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Boeing: Air Force tilted the playing field

/ Source: The Associated Press

Boeing Co. said Air Force officials tilted the playing field in a $35 billion tanker contract competition toward Northrop Grumman Corp. and European Aeronautic Defence and Space Co.

In a formal protest of the contract made public on Tuesday, Boeing said the Air Force “repeatedly made fundamental but often unstated changes to the bid requirements and evaluation process” to keep the Northrop Grumman/EADS proposal alive.

The release of the executive summary of the protest is Boeing’s latest public relations salvo in its attempt to overturn the Air Force award of the tanker deal to the Northrop/EADS team. Doing so won’t be easy — a fact Boeing acknowledged Tuesday.

Mark McGraw, manager of Boeing’s tanker program, said reversing the Air Force’s decision will be “an uphill battle,” but he’s confident the company will prevail.

Last week, the Chicago-based company filed its protest with the Government Accountability Office, which has 100 days from the date of the filing to rule. In the protest, Boeing maintains that the Air Force review “was not a fair and open competition, but a skewed process that unfairly compromised Boeing’s proposal.”

Boeing has also turned to several of its existing lobbying firms, including Denny Miller Associates and Gephardt Group, to press its case. And on Monday, Boeing said its tanker could have saved $30 billion in fuel bills over 40 years.

Northrop Grumman, too, has gone on the offensive. Paul Meyer, manager of Northrop’s refueling tanker program, said Tuesday he doesn’t understand Boeing’s claims since both companies had adequate opportunity to comment on and help shape several versions of the Air Force’s request for proposal. He added that his competitor’s attacks on the Air Force acquisition process come as a surprise.  

On the lobbying front, Northrop has hired former Senators Trent Lott, R-Miss., and John Breaux, D-La. to keep the contract where the Air Force first put it on Feb. 29.

In a statement, the Air Force defended the tanker competition as transparent and fair, saying it provided both bidders with continuous feedback on the strengths and weaknesses of their proposals.

The surprise selection of Europe’s EADS, parent of Boeing rival Airbus, and Los Angeles-based Northrop Grumman is major blow to Boeing. The company has supplied refueling tankers to the Air Force for nearly 50 years and was considered the heavy favorite to win the new contract to replace 179 planes. The deal is the first of three Air Force awards worth as much $100 billion to replace the entire fleet of nearly 600 tankers over the next 30 years.

Boeing’s shares rose $1.04 to $76.53 Tuesday. And Northrop’s shares were up 49 cents $79.79.

The tanker fight is tumbling through Capitol Hill, where lawmakers from Washington, Kansas and other states that would have gained jobs from a Boeing win are demanding the Air Force explain why it gave the deal to a foreign company.

The contract has even seeped into the presidential race. The presumptive Republican candidate, Sen. John McCain, played a key role in exposing a Boeing procurement scandal in 2003 that sent a top Air Force acquisition official to prison and led to the collapse of an earlier tanker contract.

McCain pressured the Air Force to open the new tanker contest to competition and to disregard concern over European Union subsidies to Airbus, which are at the heart of a U.S. Trade Representative complaint against the EU before the World Trade Organization.

That history is the backdrop of a key complaint in Boeing’s protest — namely that “the process became driven by the Air Force’s determination to create the possibility for competition between two planes that offered dramatically different capabilities.”

In its filing, Boeing said that pressure from Capitol Hill and the Northrop Grumman/EADS team ultimately led the Air Force to pick the larger plane offered by Northrop and EADS even though it had originally asked for a medium-sized tanker.

Air Force officials have said they choose the EADS/Northrop tanker, which is based on the Airbus 330 commercial plane, in large part because its size will enable it to carry more fuel, cargo and passengers.

But Boeing said the original request for proposal “did not call for a jumbo-sized tanker.”

The company proposed a tanker based on its 767 commercial aircraft, but said it would have used a larger 777 platform if it had known the Air Force wanted a larger plane.

The protest also charges that the Air Force changed its requirements to accommodate the bigger tanker — assuming maximum runway strength and ignoring estimates on tarmac sizes, for instance, to make it appear that more air bases would be able to handle the larger plane.

In addition, Boeing said it was unfairly penalized for not providing adequate commercial cost and pricing data for the underlying 767 plane even though the Air Force had told Boeing officials that it was satisfied with the data it had supplied.

And the company argued that the Air Force ignored Boeing’s lengthy track record of producing aerial refueling tankers for the military and “the inherent manufacturing genius of its bid.”