WASHINGTON — The Defense Department has again delayed plans to award a $35 billion contract for Air Force refueling planes, handing a victory to defense contractor Boeing Co. and leaving the politically charged decision for the next president.
Defense Secretary Robert Gates told lawmakers Wednesday that he ended the current round of bidding on the tankers because the Pentagon's plan to pick a winner by the end of the year no longer seemed possible given the complexity of the project and the rancor between Boeing and rival Northrop Grumman Corp. He said a delay would provide a "cooling-off" period.
"We can no longer complete a competition that would be viewed as fair and objective in this highly charged environment," Gates said in a statement prepared for testimony before the House Armed Services Committee.
The decision represents a major victory for Boeing in its lengthy and bitter struggle with Northrop for the lucrative contract for 179 planes that could eventually include the right to build many more. Boeing recently threatened to back out of the bidding, saying the Pentagon's time line and terms unfairly favored the larger plane proposed by Northrop.
Earlier projections by Northrop Grumman were that the tanker deal would create or support 48,000 new direct and indirect American jobs, including about 600 jobs in Nashville at Vought Aircraft Industries, which would have had a piece of the work on the plane's wing components.
The company estimated that the contract would generate nearly $245 million in economic benefits for Tennessee, due mostly to Vought's piece of the tanker.
Boeing said the Pentagon's decision will allow "the appropriate time for this important and complex procurement to be conducted in a thorough and open competition."
Fleet is agingThe Pentagon has tried and failed for seven years to award a contract to replace its aging fleet of tankers that refuel military planes in flight. Some of the planes are nearly 50 years old, and senior defense officials have said they need to be replaced soon.
In 2004, Boeing lost the contract amid an ethics scandal that resulted in prison terms for a former senior company official and a former high-ranking Air Force official. A team of Northrop and Airbus parent European Aeronautic Defense and Space Co. was awarded the contract earlier this year, but bidding was reopened after a Government Accountability Office report found serious flaws with the Air Force's decision. The Pentagon had hoped to make a new contract decision by Dec. 31.
But Boeing and its congressional supporters exerted heavy pressure on the Defense Department to defer its decision, with company officials saying they needed at least six months to come up with a new bid.
Top Boeing officials met several times with the Air Force and Pentagon after the release last month of a draft version of the latest contract guidelines.
In those discussions it became clear that "one of the competitors would not or could not conform to the timeframes" laid out by the guidelines, according to Pentagon spokesman Chris Isleib. That meant a contract award this year was not possible.
Gates' announcement means it will be left to the winner of November's presidential election between Democrat Barack Obama and Republican John McCain to sort out the contract.
The next president takes office Jan. 20. Neither campaign had an immediate comment on the Pentagon's decision.
Jets' capacity is factorThe Air Force currently flies Boeing refueling jets. For the new plane, Boeing has proposed a version of its 767 commercial jet. Northrop and EADS have proposed a variant of the Airbus A330 passenger jet, which can carry more fuel. Some defense analysts have suggested Boeing may submit a bid using its larger 777 commercial jet.
The Pentagon plans to ask for money in its fiscal year 2009 budget request for maintenance of the current fleet and planned to continue funding those planes through fiscal 2015. Isleib said some money slated for the new tanker contract will be used to maintain the current planes.
Richard Aboulafia, an aerospace analyst with the Teal Group, said the current tankers should be able to continue flying.
"This replacement program has been delayed for decades. Another year or two isn't going to matter," he said.
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