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Bidding To Reopen On $40 Billion Air Tanker Project

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By BILLY HOUSE

The Tampa Tribune

Published: July 9, 2008

WASHINGTON - The Department of Defense has decided to reopen the competition for a $40 billion military aircraft program that likely would include replacing some of the 16 aging KC-135 tankers now flown out of MacDill Air Force Base in Tampa.

In addition, top oversight of the new contract-awarding process will be handled by John J. Young Jr., the undersecretary of defense for acquisition -- not the Air Force.

"There will be a whole new team involved in the process," said Florida Rep. C.W. Bill Young today, the ranking Republican on the House Appropriations Defense Subcommittee.

Young spoke this morning to Deputy Secretary of Defense Gordon England, who provided him an early rundown of what Defense Secretary Robert Gates announced at a news conference here this afternoon.

By deciding to reopen the contract, the Pentagon is agreeing with the finding of congressional auditors in June regarding the controversial decision by the Air Force to award the tanker contract to the rival of Chicago-based Boeing Co.

In its findings, the General Accountability Office said the Air Force had made significant errors in awarding the contract to build 179 aerial refueling tankers to Northrop Grumman Corp. and its partner, the European Aeronautic Defence and Space Co., parent company of French aircraft maker Airbus, over Boeing.

That review by the GAO had come after Boeing and its supporters argued the contract was awarded improperly and that the bidding process was unfair. Boeing mounted a major campaign to sway support, saying the project will cost U.S. jobs and put national security at risk.

This morning, Young said he agreed that the Defense Department's decision to shop the contract is "the right thing to do," given the problems uncovered by the GAO with the original process.

Young said he did tell Gates that he is concerned about the delay to the program, but "it needs to be done right; we need to get the best tanker at a cost-effective price."

It is uncertain how the decision will affect companies in Florida, Alabama and other states expecting some of the Northrop subcontracting work.

Northrop had said parts of the plane will be made overseas, but 60 percent of the tanker was to be American-made, through Northrop's U.S. suppliers in Florida, Alabama and 47 others states.

In all, it said, 230 U.S. companies and as many as 48,000 U.S. jobs will be involved in the work.

For instance, the new tankers, which may replace some of the 16 aging KC-135 tankers now flown out of MacDill Air Force Base in Tampa, could mean $500 million a year for Florida companies. That includes four subcontractors in the Tampa Bay area. In all, it could create up to 2,000 new jobs in Florida.

Young said he believes Boeing's proposal would have brought in Tampa Bay area contractors, as well. But he said it is impossible to determine with the contract being put out for new bidding to determine how the Tampa area could be affected.

In recommending that the contract be offered up again, the GAO found:

•The Air Force, in awarding the contract, did not assess the merits of the competing proposals according to the criteria it listed as necessary to meet;

•The Air Force conducted "misleading and unequal" discussions with Boeing by informing Boeing that it had fully satisfied a key requirement but later determined the company had only partially done so.

•The record did not demonstrate "the reasonableness" of the Air Force's decision that Northrop Grumman's proposed refueling tanker could refuel all current Air Force fixed-wing tanker-compatible aircraft.

•The Air Force's evaluation of military construction costs in calculating the proposals was unreasonable.

•The Air Force improperly increased Boeing's estimated nonrecurring engineering costs.

Congressional critics have threatened to kill the deal if any evidence is found that Boeing was treated unfairly. House and Senate committees that set the budgets for the Defense Department and Air Force say they can turn off the funding spigot for the contract.

Reporter Billy House can be reached at bhouse@tampatrib.com or at 1 (202) 662-7673.

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