Air Force awards Boeing tanker contract

02/25/2011 12:00 AM

08/08/2014 10:02 AM

Boeing was the "clear winner" in a competition to replace the Air Force's fleet of aging mid-air refueling tankers, a victory worth potentially thousands of jobs for Kansas. Boeing beat out European Aeronautic Defence and Space Co., parent company of Airbus, for the $35 billion contract, possibly ending the Air Force's decade-long effort to replace its Cold War-era tankers that has been marked by scandal and controversy.

"I think we structured a competition that was fair, that was based on a variety of factors, including price, including warfighting capabilities, including life-cycle costs," said Deputy Secretary of Defense William Lynn. "And Boeing was the clear winner of that process."

The initial contract calls for Boeing to design, develop, manufacture and deliver 18 tankers by 2017, with a follow-on contract for a total of 179 refuelers.

The new tanker will be called the KC-46A and will fly for the first time in 2015, Boeing officials said.

"We're delighted with the news," said Sen. Pat Roberts, R-Kan. "It's super news for Wichita.... It's a big victory for us."

It's much-needed good news for Wichita, said Machinists union District 70 president Steve Rooney.

"We have seen a lot of the people laid off from the aerospace industry," Rooney said. "This is the boost that I think we need and deserve here in Wichita and in Kansas to help with the economy."

50,000 U.S. jobs

Boeing's tanker is based on its 767 commercial aircraft, giving new life to a program that has had dwindling orders in recent years.

"We're honored to be given the opportunity to build the Air Force's next tanker and provide a vital capability to the men and women of our armed forces," Jim McNerney, Boeing chairman, president and CEO, said in a statement.

"Our team is ready now to apply our 60 years of tanker experience to develop and build an airplane that will serve the nation for decades to come."

Boeing reaffirmed Thursday that it expects the tanker to support 50,000 U.S. jobs at Boeing and its suppliers. Boeing will use 80 suppliers in 40 states.

Spokesman Bill Barksdale said last year that 7,500 of those jobs would be in Kansas. That includes existing and new jobs at Boeing and its suppliers, and other jobs created in the community.

Boeing Wichita will be the finishing center to convert the jets into tankers. Spirit AeroSystems builds the forward section for the 767.

Boeing said previously that its victory would have an economic impact of $388 million a year in Kansas.

Former Rep. Todd Tiahrt, a Republican from Goddard, said he was happy with the win. Tiahrt, who left office this year after an unsuccessful run for Senate, was a staunch advocate for a Boeing tanker.

"I wish it would have happened on my watch like it should have," said Tiahrt, who worked at Boeing Wichita before being elected. "But I'm glad it happened."

"Now we've got work nailed down for the future."

Without the tanker work, Tiahrt said he was concerned Boeing would leave Wichita.

"If you look at what was going on in the next couple of years, it was going to be pretty lean at the modification facility," he said.

Dennis Muilenburg, president and CEO of Boeing Defense, Space and Security, wouldn't speculate on that.

"Wichita has been an important part of our tanker team," he said in a conference call. "We are very proud of our team in Wichita. They do great work for our customers across a number of programs."

Boeing Wichita will be a "key element" of the tanker program going forward.

Sen. Jerry Moran, R-Kan., said the decision was great news for the state's economy.

"Wichita has long been known as the 'Air Capital of the World,' and will live up to that reputation as thousands of skilled Kansans get to work on building the next generation tanker," Moran said in a news release.

Sedgwick County Commissioner Tim Norton said the tanker win will boost spirits in Wichita.

"If I was still in retail, I'd be looking for a really good Easter and spring, and a great back-to-school season," said Norton, a former Target store manager.

Fair, open process

The competition was a fair, open and transparent process, Air Force officials said.

The choice was made after multiple internal reviews from an evaluation team of more than 230 people from multiple agencies,

Both companies turned in strong bids, meeting all 372 mandatory requirements, the Air Force said.

The difference came down to price. Boeing's bid for the fixed-price contract was more than 1 percent less than the EADS proposal. Had it been within 1 percent, 93 nonmandatory would have come into play.

"Because the difference between the total evaluated prices in present value terms was greater than 1 percent, yielding substantial savings to the taxpayer, the nonmandatory capabilities, while evaluated, were not used in determining the outcome," said Michael Donley, Secretary of the Air Force.

Most analysts and experts expected EADS to win the contract because its tanker would likely have the lowest price.

"Boeing's price was so aggressive that they had their board of directors review it before submitting it," said Loren Thompson, a Lexington Institute defense analyst. "They felt it was too risky to go any lower because they might end up losing money on the contract."

EADS offered a tanker based on its A330 wide-body commercial airliner, which is larger than the 767.

The selection was based not only on development and production costs, but also on the costs to maintain and operate the aircraft over a 40-year life cycle, Muilenburg said.

Boeing's tanker burns 24 percent less fuel than the Airbus plane, he said.

This is the Air Force's third attempt to buy new tankers.

Boeing first won the contract in 2003, but the deal was scuttled amid an ethics scandal involving a government procurement officer and Boeing officials.

A second contract was awarded to EADS and Northrop Grumman, but it was overturned after the Government Accountability Office said the rules had been changed to favor the EADS/Northrop team.

Asked about a potential protest this time, Donley, the Navy Secretary, said: "We think we've established a clear, transparent and open process. We think we've executed on that and it will not yield grounds for protest."

Last week, EADS North American chairman Ralph Crosby Jr. said that unless there was some "egregious process error," he wouldn't expect the company to protest.

But in a statement Thursday, Crosby seems to leave the possibility open.

"This is certainly a disappointing turn of events, and we look forward to discussing with the Air Force how it arrived at this conclusion," he said.

"With a program of such complexity, our review of today's decision will take some time."

Work will not wait for a potential protest, Pentagon acquisitions chief Ashton Carter said.

"We'll get started right away."

EADS had said that 48,000 jobs in the U.S. would be created or supported by its tanker program. Of those, 1,500 would have been in Mobile, Ala., where EADS had planned to build a plant.

There will be two follow-on contracts for tankers beyond the initial 179 that EADS would have another chance to bid on.

"I think there was a lot of disappointment, disbelief and the combination of both," said Connie Hudson, county commissioner for Mobile County. "We really felt very positive about the outcome today. Because of our previous experience dealing with this issue, we felt EADS had a superior product for the money."

Still, Mobile has a lot of good things happening, she said.

"No reason to be down in the mouth here, but we were certainly hoping this would be positive," Hudson said.

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