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Tanker Bid Moves Toward Endgame

Boeing, Northrop Maneuver for Pentagon Deal

By Dana Hedgpeth
Washington Post Staff Writer
Friday, August 29, 2008

Score another one for Boeing.

The defense and aerospace giant has been clawing its way back into the competition to build a new generation of aerial refueling planes for the Air Force in an unusually public way. After losing the recent Air Force decision to award the $40 billion program to rival Northrop Grumman and its partner, European Aeronautic Defence & Space, Boeing managed to get the contract overturned and re-bid.

Now Boeing has said it might drop out of the competition if it doesn't get more time, a move analysts are calling shrewd in a very Washingtonian game of chess, as major corporations and their political allies jockey for a program that could be worth as much as $100 billion in the coming decades.

Boeing and Northrop leaders have each had three meetings in the past three weeks behind closed doors with Pentagon officials at Wright Patterson Air Force base in Dayton, Ohio, to air their concerns and grievances about the latest request for offers to build 179 tankers. Few will discuss details, but observers say the Pentagon is trying to avoid another round of protests from the two teams.

After Boeing threatened to pull out of the competition last week, Northrop and its foreign partner fired back with e-mail blasts and newspaper and radio ads to try to get the Pentagon to pick its plane as the winner.

The bickering has left the Air Force in a bind. If Boeing were to drop out, having only one bidder would be a major blow for the Pentagon's top weapons buyer John J. Young Jr., whose mantra is to have more competition in multibillion-dollar programs to ensure U.S. taxpayers get the best deal.

"This is becoming more bizarre than even a classic Washington story," said Robbin F. Laird, a defense industry consultant. "It's like a soap opera. We're looking at 'As Washington Turns' here. You've got politics, big money and a much needed aircraft and possibly even more delays."

The tanker deal has a long, checkered past.

The Air Force initially tried to lease tankers from Boeing in 2003 but canceled the deal after a procurement scandal sent a Boeing executive and a Pentagon official to prison. Last year, the Air Force set out again to find a contractor to replace its aging fleet of tankers, which Boeing started building nearly 50 years ago. The Air Force selected Northrop and EADS in February.

Chicago-based Boeing protested and in June won a major decision from the Government Accountability Office, which said Boeing was indeed treated unfairly. The Pentagon agreed to rebid the deal. Defense Secretary Robert M. Gates -- in an unusual move -- put Young, the undersecretary for acquisition, technology and logistics, in charge of running the new tanker competition, taking the power from the Air Force to select what its leaders have called its "number one acquisition" program in decades.

Pentagon leaders have said they want to pick a winner by year's end but are already behind schedule, having missed a mid-August deadline to put out the final request for proposals. Analysts say the decision is likely to be punted to the next administration.

The Pentagon has said bidders would likely have 45 to 60 days to place their bids from the date of the request for proposals.

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