Tanker Wars: Millions Spent Lobbying $40B Deal

Posted September 12, 2008 at 5:06pm

Correction Appended

A series of unusual guerrilla-style political advertisements hit Washington news radio stations this summer.

In one spot, an announcer launches a broadside against one of the Pentagon’s largest contractors amid whirring jet engines. “It seems like every time we hear about Boeing and military contracts, we hear about cheating.” As engines sputter, the announcer shouts “mayday, mayday.”

The ads were part of an intense political and lobbying contest that has seen millions of dollars spent in recent months to claim one the largest military contracts ever awarded. It has pitted defense giants Northrop Grumman and the European Aeronautic Defence and Space Co. against Boeing for $40 billion in work to build aerial refueling tankers for the Air Force.

Last week, turmoil roiled the contest when Defense Secretary Robert Gates announced the Pentagon would not award the contract this year. Instead, Gates called for a “cooling off” and said the new president should decide who builds the planes.

It’s the latest twist in a procurement effort that has been embroiled in controversy for much of this decade.

Earlier this year, the Pentagon awarded the contract to Northrop Grumman and EADS, but canceled that decision and called for a new contest after a Government Accountability Office found that the competition was poorly managed.

Several years ago, a Boeing and former Air Force official went to jail after Republican presidential nominee Sen. John McCain (Ariz.) blew the whistle on a sweetheart deal for the service to lease the tanker planes from Boeing.

Lobbyist and defense industry observers say Boeing has been the more aggressive in seeking Pentagon support for both reversing and then delaying the award. Several sources said Boeing threats to pull out of the competition if it was not delayed helped sway Gates’ decision. Boeing wants more time to develop a new plane; Northrop Grumman and EADS believe they already have the best plane to offer.

According CQ MoneyLine, both Boeing and Northrop Grumman were among the top spenders on lobbying for the first half of 2008. Not all the money went to the tanker competition, but disclosure forms show both contractors are on pace to spend more on lobbying this year than last year.

Already Northrop Grumman has spent $11.6 million on lobbying, nearly $1 million more than in 2007. Indeed, only the U.S. Chamber of Commerce, which represents a broad range of clients and issues, has spent more on lobbying in 2008.

Boeing spent $6 million in the first half of 2008, an amount that places it at least on pace with the $10.6 million paid last year. Their spending is in line with some of the biggest business trade groups, including the Business Roundtable and the National Association of Manufacturers.

EADS, meanwhile, spent about $3.2 million on lobbying during the first half of the year, although not all of that money is tied to the tanker deal. Disclosure reports show the company has paid the Loeffler Group $200,000 and Ogilvy Government Relations $120,000 for tanker lobbying work this year.

Moreover, disclosure reports show the companies have hired former top Congressional leaders in recent months to bolster their cases.

Northrop Grumman has paid the lobbying firm founded by former Senate Majority Leader Trent Lott (R-Miss.) and Sen. John Breaux (D-La.) $200,000 this year for work related at least in part to the tanker deal. Breaux has lobbied Congress on the issue.

Boeing has paid $180,000 to former House Minority Leader Dick Gephardt (D-Mo.) for tanker work this year.

Several defense industry and lobbying officials stressed that both companies employ senior managers or have hired former top military officials with strong ties to the Pentagon. While there is nothing illegal or even unethical about such employment, observers say those connections are invaluable in providing access to Pentagon brass.

For example, David Oliver, executive vice president and chief operating officer for EADS North America, is a retired Navy admiral who also served as a top Pentagon acquisition official in the Clinton administration.

Boeing has spent more than $100,000 on lobbying in recent years on PAW Associates, a lobbying group headed by retired Air Force Maj. Gen. Paul Weaver, who formerly ran the Virginia Air National Guard.

Senate defense appropriators with ties to the contractors also have been closely following the deal.

Sen. Patty Murray (D-Wash.), whose state has thousands of Boeing workers, praised the latest delay, saying it would ensure the deal “got done right.”

But Alabama Sen. Richard Shelby (R), whose state would gain jobs if Northrop Grumman wins, blasted Gates’ move as “irresponsible, shortsighted and harmful to both the warfighter and the nation.”

Correction: Sept. 16, 2008

Under federal ethics guidelines then in effect, former Senate Majority Leader Trent Lott (R-Miss.) cannot lobby Congress for one year from his retirement date of Dec. 18, 2007.