January 23, 2011 in Business

Caldwell: Battle over Air Force tanker nearing conclusion

By The Spokesman-Review
 

The U.S. Air Force may make its final final decision on the next generation of tanker as soon as next month.

But Congress may have the final final final word.

Defense work seldom gets awarded purely on its merits. Too much money is on the table, and too many jobs, which partly explains why this is the third go-round for a contract that could be worth $35 billion, and as many as 50,000 jobs to the winner and its suppliers.

Defense Secretary Robert Gates has taken a hard line on superfluous defense projects, but no one argues that tankers President Dwight Eisenhower would recognize do not need replacing.

So Boeing Co. and the European Aeronautic Defense & Space Co., EADS, have all their chips in. And because the two companies were inadvertently – or not – sent information on each other’s proposal, they know the hand the other is holding.

It does not look good for Boeing.

Air Force criteria apparently favor the larger EADS KC-45 over Boeing’s KC-767. A bigger plane can carry more fuel, supplies or personnel. But it will also require construction of new aprons and hangars, significantly increasing indirect costs.

This week, the Senate Armed Forces Committee will hold a hearing on the information swap, which Sen. Maria Cantwell, D-Wash., alleges compromised fair-competition regulations. She says the Air Force has glossed over the problem.

“Congress may not be as indifferent as the Air Force when so many taxpayer dollars and domestic jobs are at stake,” she wrote Sen. Carl Levin, the committee chairman, last week.

That sentence touches on the real nub: EADS will manufacture its tanker air frame, based on the Airbus A-330, in Europe. The plane will be modified for tanker use at a proposed plant in Mobile, Ala.

The KC-767 will roll off the line in Everett, where dwindling demand for the commercial version could mean thousands of layoffs.

And with EADS anxious to crack the U.S. defense market, suspicions are the company will lowball its bid. Boeing officials say they will not bid the company into a loss on the contract.

Boeing supporters claim EADS/Airbus has a cost advantage solely because European governments have contributed an estimated $20 billion to Airbus aircraft development efforts over the years. Boeing has received about $3 billion in assistance, some of that from Washington state.

Those figures are taken from World Trade Organization findings that, coincidentally, will be finalizing next month. Boeing partisans have argued mightily that the assistance given Airbus, and its foreign birth, should figure in Air Force decision-making.

Cantwell, Sen. Patty Murray, D-Wash., and former Sen. Sam Brownback, R-Kan., tried unsuccessfully to get an amendment with that requirement attached to the defense appropriations act. But the House of Representatives in December overwhelmingly supported a similar measure.

The brass knuckles will come out when the Air Force makes its choice.

Much as a win for Boeing would be a win for Washington, a choice of the EADS plane would be a boost for Spokane. Fairchild Air Force Base was among 10 the Air Force used to assess the capabilities of both airplanes. If the KC-45 is selected, the base will need major upgrades to accommodate the bigger birds.

Boeing did get one bit of good news last week. The boom on an EADS tanker broke and fell into the Atlantic Ocean during a refueling mission. Oops.

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