Pentagon Awards Boeing Tanker Contract Worth $35 Billion

Feb. 24, 2011— -- After a decade of wrangling and fierce lobbying, the Pentagon today awarded Chicago-based Boeing a $35 billion contract to being replacing the Air Force's aging aerial refueling tanker fleet.

The contract, which could create 50,000 jobs, primarily in Washington state and Kansas, was awarded to Boeing over Europe-based EADS, which planned to build the tankers in Alabama.

The battle between Boeing and the European airplane conglomerate EADS has had many fits and starts. Each company won a previous version of the bidding process only to see the bidding restarted again in each case after faults were found with the original process.

It is not clear whether this latest chapter and Boeing's victory will truly put an end to the saga.

Boeing's successful protest of EADS's win of the contract two years ago led to the latest bidding war. A Boeing win in 2001 was thrown out after it was determined that the Air Force official in charge of awarding the contract had been negotiating to work at Boeing during the selection process.

"Boeing was the clear winner," said Deputy Defense Secretary Bill Lynn during a news conference at the Pentagon.

Air Force Chief of Staff Gen. Norton Schwartz said he was "pleased with how this has produced an outcome after an exhaustive effort by hundreds of the department's very best people that we will get about delivering a capability that is long overdue and we'll stop talking about it."

Both companies proposed modified versions of existing aircraft to meet the contract requirements for the new KC-X refueling tanker. The official name for the plane will become the KC-46A. EADS proposed a tanker version of a modified Airbus 330 which is already in use by other countries while Boeing has proposed a modified 767 aircraft to serve as its tanker. Airbus is a subsidiary of EADS.

The KC-X contract is intended to replace the aging fleet of KC-135 refueling tankers that have been flying since the 1950's. Air Force officials say it is imperative to begin replacing these workhouses that have kept America's fighters and bombers flying over the skies of Iraq and Afghanistan for much of the past decade.

The Boeing victory, the third time Pentagon officials have awarded the contract in 10 years, will likely spark another political debate in Congress where both companies have support from congressional delegations representing the states that will be home to the manufacturing facilities for each plane.

The congressional delegations from Washington and Kansas advocated the Boeing plane, while EADS has the support of the Alabama delegation. Boeing's plane parts will be built at its Everett, Wash., plant and assembled in Kansas. EADS had proposed building a facility in Mobile, Ala., where the planes will be assembled with parts built in Europe. Officials have said 50,000 domestic jobs could be at stake for the winner.

In previous bids, EADS had partnered with American plane maker Northrop to dull claims that a win for the European company would mean a loss of jobs in the United States. Northrop decided not to partner with EADS for this latest round of the bidding process, believing that the contract requirements favored Boeing.

Yet, defense analysts have opined that EADS appears to be the favorite again to land the contract because its aircraft is larger and cheaper than the Boeing plane.

Military analyst Loren Thompson of the Lexington Institute has followed the tanker battle for years. In a blog posting earlier this week he said, "Judging from the frequency with which Pentagon acquisition chief Ashton Carter has been talking up the notion of a 'globalized' defense market recently, European aerospace giant EADS is the winner."

Even if the winner of the KC-X contract goes unchallenged, the tanker fight will continue for the similarly lucrative KC-Y and KC-Z contracts that will replace the rest of the aging KC-135 fleet.