Air Force says tanker deal may go to higher bidder

[Guest Chainsaw]

WASHINGTON: The U.S. Air Force unveiled the final terms of a $40-billion competition for 179 aerial refueling tankers, as Northrop Grumman Corp. and partner EADS weighed whether to pull out of the running against Boeing Co.The Air Force said on Tuesday it would make its decision based on the "capabilities" and value of bids, which could result in awarding the work to the higher-priced bidder if its approach "outweighs the cost difference."

 

The Northrop team, which plans to offer a variant of EADS' Airbus A330, dubbed the KC-30, has threatened to withdraw from the competition if it concludes the final guidelines favor Boeing, which will likely submit its smaller 767 plane.

 

The A330 sells on the commercial market for about $160 million. Boeing's 767-200 sells for about $120 million.

 

"The Air Force feels absolutely confident that the playing field is level for the requirements that we have," said an Air Force official who asked not to be named. "What we will not do is tip the competition so a particular company thinks they have an advantage with their design."

 

Northrop said it would closely review the new document before deciding whether to pull out of the competition.

 

The Air Force has sought to ensure that the competition is transparent, open and fair after an earlier $23.5 billion proposal to lease and buy Boeing 767s collapsed in the Pentagon's biggest procurement scandal since the 1980s.

 

Air Force Assistant Secretary for Acquisition Sue Payton said the document, which is more than 1,000 pages long, "laid the groundwork for a fair and open competition that will assure a thorough evaluation of any proposal we receive."

 

It includes specific factors to assess each bid, along with cost, past performance and proposal risk. The factors will determine "the best value between proposals of significantly differing capabilities and costs," the Air Force said.

 

Officials did not say how Boeing's role in the tanker lease scandal would be evaluated. In that case, Boeing's former finance chief was jailed for illegally hiring a former Air Force acquisition official, but no charges were brought against the company.

 

The changes also include metrics for the new tanker's ability to carry fuel, passengers and cargo. Bidders are required to meet just 25 of 700 specific requirements identified for the new plane, an Air Force official said.

 

The final proposal also has a calculation that measures the new tanker's air refueling capability against existing tankers, a move that may address some of Northrop's concerns.

 

NORTHROP FOCUSING ON "CAPABILITIES"

 

At issue for Northrop is how much value will be assigned to the plane's abilities to carry cargo, passengers and carry out spy missions, in addition to its central job as a flying gas station for fighter jets and other military aircraft.

 

Northop has said the KC-30 carries 45,000 more pounds of fuel than the current U.S. KC-135 fleet, but it was not sure the evaluation criteria gives credit for the extra capability.

 

"It is a tanker first, but the capabilities that you get with airlift -- and the flexibility that that brings to the fight -- are absolutely critical," the Air Force source said.

 

Boeing said it would review the terms before deciding which airliner to offer, but it expected to "offer a tanker that delivers the best technology to the warfighter, best value to the taxpayer, and lowest risk to the government."

 

If Northrop withdraws, the Air Force will follow pre-set procedures to get the best value in a sole-source competition.

 

Payton said replacing the Air Force's fleet of aging KC-135s was its top acquisition priority -- ranking even higher than work on the multinational Joint Strike Fighter. The tankers are more than 45 years old, on average.

 

The Air Force plans to buy four test aircraft and 175 production planes at a rate of 15 a year during a first phase. The second and third phases will have separate competitions.

 

The Air Force expects to pick a winner in late 2007, with the first test aircraft expected in fiscal year 2010. That means the tankers could start flying in late fiscal year 2013.

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