washingtonpost.com > Business > Local Business

Pentagon: Tanker Bids Differed by $3 Billion

By Dana Hedgpeth
Washington Post Staff Writer
Thursday, September 18, 2008

The Pentagon's top weapons buyer said the proposed aerial refueling tankers from both Northrop Grumman and Boeing were "technically outstanding" but differed by almost $3 billion on price.

John Young, the undersecretary for acquisition, technology and logistics, said in an interview at the Pentagon yesterday that under the tanker proposal from Northrop Grumman and its partner European Aeronautic Defence & Space, developing the first 68 aircraft would have cost $12.5 billion, compared with $15.4 billion under Boeing's plan.

It was the first time Young or any top official at the Pentagon has talked in detail about the long-running, $40 billion tanker deal since Defense Secretary Robert M. Gates said last week that the competition would be punted to the next administration because it had become so politically charged.

Young said that Northrop promised earlier delivery and that its aircraft "provided more tanker capability and offload rate and was substantially cheaper to develop."

"Frankly," he said, Boeing's tanker "was smaller and should have been cheaper. . . . A member of the American public might conclude that Boeing sought to charge more than the Defense Department reasonably expected" to pay.

In February, the Pentagon awarded Northrop and EADS the contract. Boeing protested, saying it was treated unfairly, and the Government Accountability Office agreed. The Pentagon started to re-bid the deal, saying it would pick a winner by the end of the year. Boeing argued for more time.

Young said that he put in an independent team to help oversee the tanker competition but that it was "way too late in the process."

He also said he had to consider the coming change in administration: "We would have picked the ingredients, the menu, and fixed the meal, only to serve the meal to the next team -- along with the bill -- and I'm uncomfortable with that."

Young also said the Air Force was not as clear as it should have been in laying out what it was looking to buy. The Pentagon had 30-some mandatory requirements for the tanker and then about 800 more considered "tradable," Young said.

"We didn't do a good job explaining what prioritization or weighting we would give to those," he said. But, Young said, Boeing exploited that argument in the protest.

Young also said Gates considered asking the firms to submit their "best and final price" and using that as one of the key criteria. But, he said, officials couldn't be sure that the airplane makers would accept that.

A Boeing spokesman wouldn't comment on Young's criticisms. "We are looking to the future, and we are not interested in discussing the past," Dan Beck said.

Northrop spokesman Randy Belote said, "We look forward to the opportunity to compete again and are confident that we will achieve the same result."

© 2008 The Washington Post Company