The Air Force has testified to Congress that of the nine criteria the Air Force used to determine the winner in the competition to supply new air refueling tanker aircraft, Boeing lost to the Northrop Grumman/Airbus bid on most, if not all, measures. Nonetheless Senators and Representatives from the states where Boeing has major plants are incensed; they want our armed forces to be equipped with the apparently less effective (smaller payload, shorter range) losing bid from Boeing. Their argument: jobs (i.e. "pork") should determine who wins, not the effectiveness or cost of the equipment, as determined by the Air Force. The issues were summarized in a PBS broadcast on The Jim Lehrer Newshour this past Thursday. Congressman Norman Dicks (D. - WA) articulated Boeing's arguments; Winslow Wheeler of the Straus Military Reform Project had a different point of view.

Audio of the PBS broadcast is available here. Go to PBS web site.

The full transcript can be found below.


March 6, 2008
Jim Lehrer Newshour (PBS), 7:00 PM

JIM LEHRER: Trouble over the Air Force decision to buy a new airplane. Ray Suarez has our story.

RAY SUAREZ: This is the tanker that Northrop Grumman and its European partners hope to make for the U.S. Air Force. The KC-45 is the next generation of an existing military tanker, Grumman’s KC-30. The Air Force announced Friday it plans to buy 179 of them. They'll cost at least $40 billion.

GEN. DUNCAN MCNABB [Vice Chief of Staff, U.S. Air Force]: The KC-45 built by Northrop Grumman will provide our nation and partners the critical ability to reach across the globe and project our combat capability or our humanitarian friendship rapidly and effectively.

SUAREZ: The Air Force picked the Northrop Grumman consortium, including the European giant EADS, over the U.S. manufacturer Boeing. General Arthur Lichte is commander of the U.S. Air Mobility Command.

GEN. ARTHUR LICHTE [U.S. Air Force]: I can sum it up in one word: more. More passengers, more cargo, more fuel to offload, more patients that we can carry, more availability, more flexibility, and more dependability. And so from my aspect, the team did tremendous work and now we will take that and put it into the fight.

SUAREZ: In Washington State, where the Boeing tanker would have been built, the announcement drew heated response from workers and their union.

LARRY BROWN [IAM District Political Director]: There’s a good chance that this program is going to be turned around and be built here at Boeing in America by American workers, as it rightly should be.

TOM WROBLEWSKI [IAM District President]: This is an unjustified gamble which puts our armed services at risk. American taxpayers should be outraged because this – they deserve better. Are you outraged?

CROWD: Yes!

NORTHROP GRUMMAN VIDEO: Mobile, Alabama will be home to the KC-30’s new assembly and production centers at –

SUAREZ: Northrop Grumman says this contract will bring jobs to the U.S. Sixty percent of the labor and parts building will happen here.

VIDEO:And we’ll also employ an additional 20,000 Americans –

SUAREZ: Now the Pentagon’s purchase is coming under sharp congressional attack because it would give thousands of jobs to EADS and its subsidiary, Airbus. House Speaker Nancy Pelosi.

REP. NANCY PELOSI [D-CA; Speaker of the House]:If we continue to outsource these contracts, we are exporting jobs out of country. I mean, will not have – let me say it another way – we will not have the industrial and technological base necessary to ensure our national security because it will fade. It will diminish. It is not strengthened.

SUAREZ: The Air Force insists it made the right decision.

REPORTER: And the foreign element – do you think that you’re going to get some blowback from Capitol Hill about this?

LICHTE: This is an American tanker. It’s flown by American airmen. It has a big American flag on the tail. And every day it’ll be out there saving American lives.

SUAREZ: Air Force officials also said jobs were not a factor in awarding the contract. For more on all this we get two views: Democratic Congressman Norman Dicks is from Washington State, where much of the Boeing aircraft would have been built. He’s on the House Appropriations Committee. Winslow Wheeler had a 31-year career as a staffer for both Republican and Democratic senators focusing on defense issues. He’s now with the Center for Defense Information, a think tank. His latest book is “Military Reform: A Reference Handbook.”

Congressman Dicks, the Air Force says for its part that this was an open and fair procedure and that it yielded a pretty good aircraft, but you don’t agree.

REP. NORMAN DICKS (D-WA): No, Ray, I disagree very strongly with that. I am very, very shocked and surprised that the Air Force, after telling us for months – they gave me a briefing in December of 2007 and said, we want a medium-size tanker to replace the KC-135R. And instead of that, they went to a large tanker, the KC-30, which is a much bigger plane, even larger than our KC-10. Now, Boeing had asked the Air Force at the start of these proceedings, do you want us to bid a larger plane? If you do, we will bid the 777, and they were discouraged from doing that.

Now, I think a smaller airplane in this situation is better because over its lifetime it will use $15 billion less fuel than the A-30. It will also have $5 to $6 billion less in maintenance. And it is – because the A-30 is a bigger plane, it will clog up fields. It will need to have new military construction facilities for hangers. I mean, this is going to be very expensive. And it hasn’t been built. I talked to the Australian embassy tonight – they don’t expect to get this plane operational until 2009. It had been promised in 2007. Boeing had already delivered a tanker of the KC-767 vintage to Japan just a few weeks ago. And until last week – I think till yesterday, the EADS Airbus tanker had not used its fuel – its boom to pass fuel.

SUAREZ: Well, Congressman, let me –

DICKS: So I just think they made a terrible decision and a terrible mistake for the U.S. taxpayer and for jobs in our country.

SUAREZ: Winslow Wheeler, you have an intimate knowledge of how this process works. Does it look like the Air Force followed its guidelines when letting this contract?

WINSLOW WHEELER [Center of Defense Information]: Right now all we have is dueling press releases from Boeing and its advocates, Northrop Grumman and its advocates, the Air Force and its spokespeople. We’re about to enter a process where we’re going to find out the details of this. What the Air Force says at this point is that it was a slam-dunk. There are nine criteria. Northrop Grumman won on most, maybe even all, of them. We don’t know the details yet. This competition was Boeing’s to lose. It lost it. The contention that nobody told Boeing that the Air Force was after a bigger airplane really doesn’t make any sense to me.

SUAREZ: Well, why is that? Is that they could change the proposal if they wanted? You heard Congressman –

WHEELER: Sure.

SUAREZ: – Dicks talk about something almost akin to a bait-and-switch.

WHEELER: Boeing was at liberty to submit two bids, one for the smaller 767, one for the larger 777.

DICKS: And as I said, Winslow, they were discouraged from offering the 777. I have got a chart, which I’d be glad to share with you, Winslow, in December of 2007 – three months ago – from Ken Miller saying that they wanted a medium-size replacement plane, and nobody was talking about a large plane. A large plane has all kinds of problems. It’s more expensive to operate. It’s going to have greater greenhouse emissions. It’s more expensive to maintain. And the only reason that they could even bid a low price is because they receive subsidy. And, again, Senator McCain jumped into this last – and said that they could not look at the subsidy issue, which I think is a big mistake, especially when the U.S. trade representative is bringing a case in the WTO on this very issue.

SUAREZ: Well, how about that, Winslow Wheeler? Right now the United States is pursuing EADS at the World Trade Organization for improper trade practices at the same time as the United States Air Force is getting ready to buy billions of dollars of aircraft from them?

WHEELER: The contention is that Airbus gets a subsidy from its government sponsors in Europe. They respond to the WTO that Boeing gets a roughly equivalent subsidy from the American government for its defense contract –

DICKS: That is totally inaccurate, and Winslow knows better. They don’t get any subsidy of the size – $2.5 billion on the –

WHEELER: If I could finish.

SUAREZ: Let him finish, Congressman.

DICKS: I will. But it’s just an outrage to hear him say that.

WHEELER: That’s their contention, and it’ll be adjudicated not by Congress, but by the World Trade Organization. There’s a fundamental point that needs to be addressed here. The Air Force made a decision of its judgment based on the criteria it put out there which airplane did the best job for our armed forces. That judgment is going to be challenged and we’re going to learn, hopefully, lots of details about that process. But their position right now is that on the nine criteria that they laid out there that Boeing went into with its eyes open that the best thing for the United States Air Force to do and for our fighting capability is to take the airplane with more payload and more range, and it’s the best choice. The criteria –

DICKS: It’s not the best choice.

WHEELER: The criteria for where it’s made is purely secondary. The object here is to get the best equipment at the best price to our armed forces.

SUAREZ: Congressman, earlier in the program you heard your leader, Nancy Pelosi, the Speaker –

DICKS: Right.

SUAREZ: – make an anti-outsourcing argument. You in other venues have talked about jobs and the loss of jobs in the United States. Is there anything in our contracting procedures in the United States military to favor domestic companies and domestic producers for military hardware?

DICKS: No, there isn’t. In fact, there are all kinds of provisions in our law that makes it more attractive to be a foreign country. Now, in this situation EADS gets subsidy from the European consortium. You’ve got the (Barry ?) amendment on specialty metals, which the Europeans don’t have to follow and American companies do. You have ITAR regulations, which the American companies have to follow, but the Europeans don’t have to follow. So there are a whole series of things that disadvantage American companies, and I think –

SUAREZ: But if I understand you, Congressman, you’re saying there should be.

DICKS: I think – I think – I think –

SUAREZ: There should be a preference for American?

DICKS: I think the Congress, the authorizers, have a job to do to go and change some of these things to put this on a level playing field. American companies are losing these competitions and jobs overseas because of these regulations that have been put into place over the years.

WHEELER: But an American producer is still getting a piece of the action, right, Winslow Wheeler?

WHEELER: Northrop claims in its press releases that 60 percent of this aircraft will be American made. Boeing says it’s a purely American-made aircraft. That’s not entirely the case. It’s 85 percent. There are essential parts of this aircraft from Boeing made in Japan, Russia, the United Kingdom, and other countries.

DICKS: But Ray –

WHEELER: If we make this a one-way street, we’re going to lose lots of jobs. Boeing sells to Europe a lot more than we buy from Airbus. America defense exports to Europe are multiples of what we import from them. If we go down this road, we’ll lose lots of jobs and lots of those jobs will be at Boeing.

SUAREZ: Congressman, are you prepared – you’re on the Appropriations Committee –

DICKS: Right.

SUAREZ: Are you prepared to hold up this contract?

DICKS: Well, that’s up to Chairman Murtha and our committee, and we’re going to have some more hearings on this. But I think there’s a very strong sentiment on the Hill that we should reconsider this decision. The Air Force has the right to do its competition, but it’s our decision to make the policy of our country about what we should do, and I think protecting 44,000 jobs at 300 companies in the United States at a time when we’re going into a serious recession – as you noted, the stock market went down even further today. This is a time of economic uncertainty. We need these jobs in the United States, and building these tankers and the aerial refueling equipment is one of the crown jewels of American technology. And I can’t understand why we would give this away. The Europeans would never in 100 years let us have a chance to bid on a contract of this magnitude in their country, so why should we do it?

SUAREZ: Well, given what you know about the structure, Winslow Wheeler, does Boeing have a court of appeal? Is there one final shot that they get at this thing before it becomes a done deal?

WHEELER: They’ll get two shots. They’ll get a shot with the Government Accountability Office. After this briefing they’ll get from the Air Force tomorrow, they will make a legal and political decision about whether they want to do a contract protest with GAO. That will take a year. They also have another court in Congress. If Boeing wants to go down the road in Congress, we’re in for a real food fight. Boeing has 40 states involved in the 767 contracting. Northrop Grumman has 49. That’s not going to be a pretty thing to watch.

DICKS: Hey Ray, by the way –

SUAREZ: Very quickly.

DICKS: – it’s not the Boeing Company, it’s Congressman Norm Dicks, Congressman Tiahrt, Congressman Murtha – a lot of us has very serious concerns about what happened here. And we’re going to take – we’re going to review this and we’re going to do what’s right for the American people.

SUAREZ: Congressman Norm Dicks, Winslow Wheeler.

DICKS: Thank you.

SUAREZ: – Gentlemen, thank you both.

Cantankerous over tankers
Being uncompetitive hurts: Just ask aircraft maker Boeing, and the wide swath of the Pacific Northwest workforce it employs. Last week, the world's second-largest aerospace and defense contractor lost its bid for a much-anticipated $40 billion Pentagon contract to supply 179 air tankers, bested by a consortium of Northrop Grumman and European firm Airbus. The loss has tripped off a congressional firestorm: Rep. John Murtha, chairman of the Defense Appropriations Subcommittee, and a growing number in the House and Senate are asking why the Air Force would give such a massive contract to any aircraft maker but a U.S. firm in this deteriorating economic climate. "I can't think of a worse time for a worse decision," said Sen. Patty Murray, Washington Democrat, whose state is home to 74,000 Boeing jobs. "We've got to start over."


Mr. Murtha and colleagues have a duty as a matter of proper congressional oversight to ensure that the Pentagon awards such large contracts fairly and properly. In this economic climate, we'd go so far as to argue that lawmakers have a patriotic duty — especially during wartime — to ensure that U.S. contracts are awarded domestically to the extent possible. The trouble is that the watchdogs are unlikely to find any reason to oppose the deal on the contracting merits — as opposed to the very unfavorable political economy — once they examine the criteria and the data on how each proposal stacks up. The Pentagon has every incentive in this election year and softening economy to side with the domestic firm if at all possible. But the decision was not even very close, according to industry analysts.


As Lexington Institute defense analyst Loren Thompson put it this week in an issue brief: "Boeing didn't manage to beat Northrop in a single measure of merit." Most tellingly, Mr. Thompson reports that Pentagon reviewers concluded that "if they funded the Northrop Grumman proposal they could have 49 superior tankers operating by 2013, whereas if they funded the Boeing proposal, they would have only 19 considerably less capable planes in that year. The Northrop-EADS offering was deemed much better in virtually all regards."


For now, lawmakers are directing their ire to the Pentagon, which should pry loose any remaining information not already public. But they might also undertake the less popular task of asking Boeing some hard questions. Congressional anger over the export of taxpayer-funded jobs will get us only so far if domestic competitors are not up to the challenge.

And from the New York Times Editorial Board:

Editorial
Buy the Best Tanker

Published: March 7, 2008 The Air Force's selection of a European supplier over Boeing for its next generation of tanker aircraft has sparked a frenzy of predictable bipartisan complaints: How could the military outsource these patriotic jobs?

Lawmakers from Washington State, where Boeing is a big employer, denounced the decision as a "blow to the American aerospace industry, American workers and America's men and women in uniform." Representative John Murtha, the chairman of the House Defense Appropriations Subcommittee, warned that Congress could cut all funding for the multibillion-dollar contract if the Air Force didn't satisfactorily justify its choice.

Fulminating politicians, unsurprisingly, have avoided explaining the consequences of their arguments: that they would rather have the Air Force buy a more expensive plane, and one that it says doesn't meet its needs nearly as well, if it were made by an American company.

According to Air Force officials, the refueler developed by the European Aeronautic Defense and Space Company, or EADS, the parent company of Airbus, in partnership with Northrop Grumman will perform better than Boeing's in many ways. Based on the Airbus A330, it is bigger and can transport more fuel, cargo and people than Boeing's 767. Boeing's delays in delivering tanker planes to Italy and Japan likely also hurt its bid.

Defense procurement is a global business. Boeing sells military aircraft and other defense systems all over the world. It and other American companies could suffer if a move to wrest the tanker contract from EADS and Northrop provoked a protectionist backlash in European capitals. American allies are already dismayed by the protectionist tone of this year's presidential campaign.

In 2003, Congress quashed a deal tailor-made for Boeing to lease 100 tankers to the Air Force because the top Air Force official negotiating the deal was also found to have been negotiating a job with Boeing. Now, Congressional critics say buying from EADS is unworthy because the United States is suing the company at the World Trade Organization over subsidies received from European governments.

The W.T.O.'s dispute settlement panel has not ruled on this charge, nor has it ruled on Brussels's accusation that Boeing receives hidden subsidies from Washington. Both companies should be taken off the public dole. But if the lawsuit was a deal breaker, EADS shouldn't have been allowed to bid.

Boeing claimed that if it had won the contract, it would have created 44,000 jobs in this country. The EADS-Northrop group says its tanker will support 25,000 jobs here. The tanker would be assembled at a new facility in Alabama. General Electric would make the engines, mostly in the United States. These job projections, however, are estimates and not hard commitments. And procurement rules sensibly require the Air Force to choose the best aircraft.

The issue has already migrated to the campaign. Senator John McCain is being criticized by Congressional Democrats for leading the probe that upended Boeing's sweetheart deal in 2003. Fortunately, he hasn't expressed any regret. Senators Barack Obama and Hillary Rodham Clinton quickly added complaints about the Air Force's choice to their shrill anti-trade rhetoric.

The Air Force is expected to brief Boeing on Friday about the selection. If Boeing thinks it got a raw deal, it can appeal to the Government Accountability Office, the oversight arm of Congress. If the G.A.O. finds merit, it could tell the Air Force to reopen the competition.

For Congress to reverse the decision on "Buy America" grounds would be bad for taxpayers: requiring them to pay for aircraft that provide less value for the money. It would also be bad diplomacy and bad business. And that can't be good for the country.

Why Boeing lost the $40bn tanker deal

Boeing is still smarting after losing out on a US$40 billion US government contract to build a new aerial refueling tanker jet, believing it had a more cost-effective product. But that's not the point. The tankers are not just big flying bladders of fuel. They are a critical component of the George W Bush and neo-conservative foreign policy of being able to bomb any country, any time. Crucially, then, the winning design by Northrup-Grumman and the European EADS aerospace consortium has a fuel cargo capacity almost 25% greater than Boeing's. - Julian Delasantellis (Mar 10, '08)

Tankers, and Boeing's Audacious Allies - Crown & Epstein, BusinessWeek

McCain Received Defense Firm Cash After Backing Its Contract On January 15, 2007, McCain appeared formally called for multiple bidders in the tanker deal. The push for an open process had only one true beneficiary - the Northrop Grumman/EADS consortium, which was poised to be Boeing's sole competitor. The following day, EADs money started flowing into McCain's campaign coffers.

milplex
+ Boeing challenges US Air Force tanker contract award
Washington (AFP) March 11, 2008 - Boeing said Tuesday it filed a formal challenge to the US Air Force decision to award a 35-billion-dollar aerial refueling tanker contract to Northrop Grumman and its European partner EADS. The Chicago-based aerospace giant said it filed a protest with the Government Accountability Office (GAO), asking the investigative arm of the US Congress to review the decision. "Our analysis of the ... more

Gates assured McCain on tanker competition: letter
Washington (AFP) March 11, 2008 - US Defense Secretary Robert Gates assured Senator John McCain last year that the tender process for a billion-dollar aircraft tanker contract had been changed in line with his concerns, the Pentagon said Tuesday. A team that included European aerospace giant EADS won the 35-billion-dollar contract to supply refuelling aircraft on February 29, setting off a storm of protests among supporters ... more

Time to Back Boeingby Martin SieffThe Boeing Company yesterday filed a protest against the Bush administration's decision to...

FOCUS Boeing challenge to Air Force tanker deal seen as uphill fight
CNNMoney.com -
WASHINGTON, Mar. 12, 2008 (Thomson Financial delivered by Newstex) -- Boeing's (NYSE:BA) decision yesterday to protest the Air Force's purchase of 179 ...

Boeing's Trouble with Tankers
BusinessWeek -
by Carol Matlack When Britain announced plans to replace its aging fleet of military refueling aircraft, BAe Systems (BAES.L), the country's biggest defense ...

Airbus Deal Critics Ignore Boeing's Outsourcing
InformationWeek, NY -
The Air Force is getting lots of ack-ack for its decision to award a $35 billion airborne tanker contract to Europe's Airbus instead of Chicago-based Boeing ...

McCain camp fights criticism over tanker deal
Reuters -
MANCHESTER, NH, March 12 (Reuters) - The campaign of Republican presidential candidate John McCain fought back on Wednesday against criticism his advisers ...

McCain aides defend (lobbied for) tanker deal
Baltimore Sun, United States -
by Aamer Madhani Sen. John McCain’s campaign is getting defensive over accusations that the presumptive Republican presidential nominee tilted the Air ...

Sen. Patty Murray has scolded Air Force officials for their ...
Seattle Times, United States -
At Wednesday's Defense Appropriations Subcommittee meeting she said she learned the Air Force did not consider some factors, including the US complaint to ...

Sen. Murray takes up Boeing tanker cause at Senate hearing
Seattle Post Intelligencer -
AP WASHINGTON -- Sen. Patty Murray has a chance to question Air Force officials about the air tanker contract in their appearance before the Defense ...

Editorial: Boeing should accept USAF decision
Newsday, NY -
Big corporations, and their patrons in Washington, mostly love globalization - unless it's their ox that's gored on the altar of free trade. ...

Boeing: Air Force Changed Tanker Contract to Aid Rival

Senators: Tanker pick will require longer runways, bigger hangars
By Les Blumenthal | McClatchy Newspapers WASHINGTON — The Air Force's decision to pick a larger European plane to replace its current fleet of aerial refueling tankers could cost millions of dollars in construction costs for new hangars, longer runways and strengthened taxi ramps, two senators said Wednesday.

"The entire selection process has raised serious questions and will add hundreds of millions of dollars in military construction (costs)," said Sen. Kit Bond, R-Mo. The Boeing Co., which is protesting the Air Force award, has its defense division in St. Louis.

http://www.mcclatchydc.com/244/story/30169.html

Passing Gas on Tanker Deal - National Review editorial

Democrats for Boeing - Christian Lowe, Weekly Standard

milplex
+ Air Tanker Wars Part Two
Washington (UPI) Mar 14, 2008 - Northrop Grumman is arguing that it won the U.S. Air Force's new air tanker contract in a fair fight. The Boeing Co., whose KC-767 air tanker lost out in the contest for the $35 billion contract to Northrop Grumman and the European Aerospace and Defence and Space Co.'s KC-45A air tanker, has protested the deal and requested the U.S. Government Accountability Office to undertake an ... more

Boeing or EADS? Don’t Give a Damn!
by Reza Fiyouzat / March 17th, 2008

The announcement that the Defense Department chose to give some lucrative contracts to the European Aeronautic Defence and Space Co., instead of Boeing, has been met with outrage and hoo-ha on the left, right and the center. If only I had enough time to list them all. (Full article …)

From the part of the hearings I was able to watch, it seems that the Air Force said they were looking for a smaller tanker, which was what Boeing designed. The Air Force then chose a design for a larger tanker. Part of Boeings argument was that they were told to design one thing and another was selected.

Boeing's Right to Protest? - Charles Horner, National Review

Air Force Tanker Decision Driven by Faulty Data by Jed BabbinToo Big, Too Heavy (Part 2)

USAF Evaluation Found Boeing Tanker More Capable, Survivable For Flight Crews
St. Louis MO (SPX) Apr 07, 2008 - While the U.S. Air Force awarded a contract to build the next aerial refueling airplane to the team of Northrop Grumman and the European Aeronautic Defence and Space Company (EADS), Air Force evaluators found the Boeing KC-767 Advanced Tanker offers more mission capability and has a better chance of surviving combat than the larger Northrop-EADS KC-30 tanker. "The fact that the Air Force ... more

Force Projection, the Industrial Base, and the U.S. Tanker Decisionby Allan E. Hesters, LTC, U.S. Army (Ret.)Concerns about what we choose to rely and the future of the U.S. Air Force.