Aerial tanker blow to Air Force

Friday June 20

The Government Accountability Office (GAO) on June 18 sustained Boeing's protest at the Air Force's award of a tanker contract worth up to 40 billion dollars to a Northrop Grumman/EADS consortium.

With the GAO's decision, Boeing wins another chance to compete for a contract to build the next generation of aerial refuelling tanker aircraft. The finding was a blow to the Air Force leadership, which had vigorously defended the selection process, and its effects will reverberate in Congress and in the global defence industry in the months and years ahead.

Troubled bid history. Boeing lost an initial 20 billion dollar arrangement to lease tanker aircraft to the Air Force in 2002, after an investigation revealed that a senior procurement officer steered the contract in the company's favour in exchange for a lucrative job offer. The Air Force procurement community was determined to recover from this embarrassment by conducting a rigorous and transparent new competition for the aircraft order. In announcing that the Northrop Grumman-led bid had won in February, Air Force acquisition chief Sue Payton confidently asserted, "we've got it nailed". Now the Air Force must again re-evaluate its selection process -- and contend with political fallout from each contractor's congressional supporters -- as it studies how best to proceed.

Domestic political fallout. Powerful political voices have not been shy about weighing in on this controversy:

• State rivalries. With Northrop/EADS planning to assemble their tankers at a new plant in Alabama, that state's leadership has expressed shock and dismay at the GAO's findings. Congressional delegations from Washington state and Kansas, home to large Boeing facilities, were elated.

• Problem for McCain? The presumptive Republican presidential nominee, John McCain, spearheaded the investigation that uncovered corruption in the contracting process, blocking the 2002 effort to lease the planes to Boeing. Democrats have since sought to tie several McCain supporters to the lobbying efforts of Northrop/EADS. They have labelled the Northrop/EADS proposal the 'French airplane' -- even though Northrop is the lead contractor, the plane would be assembled in Alabama, and most of the contract value would go to Northrop and its US sub-contractors.

• Obama boost? The GAO decision was welcomed by the Democratic party's presumptive presidential nominee, Senator Barack Obama, who opposed the Air Force's selection of Northrop/EADS in February.  Obama's home state, Illinois, is home to Boeing's corporate headquarters.