Punting the tankers

Another day, another political headache punted to the next administration and Congress.

Over the weekend, the Bush administration took over Fannie Mae and Freddie Mac and decided the next Congress and president would have to decide how the two mortgage giants that have contributed to the housing mess should function.

Wednesday morning, it was the $35 billion Pentagon contract to build a fleet of new mid-air refueling tankers for the Air Force — one of the longest-running dramas in Washington.
In a move that caught Washington by surprise, Defense Secretary Robert Gates announced he was terminating the Pentagon’s request for bids on the controversial contract. Gates said he determined it would be impossible for Defense to complete a competition that would be viewed fairly, and that he wanted to give the next administration full flexibility in deciding what to do.

As a result, a bidding process that has been marred by corruption, scandal and a sometimes ugly public relations and lobbying fight will live on through another administration.

The decision will disappoint advocates for Boeing and Northrop Grumman, the two firms that have battled for years and have both, at different times, seen the valuable contract in their grasp and then slip away.

Northrop Grumman is partnering on its tanker bid with the North American unit of EADS, the European parent company of Airbus, Boeing’s chief rival in the commercial aircraft market. Northrop would build the tankers in Alabama, but its opponents argue that awarding it the contract would amount to foreign outsourcing.

It also sets up some interesting dynamics for the next president, particularly if Sen. John McCain (R-Ariz.) wins in November. McCain was instrumental in highlighting a corruption scandal earlier this decade involving the tankers, Boeing and the Air Force. A senior Air Force procurement staffer inflated the cost of Boeing’s contract to lease tankers to the Air Force. The scandal highlighted unsavory connections between lobbyists and Pentagon officials, something McCain has denounced. McCain, now riding a surge in the polls, could be in a position to make the final call on the tanker contract.

An Obama administration would also make for some interesting politics on the tanker contract, given that the senator represents Illinois, the state where Boeing’s headquarters is now located. Obama issued a statement praising the Government Accountability Office when it overturned the awarding of the tanker contract to Northrop Grumman and EADS. Perhaps that contributed to the anger Northrop supporters were expressing Wednesday after learning of Gates’s decision.

Of course, the tanker contract is a minor issue compared to other problems the next administration will have to tackle. And we’re not just thinking about Fannie and Freddie.

The Iraq war, a slowing economy and the resulting growing budget deficit are among the other issues the next president will inherit. Gates’s decision to punt on tankers is merely the icing on the cake.