Boeing wins KC-X tanker battle
By Dave Majumdar - Staff writer
Posted : Thursday Feb 24, 2011 17:13:42 EST
Boeing has won the long-running battle to supply the U.S. Air Force with a new aerial refueling tanker, the service announced today.
The initial contract was a fixed-price incentive firm contract valued at over $3.5 billion for KC-X engineering and manufacturing development and the delivery of 18 aircraft, dubbed KC-46As, by 2017. The Air Force will eventually spend an estimated $35 billion to buy 179 planes.
Based on the modern Boeing 767 twin-engine widebody airliner, the new tankers will replace many Eisenhower-era KC-135 aircraft, based on the Boeing 707.
Deputy Defense Secretary William Lynn, along with DoD acquisition executive Ashton Carter, Air Force Secretary Michael Donley and Chief of Staff Gen. Norton Schwartz made the announcement during a briefing at the Pentagon this evening.
In a Feb. 24 statement, the chairman and ranking member of the House Armed Services Committee vowed “to continue the necessary oversight to ensure the evaluation was transparent and fair to each competitor.”
“We look forward to receiving more information from the Air Force as we review their decision-making processes. The Seapower and Projection Forces Subcommittee will hold a hearing on this issue as soon as enough information is publicly available,” said the statement by Reps. Howard P. “Buck” McKeon, R-Calif., and Adam Smith, D-Wash.
“A Boeing victory means that the company retains a 50-year franchise in being the sole supplier of aerial refueling tankers to the U.S. Air Force. It’s worth tens of billions of dollars to the company and it also assures the commercial arm of EADS will not start building airliners in North America,” said Loren Thompson of the Lexington Institute.
He said that Boeing’s victory caught most observers off guard; an EADS victory seemed all but certain.
“The Boeing victory suggests that the Air Force was concerned about the higher cost of building and then operating an A330, which burns a ton more fuel per flight hour than the Boeing aircraft,” he said.
Thompson said service officials did not consider the industrial base when making their selection.
“This is purely about the price and performance of the competing aircraft,” he said.
The program is likely to be the largest award during the Obama Administration, and a source of steady work for decades.
If EADS decides to protest, the European firm may have the upper hand in a political battle, thanks to Republican control of the House of Representatives and their increased presence in the Senate, said Richard Aboulafia, an analyst at the Teal Group, Fairfax, Va. By contrast, Boeing’s political power seems to be waning.
Still, he said, a lengthy battle is all but unavoidable. EADS sees the tanker contract as crucial for breaking into the U.S. military market, Aboulafia said.
Despite EADS’ participation, the tanker contract does not signal that the United States is necessarily more open to foreign companies acting as prime contractors for large military contracts.
“I don’t think this tells you much about the future access of foreign companies to the U.S. market,” Thompson said. “This is a one-shot deal.”
The analyst said there were unique factors surrounding the tanker contract.
Because the Air Force wanted a competition, industry sources said, EADS received a number of waivers for several “key performance parameters,” including the ability to take off from 7,000-foot runways, fitting into existing hangars, and refueling all types of Air Force aircraft — it reportedly cannot pass fuel to Air Force V-22s. As well, the sources said, the contractor will not be required to integrate government-furnished classified hardware.
EADS and Boeing have been battling over the tanker for nearly a decade. In the early 2000s, the Air Force tried to lease 767-based tankers from Boeing under a sole-source contract, then tried to appease critics by switching to a plan to buy 80 aircraft and lease 20. But opposition to the plan, led by U.S. Senator John McCain (R-Ariz.), torpedoed the deal in November 2003.
The tanker contract was further marred with the revelation that a senior Air Force contracting official named Darleen Druyun had steered contracts at inflated prices to Boeing in exchange for employment for herself and family members. The contract was formally ended in January 2006.
In January 2007, the Air Force launched the KC-X tanker competition, drawing bids from Boeing and archrival EADS, which partnered with Northrop Grumman. In February 2008, the Northrop-EADS team won the contract with their Airbus A330-based aircraft.
The following month, however, Boeing protested, claiming the Air Force failed to evaluate the two proposals using the published criteria. That June, the Government Accountability O