New Rules May Help Edge Out Northrop Grumman/EADS

Lawmakers who supported Boeing's bid to build a new fleet of Air Force refueling tankers advanced a plan in Congress that would block the Defense Department from deviating from any of its original specifications in vetting new tanker proposals. The measure also would bar the Pentagon from giving extra credit to any proposal that exceeds the Air Force's minimum requirements for the tanker -- including its size and how much fuel it can deliver to planes in midair.

The prohibition, part of a $488 billion defense spending bill that won approval from a House Appropriations subcommittee on Wednesday. The bill funds the Defense Department for fiscal 2009, and would set aside $893 million for tanker program. Hoverer, it ties the money to a host of conditions that may give Boeing an advantage in the second round of competition.

Earlier this year, Boeing lost the tanker contract to rival Northrop Grumman and EADS, the European parent company of Airbus. Defense Secretary Robert Gates ordered the Pentagon to redo the competition contract after Congress' investigative arm, the Government Accountability Office found "significant" flaws in the prior contest.

A major issue for Boeing and the rival Northrop Grumman/EADS consortium is the size of the tanker sought by the government. In the previous round of bidding, Airbus based its model on its larger A330 commercial jet; the Boeing offering was designed around its smaller 767.

The Pentagon has stipulated that at a minimum the new aircraft must be capable of hauling the same amount of fuel as the existing Boeing-built KC-135 tanker. But Young also has said the Defense Department prefers a plane that can offload more fuel than the existing aircraft. If the new solicitation gives preference to the largest plane pitched by the two companies, Northrop Grumman's model could continue to edge out Boeing's smaller design.

Rep. Todd Tiahrt -- whose Kansas district includes a Boeing facility that would be involved in assembling the tankers -- has said the size requirements defined by the Pentagon "can predetermine who wins."

Boeing supporters complained that the Pentagon unfairly gave extra points to EADS and Northrop Grumman during the first competition because their proposal could deliver more fuel than Boeing's offering. They accused the Air Force of misleading Boeing by not disclosing that the service planned to give extra weight to the biggest tanker. If the military's specifications give greater weight to a larger plane, Boeing has said the company could decide to pitch a model based on its bigger commercial plane, the 777. But that could be a lengthy and costly process.

The tanker portion of the spending bill was written by Rep. John Murtha, D-PA, head of the House Appropriations Defense Subcommittee that approved the legislation Wednesday. Other requirements include:

Requiring the Pentagon to calculate "life cycle" costs for the proposed aircraft over 40 years instead of the 25 years used during the last competition. An independent group would estimate the 40-year price tag for the tankers using the costs of fuel, maintenance and any new construction in their calculation. Boeing's supporters have said its tanker would be more fuel-efficient, and they have advised the military should consider the costs of building new hangars and runways to accommodate the Northrop Grumman-EADS model.

Require the Air Force to obtain congressional approval before spending money on the tankers, which would guarantee Congress has a big role in the tanker contract.

The House is expected to consider the defense spending bill in September, when it returns from a month-long recess that begins this weekend. Ultimately, members of the House and Senate will negotiate a final bill, and it will be up to that select group to decide whether to keep the tanker restrictions in the legislation.

FMI: www.boeing.com, www.northropgrumman.com