Decision Must Be Made By Wednesday

They wanted to atone for past missteps, and strike a defiant blow against a foreign rival for a prestigious government contract -- but 10 days ago, Boeing lost out to EADS/Northrop Grumman for the US Air Force KC-X tanker bid. Last Friday, Boeing executives heard the Air Force's reasons for making that choice... and now, Boeing must weigh the pros and cons of filing a formal protest of that decision.

The American planemaker must also do so quickly, reports The New York Times. The deadline for filing a protest with the Government Accountability Office is Wednesday.

As ANN reported, the team comprised of European Aeronautic Defense and Space Company (EADS) and American defense contractor Northrop Grumman won out for the lucrative contract, offering a specialized version of the KC-330 Multi-Role Tanker Transport (MRTT) aircraft against Boeing's smaller KC-767. Both planes are based on commercial airliners.

Boeing touted its KC-767 as the more efficient choice, noting the commercial 767 burns less fuel than the comparable A330. Northrop/EADS countered the larger KC-330 offered more capacity for fuel, cargo and passengers -- making its larger offering more efficient overall. In the end, the latter argument won the day.

Now, Boeing faces a politically -- and publicly -- thorny choice. The company badly wanted to win KC-X, for two reasons. One, because Boeing has supplied the Air Force with tankers for over 50 years, and it didn't want to lose that prestigious role to a foreign company...

... And two, because Boeing "lost" the tanker bid once before, through its own bungling. As ANN reported, in late 2003 Boeing was originally awarded a $20 billion bid to start supplying the Air Force with KC-767s -- but that bid was later cancelled on revelations a top Pentagon procurement officer, Darleen Druyun, was offered and later accepted an executive position at Boeing.

Two Boeing executives later went to jail as a result... and Boeing CEO Phil Condit stepped down over the controversy. KC-X was the end result -- a competition that forced Boeing to bid on a contract it already won.

Should Boeing protest KC-X -- and at this point, it's even money -- the company would be forced to relive that dark time in its history. Boeing would likely also face charges of further delaying the badly-needed tankers in a time of war.

For its part, the Air Force insists it picked the most-capable aircraft. "You said we want a fair and open competition under the laws. I complied with those laws," said Sue Payton, a top USAF acquisitions official.

Boeing's allies in government have strongly protested awarding the KC-X bid to Northrop/EADS, relying largely on nationalistic, protectionist arguments. "We really have to wake up the country," said Washington Senator Patty Murray recently. "We are at risk of losing a major part of our aerospace industry to the Europeans forever."

Those statements were echoed by lawmakers in Kansas; not surprisingly, Boeing is a large employer in both states. Critics of those assertions point out neither Boeing's nor Airbus' aircraft are truly "American" or "European" anymore -- as both manufacturers outsource work to other countries. The awarding of KC-X to the EADS/Northrop Grumman plane -- now known as the KC-45A -- will also bring jobs to Northrop and EADS plants in Alabama and Florida.

"Let me say I view Northrop Grumman as an American company," Payton said. "I view [engine supplier] General Electric, who has jobs from this in Ohio and North Carolina, as an American company. I view the folks in Mobile, Alabama, and Melbourne, Florida, as Americans. But that did not enter into my decision here."

Loren Thompson, defense analyst with the Teal Group, presented another side to the Boeing vs. EADS contest. Based on conversations he had with defense officials close to KC-X negotiations, Thompson said Boeing came across as arrogant during the selection process, and presumed they would walk away with the bid.

"The Boeing team was not responsive and often was not even polite," Thompson said. "Somehow that all eluded senior management. They were not even aware there was a problem."

Boeing spokesman William Barksdale said Friday those allegations had no basis in fact, saying Air Force officials had no complaints when asked "whether we were hard to get along with."

Of greater concern, perhaps, was Boeing's blueprint for supplying tankers -- which the Air Force believed would result in the delivery of only 13 Boeing tankers to the USAF by 2013, compared to 49 proposed by the Northrop/EADS team. Boeing is also building tankers for Japan and Italy.

FMI: www.northropgrumman.com/kc45/, www.globaltanker.com