Boeing has inside track for tanker as Northrop steps aside

Mar 9, 2010 — The Bellingham Herald

Les Blumenthal

Mar. 9, 2010 (McClatchy-Tribune Regional News delivered by Newstex) -- WASHINGTON -- Boeing (NYSE:BA) Co. now has the inside track on a $35 billion contract to start replacing the Air Force's aging fleet of aerial refueling tankers after Northrop Grumman (NYSE:NOC) announced Monday, March 8, it wouldn't bid.

Northrop's partner, the European Aeronautic Defense and Space Co., left open the possibility it could bid on its own, though lawmakers and military analysts said that might be difficult.

"This is now Boeing's contract to lose," said Loren Thompson, a defense analyst with the Lexington Institute, a national security think tank based in northern Virginia.

Boeing's tanker would be based on 767 airframe built in the company's Everett plant and converted for military use at its facility in Wichita, Kan. About 9,000 jobs are at stake in Washington state and 1,000 or so in Kansas.

Sen. Maria Cantwell, D-Wash., cautioned Boeing supporters against becoming overly confident.

"It's too soon to pop the champagne corks," Cantwell said.

Washington's other senator, Democrat Patty Murray, agreed.

"Boeing still must bring a very competitive bid to the table that meets all the requirements the Pentagon has set forth," Murray said.

Defense Department officials didn't indicate Monday whether they would follow through with the bid process -- even though there will likely be only one bid -- or negotiate a sole source contract with Boeing. Bids are due in May, and the contract was expected to be awarded this fall.

In a statement, Deputy Secretary of Defense William Lynn said the Pentagon was disappointed Northrop had decided not to bid and insisted the competition was structured fairly allowing both companies an opportunity to compete effectively.

Boeing supporters on Capitol Hill said Defense Secretary Robert Gates had told them the Air Force would move ahead with awarding the contract even if there was only one bidder.

But Rep. Norm Dicks, D-Belfair, who is about to become the chairman of the powerful House defense appropriations subcommittee, said the bidding should be scrapped and the Air Force should just negotiate a contract directly with Boeing.

Dicks also suggested that once the tanker is in production, he would push to increase production levels from 15 a year to 20 to 25 a year in an effort to replace the current Cold War-era tankers as rapidly as possible.

Northrop's decision was just the latest development in the nearly nine-year effort to replace the tankers. Northrop-EADS won an earlier competition, but government auditors overturned the award after Boeing protested.

The initial contract is for 179 tankers, but the deal eventually could be worth $100 billion as the Air Force replaces about 600 Cold War-era tankers in what could be one of the largest Pentagon purchases ever.

EADS is parent company of Airbus, Boeing's fierce rival in the commercial airplane market.

In announcing it wouldn't bid, Northrop said the competition "clearly favors" Boeing's tanker and precluded the larger Northrop-EADS tanker any "competitive opportunity."

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LES BLUMENTHAL covers issues about Washington state from the McClatchy bureau in Washington, D.C. He can be reached at lblumenthal@mcclatchydc.com.

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