WASHINGTON – It was a question that had been whispered around Capitol Hill corridors in the days following the Air Force’s selection of a European plane rather than a Boeing one to replace the nation’s fleet of aging aerial refueling tankers.
Rep. Norm Dicks finally asked it.
“Some people are saying Boeing was arrogant, discourteous?” the Belfair Democrat asked Air Force Secretary Michael Wynne.
“All my dealings with Boeing were objective and professional,” Wynne responded.
Wynne didn’t elaborate. Dicks didn’t press.
At congressional hearings over the past two weeks, Wynne and other Air Force officials defended the $35 billion tanker contract, insisting the competition was fair, open and legal.
But plenty of questions remain unanswered about how Boeing lost a contract it was heavily favored to win. They include:
• Did the Air Force make critical changes in the final bid proposal and a computer model used to evaluate the bids that ended up throwing the contract to Northrop Grumman and the European Aerospace Defense and Space Co., the parent company of Boeing’s rival, Airbus?
• Did Boeing misread crucial signals about the contract because of a strained relationship with the Air Force in the wake of a five-year-old procurement scandal that sent two people to jail and led to the resignation of the company’s chief executive?
• Was Boeing’s commercial airplane division so fixated on the new 787 Dreamliner that producing 12 to 15 767s a year for the Air Force tanker program became secondary?
• Did the Boeing defense team, so convinced it would win, get outhustled by Northrop-EADS, which, according to Air Force officials, brought its “A game” to the competition?
• Did the Pentagon buckle to pressure from Sen. John McCain, R-Ariz., who demanded there be more than one bidder even if it meant the Air Force couldn’t consider the estimated billions of dollars in possibly illegal government subsidies the European plane manufacturer received?
In early summer, the Government Accountability Office will rule on Boeing’s protest of the tanker contract and answer some of the questions. Until then, many details remain cloaked in confidentiality or can’t be released, since they involve proprietary information.
QUESTIONS ABOUT TANKER SIZE
Boeing, its supporters on Capitol Hill and the defense community were stunned when the Air Force announced it was awarding the contract for 179 tankers to Northrop-EADS. The contract eventually could be worth $100 billion as the Air Force replaces nearly 600 Eisenhower-era tankers.
Northrop-EADS will use Airbus A330s for the tankers. Boeing would have used its 767.
The A330s are built in Toulouse, France, with major sections manufactured by the British, French, Germans and Spanish. The tanker version of the A330 will be assembled at a new plant planned in Mobile, Ala. Boeing was prepared to build the 767 tanker in its Everett plant. Tanking equipment was to be added and flight testing conducted at the company’s plant in Wichita, Kan.
The Airbus A330 is newer, larger and can carry more fuel, passengers and cargo. The 767 is smaller, cheaper to operate and can land in more places closer to combat zones.
Initially, the Air Force seemed inclined to favor Boeing. Air Force officials told Congress they were looking for a medium-size tanker to replace the KC-135s. Cargo- and passenger-carrying capabilities were not a top priority, and Boeing and others were convinced their 767 would be a better fit than the Airbus A330.
Because it was smaller and lighter, the 767 tanker would be able to fly into more air bases in places like Central Asia, the Horn of Africa and the Persian Gulf.
In issuing its draft request for proposals, the Air Force raised the issue of government subsidies and a pending World Trade Organization ruling. By some estimates, the Airbus A330 and its companion A340 received $5 billion in research and development subsidies, or “launch aid,” from European governments.
McCain reacted quickly when he heard the subsidy issue would be a factor in the competition. The Arizona senator had been the lead opponent of an earlier $23 billion deal that would have allowed the Air Force to lease up to 100 Boeing 767 tankers. The lease deal collapsed amid a major Pentagon procurement scandal.
In a Sept. 8, 2006, letter to Defense Department officials, McCain said he was concerned about the subsidy issue becoming part of the tanker competition and told the Air Force to drop it.
At the time, Republicans still controlled Congress, and McCain was in line to become chairman of the Senate Armed Services Committee.
McCain said there was no precedent for including the subsidy issue in a procurement competition and that if the Air Force persisted, it would risk eliminating a competing bid for the tanker.
The subsidy issue was dropped, but Northrop-EADS warned that it might not bid because it thought the Air Force was still tilting the competition toward Boeing. McCain continued to bang on the Pentagon, telling then-defense secretary nominee Robert Gates that cargo and passenger capacity needed to be given a higher priority in order to ensure competitive bids.
Because of the 2003 procurement scandal, some experts said, Boeing may not have had the “back channels” to the Pentagon it needed to track officials’ thinking.
“The procurement scandal had a chilling effect on Boeing’s relations with the Air Force, and it contributed to Boeing’s lack of understanding of the Air Force (tanker) proposal,” said Loren Thompson, a military analyst with the Lexington Institute, a defense think tank based in Alexandria, Va.
The procurement scandal also opened the door for EADS to pursue the tanker contract. Eager to win a major U.S. defense contract, Northrop Grumman and EADS have spent $70 million on lobbying since 2003, according to the Center for Responsive Politics, which tracks lobbying expenses. By comparison, Boeing has spent $46.5 million.
LOW PRIORITY FOR BOEING?
Thompson and others say Boeing’s commercial airplane division was too focused on the 787 to pay much attention to the tankers.
“The tanker was not as high a priority for Boeing as it was for Northrop-EADS,” Thompson said.
Richard Aboulafia, an analyst for the Teal Group, a Fairfax, Va., firm that tracks trends in the aerospace industry, said Boeing’s commercial division was also focused on ramping up production of the 777, increasing production of the 737 and launching the 747-8.
“Tankers were a very distant fifth priority for them,” Aboulafia said. “EADS’ highest priority was to crack the U.S. military market.”
As the Pentagon issued its final request for proposals in December 2006, Boeing was concerned. Barely a month after the request was issued, the Air Force made changes in the model that would evaluate the bids. The changes essentially took away some of the advantages the 767 had, like being able to land at smaller bases.
In a March 7, 2007, letter to Air Force officials, Boeing said the “changes are clearly intended to accommodate larger aircraft, Boeing is understandably concerned that the changes in the model could appear to unfairly favor Northrop Grumman.”
Boeing officials have said they were told by the Air Force that the changes were made to “accommodate” Northrop-EADS, which was again threatening not to bid. If the Air Force had wanted a bigger plane, Boeing could have offered its 777. But Boeing officials said they were discouraged from doing so by the Air Force.
“Northrop-EADS simply convinced the Air Force bigger was an asset rather than a liability,” Thompson said.
Boeing officials deny that their relationship with the Air Force was frayed. Instead, they say, the Air Force changed the bid requirements and evaluation models. They also say Boeing’s commercial airplane division and the defense division were committed to winning the bid.
“It is clear that frequent and often-unstated changes during the course of the competition … resulted in selection of an aircraft that was radically different from that sought by the Air Force and inferior to the Boeing 767 tanker offering,” said Kerry Gildea, a Boeing spokeswoman.
Les Blumenthal: 202-383-0008