The Pentagon reopened a US$35 billion contract on Wednesday to produce a new generation of aerial fuel tankers, acknowledging flaws in the US Air Force’s decision to award it to Northrop Grumman and European partner EADS.
In an embarrassing about-face, US Defense Secretary Robert Gates said Northrop Grumman and rival Boeing would be asked to submit revised bids for the tanker contract to a new US Defense Department team.
“We believe that we can complete all of this and award a contract by December,” Gates told a Pentagon briefing, adding that reopening the competition would not “represent a return to the first step of a process that already has gone on far too long.”
The move comes after the US Government Accountability Office (GAO) last month backed a protest by Boeing that it had lost the deal to Northrop and its partner European Aeronautic Defence and Space Company — the parent firm of Boeing’s plane rival Airbus — in a flawed process.
The GAO found “a number of significant errors that could have affected the outcome of what was a close competition.”
Gates said the Pentagon would address those errors in the new process, adding “we will request revised proposals from industry.”
In an implicit rebuke to the air force, Gates also shifted responsibility for picking a winner from the air force to the Pentagon’s under secretary of defense for acquisitions, John Young.
“Industry, Congress and American people all must have confidence in the integrity of this acquisition process,” he said.
Although many members of Congress supported the move, Senator Maria Cantwell of Washington, a strong Boeing supporter, called for “a real rebid, not a rehash” of the old contract.
Republican presidential candidate Senator John McCain supported Gates’ decision.
“The steps he announced reflect ... the need for continuing oversight of the process by which the [defense] department decides to purchase its largest and most expensive weapons,” McCain said in a statement.
The new process could wrest the mega-contract from Northrop and EADS in a dogfight fraught with protectionist overtones.
Earlier this year Northrop Grumman said that the contract would directly or indirectly create 48,000 jobs in the US.
But the choice of EADS raised protectionist hackles in Congress, with lawmakers citing security concerns and job losses to Europe at a time when the US economy is struggling.
The 179 new aircraft are to replace the air force’s fleet of aging tankers made by Boeing, up to now the sole supplier of air refueling planes to the US military.
The contract is for the initial phase of a fleet replacement project worth some US$100 billion over the next 30 years.
Northrop Grumman said it wanted to make sure the bidding remains fair.
“We are reviewing the decision to ensure the re-competition will provide both companies a fair opportunity to present the strengths of their proposals,” Northrop Grumman vice president Randy Belote said.
Louis Gallois, chief executive of EADS, said the company would “fully support our partner Northrop Grumman in rapidly addressing our customer’s requirements.”
Boeing welcomed the Pentagon decision.
“We look forward to working with the new acquisition team as it reopens the competition, but we will also take time to understand the updated solicitation to determine the right path forward for the company,” a Boeing statement said.
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