence & Space, edged out Boeing for the work, but the GAO found “significant errors” and called for a new competition.

Critics of the deal, who favored Boeing’s U.S.-built 767 over the European contractor’s Airbus 330, are now linking the two controversies together as they push for Boeing to win a new competition.

The Air Force has 60 days to decide whether it will hold a new competition or stick to its original decision.

Lawmakers are vowing to push legislation that would call for a new deal if the Air Force does not.

Sen. Patty Murray (D-Wash.), whose state is home to thousands of Boeing jobs, and other supporters have promised legislation altering the Pentagon’s contracting rules — a move that could sway a new tanker competition.

Boeing allies in Congress will also press President Bush’s new Air Force nominees at their Senate confirmation hearings on the need for a new competition.

House Appropriations Subcommittee on Defense Chairman John Murtha (D-Pa.), whose panel oversees Air Force funding, explained that the service’s leadership “disarray” only complicates the battle on Capitol Hill for the contract.

Murray, for example, took to the Senate floor last week to blast the Northrop Grumman contract and tied it to the former Air Force chief and secretary who had “blessed” it and were subsequently forced out “because of a lack of confidence” by Defense Secretary Robert Gates.

Although Boeing’s supporters on Capitol Hill will tie the contract to the service’s ousted leaders, they also want to expand the criteria used to make a contract award to include the economic impact on the nation.

Another idea being floated would require that at least 85 percent of all parts for new Pentagon weapons be built in the United States. Such moves would favor Boeing over Northrop Grumman and its European partner.

“We have the responsibility to determine how our tax dollars are spent,” Murray said. “So, there are issues outside of what the GAO is looking at.”

But Sen. Ted Stevens (Alaska), a top Republican on the Senate Appropriations Committee, has called for caution. “I don’t think we should change the rules of the game yet,” he said.

One defense industry official who does not have a stake in the tanker competition explained that increasingly global markets have made the situation more complex than simply mandating that components be built in the United States.

“A U.S. company can make a valve,” the official explained. “It is then exported to Europe to make a pump. Europe then sends it back to the United States, where it is put into an engine and shipped back to Europe and put on plane. Then the United States buys the plane. How much of that engine is really U.S. built?”

Steve Ellis, vice president for programs at Taxpayers for Common Sense, said he has concerns about the impact of buy-America requirements on U.S. trade and worries it could lead to increased Pentagon spending.

“You can’t ignore local companies, but you need to get the best [weapon] and the best price even if it is partially built by a foreign company,” Ellis said.

Sen. Jeff Sessions (R-Ala.), a member of the Senate Armed Services Committee, warned lawmakers against politicizing the contract.

“Congress has the right to monitor the program, but this is ultimately a decision to be made by pilots, people being refueled in the air and engineers,” Sessions said.

Sessions is in a precarious position because he is normally a supporter of buy-America regulations. But he is also the junior Senator from Alabama, where the Northrop-EADS tanker would be assembled — a move that would create thousands of jobs.

“What is missing from this argument is that this aircraft … will be completely assembled in the United States,” Sessions said.

For now, Northrop Grumman has postponed its groundbreaking ceremony on its new tanker assembly site in Alabama, and observers say the aircraft could be delayed for several years.

It’s not the first time the Air Force has mishandled a tanker contract. Several years ago, Sen. John McCain (R-Ariz.) played a major role in derailing a deal between Boeing and the Air Force to lease refueling tankers.

It was ultimately discovered that a former Boeing executive improperly offered a job to a senior Air Force official who oversaw the leasing deal. As a result, both ended up serving time in prison.

McCain’s office, as well as Northrop Grumman, Boeing and the Air Force, did not respond to questions about changing the Pentagon’s source selection criteria.

However, in a brief statement, McCain called on the Air Force to take a closer look at the GAO’s recommendation for a new competition.

“The GAO’s finding that the Air Force did not fairly apply its own rules in making its original award decision must be taken very seriously,” McCain said. “As I have said under similar circumstances, I now urge the Air Force to carefully consider the GAO’s decision and implement its recommendations as quickly as, and to the fullest extent, possible.”