Terms for US tanker contract 'fair': Pentagon

WASHINGTON, Feb 24, 2010 (AFP) - The Pentagon unveiled final terms Wednesday for a lucrative competition to build new US aerial refueling tankers, saying it gave aviation rivals Boeing and Airbus parent EADS a fair chance at winning the deal.

The approach favored neither firm and the Pentagon had steered "straight down the middle," Deputy Defense Secretary William Lynn told a news conference.


He acknowledged the 35-billion-dollar contract was for high stakes but said the competition would be "fair, it's going to be open, it's going to be transparent."

The final guidelines clarified technical requirements for the aircraft and allowed some flexibility to industry on contract pricing, but the basic terms for the deal have not dramatically changed since a draft proposal was issued last year, Lynn said.

Despite promises of fair treatment, it remained unclear if the European Aeronautic Defence and Space Company and its partner Northrop Grumman would bid on the contract after accusing the Pentagon of favoring arch-rival Boeing.

Northrop said Wednesday it had received the US Air Force's request for proposals (RFP) for the new tanker plane but did not say if it would follow through on threats to withdraw from the bidding.

"Northrop Grumman will analyze the RFP and defer further public comments until its review of the document has been completed," said Randy Belote, spokesman for the US defense contractor.

Boeing meanwhile said it was disappointed.

"While we appreciated the open dialogue with the Air Force throughout this process, we are disappointed that the RFP does not address some of our key concerns," said Jean Chamberlin, vice president and general manager of the Boeing USAF Tanker Program.

He said the proposal failed to take into account that Airbus enjoyed what he called an unfair advantage due to subsidies from European governments.

And Boeing had concerns about how costs associated with fuel and the construction of hangars and runways would "be factored into consideration of the competing bids," he said.

The dispute over aircraft subsidies, which is before the World Trade Organization, would not be considered in the competition, US officials said, as the disagreement may not be resolved for years.

Lynn also said the Pentagon had back-up plans if EADS and Northrop bowed out, but said the Pentagon remained hopeful both sides would participate.

"There are options for pursuing an alternative if we don't have two bidders," he said when asked about procedures for a single bidder.

Wednesday's proposal marks the latest attempt to replace the aging tanker aircraft fleet after years of controversy and scandal.

A contract for the tankers was awarded in February 2008 to Northrop and EADS, but the deal was later withdrawn after Boeing successfully appealed the decision to the Government Accountability Office (GAO), the investigative arm of the US Congress.

Military commanders view the planned KC-X aircraft as crucial to sustaining US air power and are anxious to replace the older Boeing KC-135 Stratotankers that date back to the 1950s.

In the last competition, EADS and Northrop offered a modified version of the Airbus 330, while Boeing proposed an altered 767 in its bid.

The Pentagon expected to receive bids within 75 days on the new proposal and would pick a winner for the contract before the end of the summer, officials said.

After taking into account comments from the aviation rivals and members of Congress over a draft proposal issued in September, Pentagon officials made 230 changes to the guidelines.

Lynn said the competition was designed to secure the "best value" offer that would weigh price along with other factors including technical features and performance.

EADS and Northrop have charged that the previous draft proposal stressed price without taking into account their plane's advantages.

The Defense Department concluded there was no conflict of interest over Northrop providing software to the Air Force for a computer refueling model that will be employed in the competition, officials said.


by Dan De Luce
(c) 2010 AFP