Pentagon to consider extending deadline for $35B tanker contract

The Pentagon announced on Wednesday that it would extend the bidding deadline for the Air Force’s new refueling aircraft by 60 days if EADS North America formally notifies the Defense Department that it wants to compete.


The move, announced by Pentagon press secretary Geoff Morrell, could
essentially allow EADS North America to compete for the lucrative contract
against Boeing. EADS is a European conglomerate that serves as the parent company of Airbus, which is headquartered in France.

The Pentagon’s announcement comes a day after President
Barack Obama addressed the tanker competition in a press conference with his
French counterpart Nicolas Sarkozy.

{mosads} Obama pledged that the selection process would be “free and
fair” and Sarkozy said he trusted Obama’s assurances. Obama, however, stressed
that the decision with regards to Pentagon contracts lies with the secretary of
Defense.

European leaders had criticized the U.S. procurement process
after Northrop Grumman dropped out of the bidding for the tanker, but Morrell said
that politics did not play a part in the Pentagon’s decision process.

“That could not be further from the truth,” he said.

EADS, Boeing’s rival on the commercial
aircraft market, has been mulling a solo bid for the $35 billion contract.

EADS was partnered with Northrop Grumman, but Northrop Grumman officials
decided to withdraw from the competition, arguing that the selection process
favored Boeing.

Boeing’s congressional supporters are likely to be inflamed at the Pentagon’s
decision that would allow EADS to compete. They have already taken shots at the
European conglomerate over government subsidy issues and have argued such
subsidies allow EADS to have an unfair advantage on price.

One supporter of Boeing, which has been in a years-long battle with EADS and Northrop Grumman over the contract, quickly charged the administration with caving to the French.

“It is outrageous that the Obama administration has caved to European lobbying one day after meeting with French President Nicolas Sarkozy,” said Rep. Todd Tiahrt (R-Kansas), a prominent Boeing supporter.

He said the Pentagon should “reverse course” and stop “placating the Europeans,” who he said had provided subsidies to Airbus.

“I will continue to put pressure on the Defense Department to stick to its original timeline,” he concluded. “A sixty-day extension is unacceptable and will be met with much opposition in Congress.”

Another Boeing supporter, Sen. Maria Cantwell (D-Wash.), also criticized the decision.

“I see no reason why a 60-day extension in the bidding deadline is necessary,” Cantwell said in a statement. She said she was even more concerned that the Pentagon’s request for proposals on the tanker contract does not account for subsidies European nations provide Airbus. 

The U.S. and European Union are involved in a long-running fight at the World Trade Organization over subsidies the two sides allege are provided to Airbus and Boeing.

The Pentagon’s announcement was not immediately hailed by EADS.

EADS spokesman Guy Hicks said in a statement the company will assess the Pentagon’s 60 day offer. Hicks indicated that  90 additional days were minimum the minimum time necessary for EADS to prepare a “responsible proposal” for the contract.

EADS officials then indicated they were interested in staying in the
competition, but said that they could not do so without an extension to the
deadline for submitting the bids. EADS asked the Pentagon for a 90-day
extension after the initial deadline of May 10. The Pentagon agreed to extend
the deadline by 60 days instead of 90.

Morrell called the extension to July 9 “a reasonable amount of time.” He
stressed that the Pentagon is willing to compress the evaluation period to
still be able to select a contractor for the much needed tankers.

“This program is long overdue,” Morrell said at a Pentagon press briefing
Wednesday.

Northrop teamed with EADS won the contract for the tankers in February 2008.
Boeing successfully protested that award with the Government Accountability
Office.

Subsequently, Defense Secretary Robert Gates decided to start a new
competition. Northrop withdrew from it at the beginning of March arguing that
the selection process favored Boeing.