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Editorial: Boeing’s odds good, but caution still needed

Thu., March 11, 2010

The fact that Northrop Grumman and its European partner EADS have bowed out of the bidding for a new generation of tankers is certainly cause for rejoicing in Washington state. Barring a change of plans, a winner will be chosen in May, and Boeing is the only contestant.

Boeing released a study on Wednesday showing the economic effects of landing the huge contract. The company paid for the study, so take the numbers with a grain of salt, but it says a Boeing deal should lead to the creation of an estimated 62,605 to 70,706 new American jobs, or 10 times the amount if Northrop had won. That’s because a lot of Northrop’s work would have been done overseas.

An estimated 2,000 jobs would be created in Everett and another 6,000 around the state for suppliers and others through 2027.

Boeing must still make a final bid. The government must settle on a final price without the benefit of a competition. While we’re happy with the prospect of the work going to Boeing, we can’t forget the messy process and what it says about military procurement.

This all started nine years ago, when the government agreed to lease the tankers from Boeing. But U.S. Sen. John McCain, R-Ariz., unearthed a too-cozy relationship between the Air Force and Boeing. A corruption scandal ensued and the leasing deal was scuttled. That reopened the process to competitive bids, and Northrop-EADS won. But that touched off protests that led to a probe by the Government Accountability Office showing that the process was unfair to Boeing. So the bidding was renewed with new specs and guidelines. Northrop complained that this favored Boeing, which led to its dropping out. Behind the scenes, both combatants poured unprecedented donations into lobbying, with Boeing spending $17.5 million in 2008 and Northrop shelling out $21 million, according to Politico.

This is not how military procurement should work. The GAO has noted that the process is broken, with major new systems an average of 21 months behind schedule and cost overruns typically reaching 40 percent.

The tanker fleet will end up costing an estimated $40 billion, so the government still has a duty to press for a bid based on the Air Force’s needs and timely delivery.

Congratulations to Boeing, but please be prudent. Too much has been wasted already.