The Air Force Wins Back Control of Tanker BidsSeptember 24, 2009

 

tanker refuel

Defense Secretary Robert Gates returned control of the competition to pick a new aerial refueling tanker to the Air Force, but also issued a warning.

"I don't need to belabor the importance of getting this done soon and getting this done right," Gates said. "We cannot afford the kind of letdowns ... and corporate food fights that have bedeviled this source selection for years."

Boeing and Northrop Grumman (in a partnership with Europe's Airbus parent EADS) have been competing fiercely for a contract to build a new fleet of in-air refueling tankers that would have replaced the refueling tankers now in use for more than 50 years. Two rounds of competition have stalled amid corporate scandal and lawsuits. The deal is worth at least $35 billion, with subsequent procurement phases making the deal worth a whopping $100 billion.

Air Force Secretary Michael Donley said the release of the request proposal is "close" and noted that companies interested in bidding will have ample time for discussions, the online publisher Politico.com reported. The formal bid specifications will be released by year-end and a contract awarded in 2010.

The two companies are positioning themselves as they wait for the new draft bid specifications. Some analysts have noted that the two prime contractors might not simply be planning their bids but might also be preparing to file protests if they think that the newest requirements favor one company over another.
Morris Cohen, a professor of operations and information management at Wharton, says that if suppliers perceive that their chances of using litigation to block a procurement awarded to a competitor have increased, they will make more use of this option. But he warns that for the most part, such challenges are hard to win and costly to execute.

"Increased use of litigation could slow down procurements and raise the cost of acquisition," says Cohen. "In the long run, the government will want to achieve a balance in encouraging such challenges."

The process is just as politically charged, with the winning bidder drawing thousands of high-paying jobs to key states for years to come. Congressional leaders are also positioning themselves by pointing out the results of the trade dispute between the United States and the European Union over civil aircraft subsidies, Politico noted.

President Barack Obama and Gates have received letters from Sen. Patty Murray (D-Wash.) saying that the World Trade Organization's decision that the European aircraft maker did receive unfair subsidies should influence the decision. Other senators, like Sen. Richard Shelby (R-Ala.), argue that the WTO decision is being misused.


(U.S. Air Force photo/Staff Sgt. Paul Clifford (RELEASED))