The Pentagon said Monday that it would require the Air Force to open to competitive bidding any new contract to replace or upgrade its aging fleet of aerial refueling tankers, long a lucrative source of revenue for Boeing Co.
"Let me be clear: After we have selected an appropriate alternative, we intend to require competition," Deputy Defense Secretary Paul D. Wolfowitz said in a letter to Sen. John W. Warner (R-Va.), chairman of the Senate Armed Services Committee. The letter was released Monday
Congress last month killed a 2002 deal, valued at $23.5 billion, to lease and buy 100 tankers from Boeing after a former top Air Force acquisition official admitted providing favorable terms to Boeing while she was negotiating a job with the aerospace company.
Wolfowitz's decision marks the latest fallout from one of the biggest Pentagon ethics scandals in decades. This month the former Boeing executive who hired the Air Force procurement official in charge of the tanker deal pleaded guilty to a conflict-of-interest charge.
Analysts said the new competition would bolster the prospects for Boeing's chief rival, European Aeronautic Defense & Space Co. Netherlands-based EADS owns 80% of European aircraft maker Airbus. In 2002 the Air Force awarded the tanker contract to Boeing over EADS.
"We've always said if there is a competition, we'll be there," EADS spokesman Guy Hicks said Monday.
Boeing spokesman Douglas Kennett said the company "respects the [Defense] Department's position and looks forward to the competition."
Despite the Boeing scandal, there remains some support in Congress to award any tanker contract to an American defense company.
But Ralph Crosby, head of EADS' North American operations, has been aggressively campaigning for a new, open competition for the lucrative tanker project. EADS has proposed modifying Airbus' A330 passenger jet for refueling purposes.
In an interview with The Times this month, Crosby said it would now make sense economically for the Air Force to split the contract and buy tankers from both Boeing and EADS.
To try to make an Airbus tanker deal politically palatable, EADS has pledged to build a $600-million plant in the United States for final assembly work and to guarantee that at least half the parts would be made by American companies.
EADS also would try to team with a U.S. company in any tanker bid. Last week Lockheed Martin Corp. and Northrop Grumman Corp. said they would consider partnering with EADS, after initially balking.
