Air Force tanker bidding scrapped

WASHINGTON – Defense Secretary Robert Gates on Wednesday canceled a bitter competition to build a new fleet of Air Force refueling tankers, saying the contest had become so acrimonious that picking a winner was impossible before President Bush leaves office.

The unexpected move is the latest in a series of setbacks for the $35 billion program, which now has had its selection process started and stopped three times over the last five years.

The move will put off a decision on how to restart the 179-plane program to a new presidential administration, a delay which could push back delivery of the much-needed new tanker as much as another year. The Air Force first awarded a contract to build the replacements shortly after the Sept. 11, 2001, terrorist attacks.

The decision to scrap the competition is a particularly tough blow for Northrop Grumman Corp., which beat Boeing Co. in the most recent contest and was widely expected to have that victory confirmed in the follow-up competition that Gates canceled.

Boeing had been pushing for a four-month delay in order to completely overhaul its bid, and it said in a statement that it welcomed Gates’ decision, arguing it will allow for a “thorough and open competition” in the future.

The move is a remarkable turnaround for Boeing, which now has been given new life in one of the last remaining large-scale weapons contracts of its generation, said Richard Aboulafia, an aircraft expert at the Teal Group, an aerospace and defense analysis group. “It sure beats the sudden death they were facing with the existing plan.”

Washington state’s congressional delegation applauded the announcement Wednesday. Sen. Patty Murray called it a “reality check on a procurement process that got very complicated and a little muddled.”

The delay will give the Pentagon time to settle one of the biggest disputes in the previous bidding process: How big of a replacement does the Air Force want?

“It’s the question all of us don’t know the answer to,” Murray said.

Rep. Cathy McMorris Rodgers, an Eastern Washington Republican whose district includes Fairchild Air Force Base, one of the nation’s tanker facilities, said it’s important to replace the aging KC-135s as soon as possible. But it’s also important to have a fair and transparent bidding process.

The cancellation comes after two months of disarray following a July ruling by government auditors that the Air Force mishandled the selection process that chose Northrop, which was building its tanker from an Airbus A330 commercial airliner.

Following the Government Accountability Office ruling, Gates took away responsibility for the competition from the Air Force and vowed to run it out of his own office, saying he believed it could be completed by the end of the year.

But Pentagon officials have in recent weeks grown increasingly concerned that Boeing, which has been aggressively pressing its case on Capitol Hill, was about to launch a legal challenge to the Pentagon’s revised competition rules.

The threat appears to have been part of what convinced Gates that a “cooling off” period was needed.

“Over the past seven years the process has become enormously complex and emotional – in no small part because of mistakes and missteps along the way by the Department of Defense,” Gates told a House committee Wednesday morning. “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.”

According to Defense officials, Northrop was able to beat Boeing’s 767 tanker, in part, because the A330 is larger in size, and the Chicago-based aerospace giant said last month that it would take months to reconfigure its bid to deal with what it saw as a new, larger size requirement.

Boeing was in the midst of considering a bid based on a 777 aircraft, which is even larger than the A330, but such a move would have required more time to prepare the proposal. Gates’ decision gives Boeing more time to prepare a 777 bid, or to revise its 767 offering.