Replacing the aging fleet of aerial refueling tankers has been an Air Force priority since 2002. That year, Congress approved funding for Boeing to lease up to one-hundred 767s to replace the 50-year-old KC-135 tankers. However, the deal fell apart in the wake of a 2004 bribery scandal that resulted in the convictions of a top Pentagon procurement officer and a senior Boeing official.
After a bidding process in 2007, the Air Force awarded a contract to Northrop Grumman and the European Aeronautic Defense and Space Company (EADS). Boeing contested the results, and the Government Accountability Office overturned the award on the grounds that the competition had been conducted unfairly.
A third round of bidding ended on July 9, 2010, when Boeing and EADS submitted new bids under a new set of parameters. The Air Force announced on June 18of this year that it would make a decision in mid-November, after the midterm elections. Under either competitor, the tanker contract will greatly benefit a handful of states. Kansas stands to benefit the most. According to a Boeing press release, the tanker contract would bring 7,500 jobs and $388 million to the state. Arizona, California, Iowa, Michigan, Ohio, Texas, and Washington would gain hundreds of jobs each, and tens of millions of dollars. Predictably, the process has been mired in parochial political interests, pork-barrel spending, and congressional interference.
Senate appropriator Patty Murray (D-Wash.), who has a vested interest in Boeing’s victorious bid as the company has a large presence in her state, has claimed credit for preventing EADS from winning the contract in 2007. According to a September 9, 2010 Seattle Times article, she released a campaign advertisement claiming tanker-related “jobs were going to France if Patty Murray hadn’t stopped it.” However, the final assembly of EADS’ tanker would take place in Mobile, Alabama. In addition, if EADS is offered the contract, Airbus and EADS will also assemble commercial freighter aircraft in Mobile, using the same platform as the tanker.
Senate appropriator Richard Shelby (R-Ala.) has spoken out against the government and the contest on behalf of EADS. Shelby claimed in a September 21, 2010 Reuters article that “the administration is determined to give this contract to Boeing if there’s any way to do it.”
Further complicating the contest, on June 30, 2010, the World Trade Organization (WTO) released a report finding that EADS had allegedly received illegal subsidies from the European Union. Boeing’s supporters have been using the WTO’s findings to argue for the rejection of the EADS bid, or alternatively for adding the cost of the subsidies onto the final submitted price.
However, on September 15, 2010, the WTO released another report to US and EU officials indicating that Boeing also allegedly received subsidies — validating the fact that both manufacturers have received government support for decades. Boeing supporters argue that the company received far less assistance than EADS and continue to insist that the cost of the subsidies be added onto the cost of the final EADS bid. Noting that such an action would violate WTO rules, the Pentagon has repeatedly stated that it will not consider trade disputes in the bidding process.
At this point, it is hard to predict the outcome. Citizens Against Government Waste urges the Air Force to bring this lengthy and overwrought process to a conclusion that works best for taxpayers and the nation’s warfighters without regard to politics by choosing the best, most cost-efficient design, and to conduct future acquisitions in a manner that is more palatable to taxpayers.
Thomas A. Schatz is President of Citizens Against Government Waste (CAGW) and its lobbying affiliate, the Council for Citizens Against Government Waste (CCAGW).