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Boeing: Why the Rush?

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In an absurd twist to an already tortured tale, the Air Force last week gave the Boeing Co. just eight weeks to design a new, larger aerial refueling tanker. The deadline is ridiculous, and it raises questions about exactly what is motivating the Pentagon's procurement operations these days.

The Oct. 1 deadline was issued just a month after Defense Secretary Robert M. Gates ordered the Air Force to reopen the competition for the $40 billion contract to replace the Air Force's aging tanker fleet. The Government Accountability Office had found serious flaws in the process the Air Force used to award the deal to Boeing's European-based competitor, EADS, which is the parent company of Airbus, and its California-based partner, Northrop Grumman Corp.

Among the problems cited by the GAO review was that the Air Force, without notifying Boeing, had decided it preferred a bigger tanker. Airbus and Northrop had submitted a design based on the large Airbus 330 commercial jetliner. Boeing, reading the original specifications, had submitted a design based on its mid-sized 767 aircraft.

Now comes the re-bid, with the Air Force saying upfront that it wants a bigger tanker, and it wants the bids in eight weeks. This is a huge advantage for EADS, which already has a design in hand. Does the Pentagon want a fair competition for this $40 billion contract? Does it want to slam the door on Boeing so that it can give the deal, by hook or by crook, to Airbus? Or is the Pentagon punishing Boeing for its past indiscretions and currying favor with a man who might be the next president?

The American taxpayers will be the losers if this deal is awarded without real-world competitive bidding. Given enough time, Boeing could offer a larger tanker based on its 777 model, but Boeing officials say the firm can't design a big tanker in eight weeks.

A little background is needed to understand this star-crossed contract and the political storm swirling around it.
Four years ago, the Pentagon approved a highly unusual $23 billion deal to replace its Elvis-era fleet of aerial tankers. In effect, the Air Force would lease new tankers from Boeing.

The deal was denounced, rightly, as a sweetheart arrangement for the big defense contractor. Among its biggest critics was Sen. John McCain, R-Ariz., who might be the next commander in chief.

When the truth emerged, the Air Force's chief procurement officer and Boeing's chief financial officer went to prison for corruption. That, along with shady dealings on a missile contract, left Boeing on the outs at the Pentagon.

Boeing cleaned house and went after the new tanker contract. In February, after the Air Force announced it had picked the EADs plane, Boeing cried foul, claiming that the Air Force ignored its own bid specs. On July 9, the GAO agreed.

There is strong evidence that the Pentagon would be better off with a mid-sized tanker than a larger one. Mid-sized planes use less fuel, and they can land at more airfields, including those that might be closer to war zones. Even the smaller tankers in use today rarely transfer all the fuel they can carry.

We admit to some hometown bias. Boeing's defense operation is headquartered in St. Louis, although construction of new tankers would take place elsewhere.

That aside, the Pentagon's actions seem beyond reason. "It is unimaginable that the government would launch a $40 billion procurement with final proposals due in 45 days," said Rep. Norm Dicks, D-Wash., vice chairman of the House Defense Appropriations Subcommittee.

In announcing in July that the contract would be re-bid, Mr. Gates promised to watch the proceedings carefully. He should start immediately, perhaps with the help of a congressional investigation. Something is wrong with this arrangement.

REPRINTED FROM THE ST. LOUIS POST-DISPATCH.

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Originally Published on Tuesday August 12, 2008


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