http://edition.cnn.com/2008/US/02/29/air.f...kers/index.html

WASHINGTON (CNN) -- The U.S. Air Force on Friday announced one of the largest military acquisition programs in U.S. history, saying the service had chosen Northrop Grumman over Boeing to replace its aging air refueling tanker fleet.

"We look forward to partnering with them as we continue to defend our great nation in the future," said Secretary of the Air Force Michael Wynne.

The announcement was a surprise to many in the business industry who expected Boeing to be favored over the company, which will use a European company's airframe, Airbus, for the tanker.

The $40 billion deal to start replacing 179 tankers -- known as the KC-45A program -- will expand to over $100 billion to replace the entire fleet of almost 500 planes, Pentagon officials said.

Boeing proposed a tanker based on its 767 commercial airliner, while Northrop -- working with Boeing arch-rival Airbus and its parent company, European Aeronautic Defense and Space Company (EADS) -- offered a model based on the Airbus A330 airliner, which is larger than the 767.

To sweeten the deal, EADS announced it would put a plane assembly plant in Mobile, Alabama, if the company won the contract.

Boeing, a U.S. company, builds planes in the state of Washington.

"We had two very competitive offers in this competition," said Sue Payton, assistant secretary of the Air Force for acquisition, briefing reporters after Wynne made the announcement. "Northrop Grumman clearly provided the best value to the government."

Payton said "debriefings" were planned for both competitors, and declined to say where Boeing's offer fell short until after that happens, sometime on or after March 12.

"We owe it to Boeing to give them the first debrief on this," she said.

The Air Force has been trying since 2001 to replace the tanker fleet, which has some planes close to 50 years old, according to Air Force statistics.

The average age of the fleet is more than 24 years, while the average age of a U.S. commercial airline fleet is just over nine years, according to Air Force officials.

It will take several years to get the new KC-45 flying, said Gen. Arthur Lichte, commander of Air Mobility Command.

"We hope that we'll get the first aircraft into the test program beginning in 2010. And we're hoping that the first capability operationally will be about 2013," he said.

The contract to replace the aging fleet of air refueling tankers was mired in corruption and political wrangling for years.

In 2004, Congress, led by Sen. John McCain, R-Arizona, banned the Air Force from working out a lease and purchase deal with Boeing after a federal investigation uncovered improprieties at the highest levels of the Air Force procurement process.

Critics also complained that Boeing was awarded the contract without competition and that the deal was a bailout for the 767 program, which was facing slumping sales.

Congress forced the Air Force to start a new contract bidding plan that allowed Airbus to compete for the contract.

Pentagon officials said the losing company could protest and ask the Government Accountability Office to investigate the decision, which would delay the program again.

Although the deal announced Friday is one of the largest U.S. military contracts in history, it falls short of the Army's recent $200 billion Future Combat System program and the Pentagon's future F-35 Joint Strike Fighter program, expected to be over $200 billion

Air tanker deal provokes US row


Boeing's loss of a $40bn contract to build a new in-flight refuelling aircraft for the US military has drawn angry protests in Congress.

Lawmakers from Washington state and Kansas, which have big Boeing plants, voiced "outrage" that it had gone to a consortium including Europe's Airbus.

The planes will be assembled in Alabama but constructed largely in Europe.

Boeing has said it is awaiting an explanation from the military before deciding whether or not to appeal.


We are outraged that this decision taps European Airbus and its foreign workers to provide a tanker to our American military
Statement by congressional lawmakers from the Seattle area

The new aircraft, named the KC-45A by the US Air Force, is based on the Airbus A330 and will be manufactured in partnership with US defence firm Northrop Grumman.

Its job will be to refuel the vast array of US warplanes and the contract is worth in the region of $40bn over 15 years.

It is a huge blow for Boeing, the BBC's Vincent Dowd reports from Washington.

America has around two-thirds of all such aircraft in use anywhere, and a senior figure in the company said recently if it lost this contract it could be out of the refuelling market totally for years.

'Outsourcing'

Gen Arthur J Lichte, commander of the US Air Force's Air Mobility Command, said the winning design had many advantages over Boeing's tanker.

A US KC-135 tanker refuels a B-2 bomber over the Pacific near Hawaii, October 2007
The average age of current US refuelling planes is nearly 50 years

"More passengers, more cargo, more fuel to offload, more patients that we can carry, more availability, more flexibility and more dependability," he said.

In Everett, Washington state, a few dozen Boeing workers protested outside a Machinists Union hall holding up signs saying "American workers equal best tankers" and "Our military deserves the best".

Congressional lawmakers from the state's Seattle area issued a joint statement condemning the "outsourcing" of the contract.

"We are outraged that this decision taps European Airbus and its foreign workers to provide a tanker to our American military," they said.

Todd Tiahrt, a Republican congressman from Wichita, Kansas, called for "an American tanker built by an American company with American workers".

"I hope the Air Force reverses its decision," he added.

But the news was a boon for Alabama Republican congressman Jo Bonner.

"We are so very excited about having the opportunity to help the Air Force acquire the most modern and capable refuelling tanker - a tanker assembled in America by Americans," he said.

The deal will also safeguard thousands of British aviation jobs, the BBC's Andy Moore says. Wings will be made at factories in Bristol and in North Wales.

Breaking through

For Airbus's parent company, the European Aeronautic Defence and Space Company (EADS), it is a long-desired and potentially crucial breakthrough into the US market, our correspondent says.

Boeing KC-767
Boeing's KC-767 design had been widely predicted to win

Replacing America's ageing KC-135 refuelling planes - which date back to the 1950s - has proved controversial, he notes.

In 2002, the Air Force negotiated a $23bn deal with Boeing for 100 tankers to be based on the Boeing 767.

But that deal was declared invalid after allegations of fraud.

Two Boeing executives went to jail and eventually Boeing's chief executive resigned.

Political pressure on the Air Force over the deal was led by Sen John McCain, the front-runner to win the Republican nomination for the presidential elections this year.

Our correspondent adds that two further contracts are expected later as the US Air Force replaces the rest of its ageing fleet of refuelling craft.


link

DoD Kicks Tanker Decision to Next Administration

U.S. Defense Secretary Robert Gates has opted to leave the tanker decision, including the parameters of competition, up to the next administration, Pentagon officials said.

The Pentagon told bidders Boeing and Northrop Grumman this morning that it was "terminating the current competition for a U.S. Air Force airborne tanker replacement," according to a Sept. 10 press release.

"Secretary Gates, in consultation with senior Defense and Air Force officials, has determined that the solicitation and award cannot be accomplished by January," the release said. "Rather than hand the next Administration an incomplete and possibly contested process, Secretary Gates decided that the best course of action is to provide the next administration with full flexibility regarding the requirements, evaluation criteria and the appropriate allocation of defense budget to this mission."

In the statement, Gates said, "Over the past seven years the process has become enormously complex and emotional - in no small part because of mistakes and missteps along the way by the Department of Defense."

More>>http://defensenews.com/story.php?i=3717758&c=AME&s=AIR

$35B Air Force tanker competition set to reopen
AP

By DONNA BORAK, AP Business Writer Donna Borak, Ap Business Writer – Fri Sep 25, 1:12 am ET

WASHINGTON – The Air Force is poised to reopen the competition between rivals Boeing Co. and Northrop Grumman Corp. for a troubled $35 billion tanker contract.

The Pentagon has tried and failed twice to award a contract to replace its Eisenhower-era fleet of tankers that refuel military planes in flight. The last attempt in early 2008 was overturned on appeal and led Pentagon leaders to temporarily revoke the Air Force's authority to award a contract. The 2004 award to Boeing was undone by an ethics scandal that resulted in prison terms for a former company executive and a former high-ranking Air Force official.

"After eight years, we can finally get on with this program," Rep. John Murtha, D-Pa., said Thursday.

Murtha chairs the House Appropriations subcommittee on defense. He was one of several lawmakers briefed by Air Force Secretary Michael Donley and other Pentagon officials on the latest request for bids — due out Friday — on the tanker competition.

The Pentagon's briefing materials said the Air Force is seeking to reduce the number of requirements to replace its aging tankers to 373 from 800, in a bid to make the process more transparent.

"This time we will be crystal clear about what we want and what the bidders need to do to win," according to the briefing.

The department also changed course on two other issues. The winner will be based on "best value" and not price, and the deal will be a fixed-price contract. The switch from a cost-plus pact means the contractor will be paid a negotiated amount regardless of extra expenses.

"At this point, neither (company) knows enough about the selection process to figure who is better off with the new terms," said Loren Thompson, a defense consultant for the Lexington Institute.

Richard Aboulafia, aerospace analyst for the Teal Group, said despite a strong start, the Air Force's efforts won't be enough to shield the contract from political bickering on Capitol Hill.

"It's tough to be optimistic of avoiding yet another political firestorm, but this is the best chance they've got to start with," said Aboulafia.

Rep. Norm Dicks, D-Wash., a Boeing supporter, said the service's plan appeared to be "a much fairer approach."

Washington, Kansas, and other states stand to gain jobs if Boeing lands the award, while Alabama is anticipated to get a new plant in Mobile should Northrop win.

Los Angeles-based Northrop and partner Airbus parent European Aeronautic Defense and Space Co. N.V., won the deal to replace 179 aging planes in February 2008. Boeing later successfully protested the award after congressional investigators found the Air Force failed to evaluate both proposals on the same merits.

Representatives from Northrop and Chicago-based Boeing declined to comment until the companies receive a draft of the request for bids.

EADS North America Chairman and CEO Ralph Crosby said the company is looking forward to working with Northrop in evaluating the tanker request.

The Pentagon still anticipates awarding a single contract next summer, according to lawmakers. Some, including Murtha, had pushed for awards for both companies, but Pentagon leaders say that would be far more costly to taxpayers.

One area of concern to Dicks and Sen. Patty Murray, D-Wash., was the exclusion of language in the contract that would require the Air Force to consider the World Trade Organization's interim ruling earlier this month that European loans for Airbus were illegal subsidies. A separate ruling on a European Union counter-complaint against the U.S. is expected in about six months.

Northrop supporter, Alabama Republican Sen. Richard Shelby welcomed the service's decision to exclude the WTO's results from the competition. Sen. Jeff Sessions, also an Alabama Republican, said it was too early to tell whether the draft request includes more objective criteria.

The tanker deal — one of the largest in Pentagon history — is the first of three contracts worth up to $100 billion to replace nearly 600 aircraft over the next 30 years.

Defense Secretary Robert Gates last week restored the Air Force's authority to select a new winner after stripping the service's ability to award a deal in the wake of the congressional investigators' report. Gates' office will continue to oversee the competition.

The Air Force says replacing the tanker remains its top acquisition priority.

http://news.yahoo.com/s/ap/20090925/ap_on_...us_tanker_fight