labels: Boeing, EADS, News reports, Defence general, US Air Force
EADS to bid even if Pentagon splits USAF tanker contract news
17 April 2009

Washington: Louis Gallois, the chief executive of EADS, Europe's largest aerospace company, said Thursday that it would probably bid on a $35 billion contract for aerial refueling tankers even if it should be split between bidders. According to Gallois, EADS and partner Northrop Grumman, would consider dividing the contract with Boeing provided they received a minimum of 12 aircraft orders per annum.

This, he clarified, was the minimum work required to keep a new factory functional. The new facility would come up in Mobile, Alabama and would be built specifically to handle the proposed contract. 

Gallois spoke in response to recent proposals that the tanker contract, one of the richest ever in the history of the Pentagon, be split between bidders in order to get the controversial, hugely delayed fleet renewal plan moving,

The Pentagon is seeking to renew an Eisenhower-era tanker fleet and expects to order atleast 400 of these aircraft over the coming decades at a cost of $100 billion.

Over the last eight years, the US Air Force has twice attempted to award the contract to one company. The first time it was Boeing that bagged the contract only to see defense department officials jailed on corruption charges related to the contract. Next time around, it was the EADS-Northrop Grumman combine, which award was overturned on the technicality that points were awarded to the winners for factors that were not part of the bid provisions.

Now, leaders of two US House of Representatives subcommittees on military issues have suggested that splitting the contract may possibly be the most sensible way to move ahead.

This, in turn, has met with opposition from defense secretary Robert M Gates who argues that setting up two production lines would actually add billions of dollars to the cost over the next several years.

House leaders argue contrarily that a split contract actually provides flexibility, in that the contract may be consolidated with one company at an eventual stage, depending on their performance in the initial years.

Two production lines, they say, would also allow quicker delivery of aircraft and allow the Pentagon to catch up on lost time. It would also save money as both companies keeping bidding against each other at every stage of the contract.

EADS has made a determined push to enter the military market in the United States, which offers possibly the most lucrative contracts in the world.

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EADS to bid even if Pentagon splits USAF tanker contract