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Pentagon Cancels Tanker Competition
The Department of Defense is calling off a hotly disputed $40 billion competition to replace its aging fleet of aerial-refueling tankers because officials don't think they can pick a winner before the next presidential administration as planned.
The decision is a major victory for Boeing Co., which had lost the initial competition in February to a team comprised of Northrop Grumman Corp. and the parent company of Europe's Airbus. Boeing's protest of that decision was upheld by the Government Accountability Office, leading to a new round of bidding.
Department of Defense The Defense Department's decision to end the aerial-refueling tanker competition is a major victory for Boeing, which had lost the initial race to a Northrop-led partnership.
Most recently, Boeing had asked the Pentagon for extra time to submit a new bid after it became clear to the company that the Air Force was looking for a bigger plane than Boeing had originally bid.
Senior Defense Department officials notified key lawmakers Wednesday morning that Pentagon officials had determined that it would be impossible to meet a deadline of selecting a new winner by the end of the year.
According to a statement, Defense Secretary Robert Gates said he believed it was time for a "cooling off" period. Over the past few weeks, Mr. Gates concluded the competition had become too emotionally charged and compressed to rush. The decision will now be made under the next presidential administration, virtually guaranteeing that one of the most controversial defense acquisitions of the Bush administration continues for the foreseeable future.
"It is my judgment that in the time remaining to us, we can no longer complete a competition that would be viewed as fair and objective in this highly charged environment," Mr. Gates said in a statement.
Mr. Gates read a statement regarding his decision Wednesday morning during a House Armed Services Committee on Iraq.
Although the decision gives Boeing a chance at a fresh start, the company will face the prospect that one of its key critics, Sen. John McCain, could potentially be the next president when the matter is decided. Five years ago, the Republican senator helped scuttle an original plan to lease a fleet of tankers from Boeing because the contract was not competitively bid. His office played a key role in opening up the competition to Northrop Grumman and its partner, European Aeronautic Defence & Space Co.
The contract's cancellation is a disappointing blow to Northrop, which was surprised by its victory over Boeing in February and sees the tanker as a way to lock in billions of dollars in Air Force aircraft business during the coming decades. The company seemed poised to be the eventual winner because its Airbus aircraft could haul more fuel and cargo than Boeing's 767-based design, both key characteristics sought by the Pentagon. The Los Angeles company said it was "extremely disappointed" with the decision and that the company is "greatly concerned about the potential future implications for the Defense acquisition process."
Boeing said in a statement that the decision "will best serve the warfighter in allowing the appropriate time for this important and complex procurement to be conducted in a thorough and open competition."
Boeing Chairman and Chief Executive Jim McNerney and Jim Albaugh, the
head of its defense business, recently appealed to the Pentagon for six more
months to respond to the most recent request for proposals. It seemed a long
shot that Boeing would get that much time, so the company made clear that it
would rather not bid than submit a hastily done bid.
One of Boeing's staunchest supporters in Congress, Washington Democrat Rep. Norm Dicks, said that pushing the contract into the hands of the next administration will help Boeing's bid. "I think we've got a better shot, no matter who it is," said Mr. Dicks in an interview.
Although Air Force officials have said the acquisition of 179 tankers is one of their top priorities, officials have concluded that the current fleet of Boeing-made KC-135 tankers can be adequately maintained for the near future. The average age of the existing fleet is approaching 50 years old.
In a statement, Alabama Republican Sen. Richard Shelby, in whose state Northrop planned to assemble its fleet of tankers based on an Airbus A330, accused the Defense Department of playing politics. "This misguided decision clearly places business interests above the interests of the warfighter."
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http://online.wsj.com/article/SB1221052 ... s&ru=yahoo
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