labels: Boeing, EADS, Northrop Grumman, News reports, Defence general, Military aircraft
$100 billion USAF tanker contract may be split news
03 April 2009

The Pentagon's richest contract, an initial $35 billion order for 100-odd air-to-air refueling tankers for the US Air Force, may be split between the two contenders, Boeing and Northrop Grumman-backed EADS, should a proposal by Congressman John P. Murtha pass muster with the powers that be.

Boeing KC767The tanker contract, one of the most controversial and, certainly, time consuming, has been twice cancelled, and re-tendered, over the last eight years.

According to Representative John Murtha, a Democrat, who is also chairman of the House defense appropriations subcommittee, and Representative Neil Abercrombie, another Democrat, who heads another panel that oversees Air Force programmes, a split may be the only practical way to break the logjam.

The contract could run over decades and may eventually be worth over $100 billion for a fleet of 400 tankers.

Defence secretary Robert M. Gates has opposed the notion saying it would be ''an absolutely terrible idea'' to set up two production lines. Officials suggest that such a move may well add $14 billion to the cost over the next five years.

Murtha and Abercrombie argue that the advantage with a contract split is that over time the Air Force will have the facility to shift a greater share of the contract to whichever company offers the best service. They also point out that even though the plan may cost more in the short run, the ability to increase production rates and replace the aging tanker fleet more quickly could well be huge cost-saving factors, which could save billions, in purchase and maintenance costs.

The two Congressmen claim these are factors not adequately considered by the Pentagon.

They also say that the absolutely flawed process could well lead to another protest, and yet another round of bidding.

An earlier award to Boeing was overturned as corruption was uncovered in the defence department. A second round of bidding, this time awarded to EADS-Northrop-Grumman combine was also overturned on technicalities, even though their bid was $3 billion lower than Boeing's.

Abercrombie lashed out at the defence department saying by now they ought to have come up with a plan that would resolve the tangle. Evidently, it has not.

''It's hard to believe that after all these years, the Air Force hasn't come up with one already,'' Abercrombie said in an interview. He pointed out that the basic nature of the plane should have provided no problems in coming up with an ideal contract.

''It's just a flying gasoline tank,'' he said. ''It's not the F-22 or the Battlestar Galactica.''

Murtha has suggested that the Air Force buy 24 tankers each year, starting with 12 from each company.

Both the competing tankers are versions of commercial jets.

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$100 billion USAF tanker contract may be split