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Boeing wins $35 billion contract to supply new aerial refueling tankers

The Air Force has awarded a $35 billion contract to build the next generation of air refueling tankers to Boeing Co. (Feb. 24)

Northrop Grumman subsequently dropped out, and EADS decided to bid alone, promising that it would match Boeing's promised number of U.S. jobs by manufacturing the plane in a factory it planned to build in Mobile, Ala., and buying parts from U.S. companies.

Many defense experts had projected EADS as the likely winner, based on its victory in the last round, and expressed surprise at the decision.

EADS has the right to challenge the new award. "This is certainly a disappointing turn of events, and we look forward to discussing with the Air Force how it arrived at this conclusion," EADS North America Chairman Ralph D. Crosby Jr. said in a statement. "There are more than 48,000 Americans who are eager to build [the aircraft for EADS] here in the U.S., and we owe it to them to conduct a thorough analysis."

But Lynn and Donley made clear that they thought the Pentagon had gotten it right this time and that they did not anticipate a challenge. "We think we've established a clear, transparent and open process . . . and this will not yield to a protest," Lynn said.

Last fall, the Pentagon inadvertently provided Chicago-based Boeing and Netherlands-based EADS proprietary data on each other's bid. The Pentagon's inspector general last week told lawmakers concerned with the project that the contest was not irreparably harmed by the mix-up.

"I suspect EADS will not protest," Thompson said. "We know the two planes rated equally on performance. All they could protest is whether the price of the plane was correctly calculated."

At the request of the Air Force, the two aerospace giants submitted revised final bids Feb. 10 and fired a last round of salvos at each other. Crosby said last week that his firm had lowered its final bid to a "very competitive price proposal." Boeing chief executive Jim McNerney described its bid as an "aggressive" attempt to beat its "subsidized" European rival.

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

The contract dispute was marked by fierce lobbying by both sides, with advertising expenditures rivaling those of political campaigns. The issue became a political football among lawmakers seeking jobs for their states - in Washington state and Kansas for Boeing and in Alabama for EADS.

Despite EADS's promise to provide an equal number of U.S. jobs, Boeing proponents insisted that it was a "Buy America" issue during a time of high unemployment.

At a visit to a veterans center in Everett, Wash., on Tuesday, Sen. Patty Murray (D-Wash.) said she was nearly sick with concern about the contract award, the Everett Herald reported. "I can't believe our country would make a decision to go with a company based in a foreign country," Murray said. "I won't tolerate it."

Staff writer William Branigin contributed to this report.

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