Boeing wins major contract to supply new aerial refueling tankers

The Pentagon announced Thursday that it has selected Boeing to supply a new generation of aerial refueling tankers in a deal worth more than $30 billion.

“Boeing was a clear winner,” Deputy Defense Secretary William Lynn said after Secretary of the Air Force Michael Donley announced that the U.S. plane manufacturer had won the years-long competition over its European archrival.

Donley said Boeing beat out European Aeronautic Defence and Space (EADS), to provide 179 tankers in the first phase of the program to replace the aerial refueling fleet. He indicated that both companies met all 372 mandatory requirements of the contract but that Boeing submitted the lower bid.

The tanker is to be designated the KC-46A, and the first 18 planes are to be delivered by 2017, Donley said.

“This was a spirited competition, with both offerers acquitting themselves well,” he told a Pentagon news conference. Now, he said, “we hope all parties . . . will respect the decision and allow this important procurement to proceed unimpeded.” The award “represents a long-overdue start to a much-needed program,” he said.

The competition for the contract was marked by bitter recriminations and extensive advertising campaigns by both sides that smacked of negative ads in a political campaign.

The initial contract is for engineering and manufacturing development and is valued at $3.5 billion, Donley said. The overall contract for the first phase is worth “over $30 billion,” he said.

EADS teamed up with Northrop Grumman to win a $35 billion award for the tankers in 2008, but it came under heavy criticism lawmakers and was overturned after Boeing successfully challenged the Pentagon’s decision-making process. The Defense Department then relaunched the tanker competition.

Last July, Boeing and EADS both formally entered the latest competition, as each submitted thousands of pages in highly technical proposals.

Domestically, the case pitted Washington state and Kansas, where Boeing has plants, against Alabama, where EADS promised to build its tanker in Mobile.

Boeing proposed altering its wide-body, twin-engine 767 to become a tanker, while EADS said it would convert its Airbus A330.

Internationally, the contest figured prominently in a long-running trade dispute between the United States and the European Union over government subsidies to aerospace companies, one that drew the attention of President Obama and French President Nicolas Sarkozy.

Last June, the World Trade Organization ruled that European governments gave EADS’s Airbus illegal subsidies in its efforts to overtake Boeing as the world’s largest planemaker. The European Union, meanwhile, filed a complaint claiming that Boeing has improperly benefited from billions in subsidies from its military business and tax breaks.

The House voted in May 2010 to require defense officials to consider any “unfair competitive advantage” that companies might have in pursuing the refueling contract.

“At a time when our national unemployment rate is nearing 10 percent, it is outrageous to even consider outsourcing thousands of jobs to a foreign company,” Rep. Todd Tiahrt (R-Kan.) said after the vote. “We asked the Pentagon to consider the illegal subsidies, they refused, and so today we made sure they will consider the illegal subsidies and give American workers the fair chance to compete that they rightfully deserve.

The companies were vying for the first phase of the Air Force’s multi-decade effort to replace 415 refueling tankers, at least some of which are 50 years old.

Their replacement is the Air Force’s most urgent acquisition priority, a spokesman said.

Staff writer Peter Whoriskey contributed to this report.

braniginw@washpost.com

William Branigin writes and edits breaking news. He previously was a reporter on the Post’s national and local staffs and spent 19 years overseas, reporting in Southeast Asia, Central America, the Middle East and Europe.

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