Boeing still has to work for tanker contract after Northrop drops out

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by GLENN FARLEY / KING 5 News, KING5.com and Associated Press

Bio | Email | Follow: @GlennFarley

KING5.com

Posted on March 8, 2010 at 12:04 PM

Updated Monday, Mar 8 at 6:31 PM

SEATTLE - Northrop Grumman Corp. says it won't compete against Boeing Co. for a $35 billion contract to build refueling tankers for the Air Force because it doesn't think it can win, perhaps leaving Boeing as the sole bidder on the contract.

But Reuters, citing sources close to the situation, reports that EADS, the European parent of Airbus, may be mulling over whether to post its own bid. A partnership of Northrop Grumman and EADS won the tanker contract in 2008 before Boeing successfully protested.

Northrop's chief executive officer and president, Wes Bush, said Monday that the Pentagon guidelines for the program favor Boeing's smaller refueling tanker.

"After a comprehensive analysis of the final RFP, Northrop Grumman has determined that it will not submit a bid to the Department of Defense for the KC-X program," said Bush. "We reached this conclusion based on the structure of the source selection methodology defined in the RFP, which clearly favors Boeing’s smaller refueling tanker and does not provide adequate value recognition of the added capability of a larger tanker, precluding us from any competitive opportunity."

Last week, Boeing announced it would use the 767 as a model for the fleet of 179 refueling tankers, which will replace the 50-year-old KC-135 tankers.  Northrop's tanker , based on the Airbus 330 airframe has been ordered by several allied Air Forces, but is much larger.

In Everett, where the tankers will likely be built, members of the Machinists Union are understandably thrilled.

"Everybody in the plant is pretty much happy about it. There's a lot of optimism now," said machinist Mike Baker.

EADS could make its own bid for the tanker contract, but the public relations battle has been fought for years over the amount of American content in the respective planes. For example, the fuselage panels for the 767 are built in Japan, but the plane is assembled in Everett, mostly from U.S. parts. In the original competition, Northrop promised to assemble its tankers in Alabama with most of its major parts built in France and Germany. But now that Northrop is out of it, the question is whether it's realistic for EADS to win to against a backdrop of an economy struggling to create jobs.

But it's not a slam dunk for Boeing. The company still needs to meet requirements laid out by the Air Force.

"For some people who want to worry about 'will there be a competition?' We had a competition, so we know exactly what Boeing's numbers are here and so the taxpayers aren't going to be hurt in any way and the Air Force and the Defense Department can negotiate with Boeing on price," said Rep. Norm Dicks, D-Wash.

The Obama administration had said such sole-source contracts aren't a good deal for the taxpayer. But industry insiders say there's no other company poised to meet the Air Force's guidelines for the program.

The refueling tanker contract has been delayed numerous times. Boeing initially won it several years ago, but the contract was cancelled after it was learned that a former Air Force official who later served as a top Boeing executive conspired to help the company win. Darlene Druyan pleaded guilty to conspiracy in 2004 and was fired by Boeing.

A new round of bidding was ordered.

In Feb. 2008, Boeing lost the contract to EADS and Northrop Grumman. Boeing protested, saying the Pentagon selected a larger plane than it originally asked for. Washington state lawmakers also blasted the Pentagon for awarding the contract to send work overseas.

Several months later, the contract was put back up for bid after the Government Accountability Office backed Boeing's protest.

It was speculated that the combined forces of Northrop Grumman would pull out of the competition after it appeared that The Pentagon's latest requirements favored Boeing's 767 over the larger Airbus A330. Northrop could have protested the Request For Proposals issued last month to restart the bidding, but Northrop says it won't protest.

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