Boeing says seriously weighing tanker protest
by Jim Wolf
Washington, March 7 (Reuters) - Boeing Co said on Friday it would seriously consider challenging a U.S. Air Force snub that gave a $35 billion aerial-refueling program to a team that includes its European archrival Airbus. Company executives said they had "significant concerns" about the contract decision after an Air Force briefing on the victory by a team made up of Northrop Grumman Corp and Airbus parent EADS. These concerns include "evaluation of the bids and the ultimate decision," said Mark McGraw, program manager for Boeing's tanker, based on the company's 767 commercial airliner. "What is clear now is that reports claiming that the Airbus offering won by a wide margin could not be more inaccurate," he added in a statement.
Chicago-based Boeing said it would take the next few days to evaluate the data presented by the Air Force and will give "serious consideration to filing a protest." A week ago the Air Force announced the winner in the $35 billion program to supply 179 tankers over 15 years. Tankers are used to extend warplanes' range by refueling them in mid-air. U.S. Air Force Secretary Michael Wynne told a congressional panel on Wednesday that the Northrop-EADS tanker was "clearly a better performer." Ultimately, the Air Force plans to replace more than 500 of its current KC-135 tankers, built by Boeing and averaging 47 years old. Boeing now has 10 calendar days to file a protest with the Government Accountability Office, the audit and investigative arm of Congress. The GAO would have 100 days to make a recommendation to the Air Force. If it found a problem in the selection process, it could urge a new competition be held. McGraw said Boeing executives would work through the weekend to decide on a course of action early next week. "It will be a very rigorous and deliberative process to ensure we're balancing the needs of the warfighter with our desire to be treated fairly," he said. Challenging the decision by its biggest customer would be a gamble for Boeing, which must weigh the risk of losing again, or winning and angering European airline customers. On his campaign plane on Friday, Sen. John McCain of Arizona, the presumed Republican nominee for U.S. president, defended a push he led that derailed a post-Sept. 11 Air Force plan to lease and then buy 100 modified Boeing 767s as tankers. Some Democrats, including Rep. Norm Dicks of Washington state, where Boeing has major manufacturing plants, have suggested voters punish McCain for Boeing's loss to a tanker based on the Airbus A33O airliner. "We stopped it because I had enough knowledge and experience about defense procurement to know that it was a rotten deal," McCain told reporters, of the original plan. He said nonpartisan congressional auditors later estimated he had "saved the taxpayers $6.2 billion." The deal collapsed in 2004 amid a procurement scandal that sent the Air Force's former No. 2 arms buyer, Darleen Druyun, to prison for negotiating a job with Boeing even as she oversaw billions of dollars of Boeing's weapons programs. Boeing's then chief financial officer, Michael Sears, also went to prison and Phil Condit, then chief executive, resigned in fallout from the deal McCain called a taxpayer "rip-off." The Congressional Budget Office, in an Oct. 16, 2003, report for the Senate Armed Services Committee, estimated savings of $6.7 billion for an outright Defense Department purchase of the 100 Boeing tankers then at issue. "We estimate that a straightforward purchase of 100 tankers under a new contract that takes full advantage of market conditions and the department's unique position as a large buyer to obtain the best price from Boeing would cost $14.8 billion in current dollars, a savings of $6.7 billion compared to the proposed financing arrangement," CBO said then.
(Additional reporting by Jeff Mason with McCain, editing by Gerald E.
McCormick and Tim Dobbyn)
Reuters 080308
by Jim Wolf
Washington, March 7 (Reuters) - Boeing Co said on Friday it would seriously consider challenging a U.S. Air Force snub that gave a $35 billion aerial-refueling program to a team that includes its European archrival Airbus. Company executives said they had "significant concerns" about the contract decision after an Air Force briefing on the victory by a team made up of Northrop Grumman Corp and Airbus parent EADS. These concerns include "evaluation of the bids and the ultimate decision," said Mark McGraw, program manager for Boeing's tanker, based on the company's 767 commercial airliner. "What is clear now is that reports claiming that the Airbus offering won by a wide margin could not be more inaccurate," he added in a statement.
Chicago-based Boeing said it would take the next few days to evaluate the data presented by the Air Force and will give "serious consideration to filing a protest." A week ago the Air Force announced the winner in the $35 billion program to supply 179 tankers over 15 years. Tankers are used to extend warplanes' range by refueling them in mid-air. U.S. Air Force Secretary Michael Wynne told a congressional panel on Wednesday that the Northrop-EADS tanker was "clearly a better performer." Ultimately, the Air Force plans to replace more than 500 of its current KC-135 tankers, built by Boeing and averaging 47 years old. Boeing now has 10 calendar days to file a protest with the Government Accountability Office, the audit and investigative arm of Congress. The GAO would have 100 days to make a recommendation to the Air Force. If it found a problem in the selection process, it could urge a new competition be held. McGraw said Boeing executives would work through the weekend to decide on a course of action early next week. "It will be a very rigorous and deliberative process to ensure we're balancing the needs of the warfighter with our desire to be treated fairly," he said. Challenging the decision by its biggest customer would be a gamble for Boeing, which must weigh the risk of losing again, or winning and angering European airline customers. On his campaign plane on Friday, Sen. John McCain of Arizona, the presumed Republican nominee for U.S. president, defended a push he led that derailed a post-Sept. 11 Air Force plan to lease and then buy 100 modified Boeing 767s as tankers. Some Democrats, including Rep. Norm Dicks of Washington state, where Boeing has major manufacturing plants, have suggested voters punish McCain for Boeing's loss to a tanker based on the Airbus A33O airliner. "We stopped it because I had enough knowledge and experience about defense procurement to know that it was a rotten deal," McCain told reporters, of the original plan. He said nonpartisan congressional auditors later estimated he had "saved the taxpayers $6.2 billion." The deal collapsed in 2004 amid a procurement scandal that sent the Air Force's former No. 2 arms buyer, Darleen Druyun, to prison for negotiating a job with Boeing even as she oversaw billions of dollars of Boeing's weapons programs. Boeing's then chief financial officer, Michael Sears, also went to prison and Phil Condit, then chief executive, resigned in fallout from the deal McCain called a taxpayer "rip-off." The Congressional Budget Office, in an Oct. 16, 2003, report for the Senate Armed Services Committee, estimated savings of $6.7 billion for an outright Defense Department purchase of the 100 Boeing tankers then at issue. "We estimate that a straightforward purchase of 100 tankers under a new contract that takes full advantage of market conditions and the department's unique position as a large buyer to obtain the best price from Boeing would cost $14.8 billion in current dollars, a savings of $6.7 billion compared to the proposed financing arrangement," CBO said then.
(Additional reporting by Jeff Mason with McCain, editing by Gerald E.
McCormick and Tim Dobbyn)
Reuters 080308
