Tuesday, March 04, 2008

Tankers and Politics

Once upon a time, announcement of a DoD contract meant that someone won, and someone lost.

Now, it merely signals the next round of political jockeying and protests in the defense procurement game.

Consider last Friday’s award of a $35 billion contract for new tanker aircraft to Northrop-Grumman and its European partner, EADS. By accepting their proposal, the Pentagon rejected a rival bid from Boeing, which offered a refueling variant of its 767 jetliner.

But the matter is far from settled. With so much money—and thousands of jobs—at stake, Boeing will almost certainly protest the Pentagon’s decision. And the aerospace giant is mobilizing its allies on Capitol Hill, who are already demanding investigations.
House Speaker Nancy Pelosi was one of the first out of the gate, saying the Air Force decision “raised serious questions.”

After that, the rhetoric only intensified. Les Blumenthal of the McClatchy Newspapers Washington bureau quotes Washington Senator Patty Murray (“the contract "puts our war-fighting ability in the hands of a foreign government") and Republican Senator Pat Roberts of Kansas (the Air Force used an "Alice in Wonderland" approach in awarding the contract to a French company with no experience in making tankers). Can you guess where Boeing planned to build those 767 tankers?

Obviously, Boeing and its supporters aren’t going down without a fight.

But it’s also appropriate to ask how much of a fight they’re willing to put up. Under Pentagon acquisition rules, losing firms are allowed to file a protest, a process that can last up to a year. Boeing has every right to question the Air Force’s decision, and demand a fair review of the process.

Unfortunately, haggling over the tanker deal could last well beyond the protest period. Factor in political considerations—including the obligatory hearings, briefings and legislative maneuvering—and the fight over the new tanker might drag on for years.

Fact is the competition apparently won by the Northrop-Grumman/EADS team came four years after the Pentagon’s first effort to acquire new tankers. In 2003, the Air Force announced plans to lease 100 767 tankers from Boeing, a proposal that also attracted Congressional attention.

With Arizona Senator John McCain in the lead, House and Senate leaders pounced on the proposed lease, noting that it would be more expensive than buying new aircraft. The deal was subsequently derailed by revelations that the Air Force’s former top procurement civilian, Darlene Druyun, had been recruited by Boeing during lease negotiations. She later served a nine-month prison sentence on corruption charges..

In hindsight, McCain’s criticism of the original tanker deal was certainly valid. And, it could also be argued that re-opening of the contract resulted in a better deal for the Air Force and the taxpayer, through the acquisition of a larger aircraft (the KC-30) with greater fuel off-load and transport capabilities.

But the process also delayed acquisition of badly-needed refueling planes, designed to replace aircraft purchased during the Eisenhower administration. We’ve written extensively about problems with aging KC-135Es, assigned mostly to Air Force Reserve and Air National Guard units. Some of those aircraft are no longer flyable and their replacements won’t enter the USAF inventory for another 5-6 years.

Sadly, that forecast is decidedly optimistic. It took almost five years to untangle the last tanker mess, and it could take even longer this time around. In an election year, with thousands of jobs at stake and all that money on the table, Congressional efforts to scuttle the new tanker contract are inevitable. We can expect endless hearings on the issue, along with legislative amendments and, of course, various earmarks.

After all, if Ted Kennedy can fund a jet engine the Air Force doesn’t want (to the tune of $1 billion), we can easily envision Pat Roberts, Patty Murray, Nancy Pelosi and their friends setting aside money for a “next-generation tanker aircraft,” while working to defund the Northrop-Grumman aircraft. Boeing has already indicated that it can build a larger tanker—based on the 777 airframe—and its Congressional supporters will quickly rally to that cause.

Will that result in a better refueling platform for the Air Force? That remains to be seen. Meanwhile, those KC-135Es aren’t getting any younger, and our current tanker “shortfall” will only grow worse over time. In a rational world, the Pentagon and Congress would be working together to get new tankers into the inventory as soon as possible. But in the realm of politically-charged defense acquisitions, operational needs often take a back seat to jobs, jobs, jobs and defense dollars for the folks back home.

That’s why we won’t be surprised if the “new” tanker deal comes undone, and we’re still arguing over a KC-135 replacement in 2012. After all, if Congress could thwart the original tanker lease plan—and more recently, force re-bidding of the CSAR-X contract-- then spoiling the Northrop-Grumman/EADS program should be a piece of cake.


halojones-fan said...

The problem is that Boeing built a plane for the USAF, while Northrop-Grumman built a plane for the DOD, and ultimately the DOD is paying for the plane.

See, this is coming from the same place as the "183-381" debate. The USAF, being an organization created for the promotion of pilots, likes having lots of planes for pilots to fly. However, planes are expensive, and the DOD does not like paying for them.

One base can only handle so many planes and pilots. And, in general terms, you need one refueling tanker for each base. So if you reduce the number of tankers, then you reduce the number of bases, and ipso facto you reduce the number of planes and pilots.

KC-30 uses fewer planes than KC-X. Sure, the KC-30 fleet would have the same total airborne fuel load, but it would do it with a few big planes rather than a bunch of small ones. And that means only a few bases--which dovetails neatly into the DOD's plan to shrink the USAF.

Ken Prescott said...

Boeing has already indicated that it can build a larger tanker—based on the 777 airframe—and its Congressional supporters will quickly rally to that cause.

Which begs the question, "Why didn't they offer a 777 in the first place?"

Answer: because airlines aren't retiring 777s yet, and Boeing doesn't need the US taxpayer to subsidize their customer support for that airframe . . . unlike the 767.

Maguro said...

Yeah, the fact is that Boeing built a plane that fit the needs of Boeing, not the USAF. Keeping the 767 line open was key for Boeing and their supporters in the Washington congressional delegation. Boeing thought they couldn't lose so they didn't much worry that their offering was inferior to NG/Airbus.

I'd also expect a protest and it will probably drag on for a long time based on the money at stake. A shame, because we need those planes.

ChrisP said...

Boeing offered an "Off The Shelf" tanker that is flying in Japan and Italy that met the RFP.
EADS offered a larger plane that was $23-$35 million more expensive and did not exist (except on paper) that had more capacity and more range than the 767 variant. Features that were not asked for. Had they been, Boeing would have worked up a proposal based on the larger (777) airframe.
EADS/Airbus partnered with Northrup-Grumman to give the effort an "American" flavor. EADS got the contract. I can only surmise that Boeing did not 'grease the right palms', or not enough.

Charlie said...

Aren't jobs important? I made this point in an earlier post. But why shouldn't the Air Force consider the jobs aspect (as they said they haven't) it keep the technical expertise in this country and makes us economically more secure. The Air Force managed to put thousands of people out of work who the tanker is designed to protect. Some protection.