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Boeing to challenge Air Force decision on tanker contract

'Serious flaws' in the competition are cited by the company.

March 11, 2008|Peter Pae | Times Staff Writer

Escalating the fight over the biggest defense contract in years, Boeing Co. said Monday that it intended to challenge the Pentagon's decision to place an aircraft order potentially worth $40 billion with the consortium of Northrop Grumman Corp. and European aircraft maker Airbus.

Boeing, the world's largest aerospace company, plans to file a formal protest today challenging what is likely to be the nation's last big new defense contract for at least a decade.

"Our team has taken a very close look at the tanker decision and found serious flaws in the process that we believe warrant appeal," said Boeing Chief Executive James McNerney. "This is an extraordinary step rarely taken by our company, and one we take very seriously."

Culminating an intense competition whose outcome has riled "buy American" proponents, the Air Force on Feb. 29 chose the Northrop-Airbus proposal over Boeing's. The planned fleet of 179 new aerial refueling tankers will replace KC-135 tankers that were built in the late 1950s and early '60s.

The Air Force has not yet publicly detailed how it made its decision, but executives of Century City-based Northrop said they were told in a briefing Monday that their entry proved to be "more advantageous" than Boeing's offer in four of the five key categories. Those included cost, the company's past performance with other defense contracts and the mission capability of the aircraft.

The surprise decision has prompted a flurry of outcries, particularly from lawmakers representing states with big Boeing payrolls. They argue that the contract will send U.S. jobs overseas and hurt the nation's defense industry.

The winning tanker entry is based on the twin-engine A330 passenger jet that was developed in France by Airbus, a subsidiary of European Aeronautic Defense & Space Co. A330s are built in Toulouse, France, but the Northrop-Airbus team plans to assemble the tanker versions, to be known as the KC-45A, in Mobile, Ala.

Northrop shot back Monday at Boeing's decision to appeal the contract award, saying that its tanker was just as "American" as it rival's proposal, which would have been built at Boeing facilities in Everett, Wash., and Wichita, Kan.

Northrop spokesman Randy Belote said that Northrop's tanker program would create 48,000 jobs, a vast majority of them in the U.S.

The new estimate would be nearly double the initial projections of 25,000 made two years ago before the competition began. Northrop's latest figures would top Boeing's projections that its tanker, based on the 767 jetliner, would have created 45,000 jobs.

Belote said the new estimates were based on revised data from its suppliers, about 230 of which are U.S.-based, and new Department of Labor figures. As such, its tanker program would create 14,000 direct jobs and 34,000 indirect ones, which include such jobs as janitors and truck drivers.

Boeing's decision to challenge the award comes as Congress prepares to hold hearings on the issue. Pentagon officials are expected to be grilled over the next several days, with some lawmakers considering whether to try to block funding for the planes.

A pivotal meeting is scheduled this morning when a powerful House Defense subcommittee is expected to get a detailed but confidential briefing from Air Force officials on how they settled on the Northrop-Airbus plane.

The meeting's outcome could portend how Congress is likely to address the outcries over the use of a plane developed by a French company.

In a phone interview Monday, Rep. Norm Dicks (D-Wash.), one of the chief critics of the contract award to the Northrop-Airbus team, said that in addition to demanding an explanation he would "tell them what they did was not right."

Dicks said he intended to press the Pentagon to not only overturn the decision but award the contract to Boeing, adding, "Americans want to see this built by Boeing, and that's the right answer."

But longtime congressional observers said other lawmakers would be hard pressed to go along with Dicks.

"Unless they find new compelling evidence that there was something fundamentally wrong in the way the contractor was chosen, it'll be very difficult for Congress to take drastic action," said Keith Ashdown, a policy researcher for nonpartisan government watchdog group Taxpayers for Common Sense.

The decision to protest came just three days after the Air Force, in a confidential briefing, provided Chicago-based Boeing a detailed explanation of how the tanker decision was reached.

Based on that meeting, Boeing CEO McNerney said the company continued to believe that it submitted the "most capable, low risk" proposal. Boeing said it would provide additional details of its case in conjunction with the protest filing today.

The Government Accountability Office, the investigative arm of Congress, has 100 days to review Boeing's protest and decide whether to dismiss or uphold it. If Boeing's challenge is upheld, the GAO could require the Air Force to stage another competition.

Air Force officials were not immediately available for comment, but Air Force spokesman Geoff Morrell said early Monday that "we believe this to have been a fair and transparent competition."


Times staff writer Peter Spiegel in Washington contributed to this report.

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