5 Minute Delay Scuttles Chance at $40 Billion Air Force Deal

Aerospace firm disqualified from bidding because messenger was 5 min. late.

August 6, 2010, 12:37 PM

Aug. 7, 2010— -- Somehow, against all odds, the already-surreal competition to build America's next fleet of tanker planes just got sillier and more venal. A tiny, troubled aerospace firm and its Ukrainian partner have been disqualified from the bidding because they handed in their proposal five minutes too late. The companies, for their part, insist that their messenger had a few minutes to spare.

For at least a decade, the Defense Department has been trying to replace its creaky cadre of Eisenhower-era refueling aircraft — the planes that keep the entire American fleet flying. A combination of corruption, jingoism, political preening, lack of will and sheer incompetence has kept Washington from accomplishing what should have been a relatively straightforward task. (Compared to, say, fighter jets, these tankers are technically simple.)

In 2003, the Air Force gave Boeing a $20 billion deal to lease some tankers. But the contract award process turned out to be beyond-shady; the deal was canceled.

In 2008, EADS and Northrop seemingly beat out Boeing in a fair fight, winning up to $40 billion in business. Then the Government Accountability Office ruled that the competition wasn't so fair, after all.

The ongoing drama has been manna for journalists and publishers, as Nathan Hodge recently pointed out. Not only has the tanker saga included everything from back room deals to dramatic reversals to heated Congressional hearings to military officials going to the pokey.

The two main competitors, Boeing and EADS, also indirectly subsidized with their advertisements and marketing just about every defense industry publication around.

Then, on July 2nd, just when the steel cage match between Boeing and EADS looked like it might be heading for some sort of final resolution, into the octagon stepped a third wrestler.

Tiny California firm U.S. Aerospace said it would enter the tanker throw-down by partnering up with Antonov, a Ukrainian plane-maker. Never mind the SEC report that noted regulators' "substantial doubt about the [U.S. Aerospace's] ability to continue as a going concern." Never mind that the tag team wasn't sure which plane it would modify for tanker duty, even though bids were due just a week hence.

Air Force Guards Allegedly Denied Messenger Access to the Base

Aviation analyst Richard Aboulafia called the whole thing "dumb beyond belief." U.S. Aerospace didn't exactly work hard to disprove him. A few days later, the company asked for an extra 60 days to submit its bid. ("Somewhere inside the Pentagon, a harried staffer has received an urgent, high-level tasker to check a thesaurus for appropriate and non-profane alternatives to the term "hell, no," quipped Flight Global's Stephen Trimble.)

The new team scrambled to get in its proposal on time, only to be rejected by the Air Force. So U.S. Aerospace turned to the Government Accountability Office for redress. After all, the GAO had already helped overturn the tanker deal once. Maybe they'd do it again.

According to Aviation Week ace Amy Butler, the company claims its messenger delivered the proposal to the gate of Wright-Patterson Air Force Base in Ohio by 1:30 pm on July 9th. But the messenger had time to spare: The deadline was 2 p.m. that day. (What, you wouldn't leave a contract worth tens of billions of dollars to the last half-hour, too?)

Anyway, Air Force guards allegedly denied the messenger access to the base. Then the guy got lost, once he was inside.

"By the time the papers reached their destination, the Air Force stamped the proposal as being received at 2:05," Butler reports. Too late, in other words.

"Air Force officials subsequently told a company representative that delays at installation gates are common (and they are — I've been subject to more than a few), and that the company should have anticipated this potential snag and planned appropriately.

But, the U.S. Aerospace argument is that Air Force personnel "intentionally delayed the messenger from delivering the proposal in order to create a pretext for refusing to consider it because they have political issues" with the principal supplier, Ukrainian state owned Antonov, according to the industry executive.

If this is proven to be true, it will bring the KC-X competition and the entire U.S. Air Force acquisition system to its knees after and already rough decade of missteps and scandals."