Pressure Building On KC-X Award

(MoneyWatch)  The recent semi-private World Trade Organization (WTO) ruling in the Airbus subsidiaries matter is now inserting itself into the U.S. Air Force's new tanker contract. As we recently wrote about there are many Boeing supporters willing to use this ruling to support making the new contract sole source.

Boeing has announced a new website in support of their proposals based on the Boeing 767 and 777 airliners. The website is called www.UnitedStatesTanker.com and features information about their possible bids for this major contract. In an attempt to get around the issues with the last award where the Air Force chose a larger aircraft Boeing is offering both models of aircraft this time.

Many in Congress especially the delegations from Washington and Illinois support Boeing over Airbus using the WTO ruling as another piece to support their views. The Department of Defense would most likely not want to comment on this action as with appeals it may take several more years to resolve. EADS and the European countries have also filed a complaint with the WTO about the fact that the many military contracts awarded to Boeing over the last seventy years amounts to a subsidy. In an attempt to draw out Secretary of Defense Gates Senator Murray (D-WA) has asked for a comment.

The Department of Defense really needs at least two bidders to ensure some sort of competition in the contract. The Air Force in the 2002 time frame attempted to award Boeing lease for KC-767 without any competition and Congress overturned the decision. Now seven years later there is still not a replacement. Murray is trying to get Gates on record as saying how the WTO ruling will influence the competition as in her eyes, and many others, it is an unfair advantage to Airbus on price.

Unfortunately for the Air Force other then Russian companies there are no other qualified ones able to bid on this contract. It requires a large aircraft to perform long range strategic tanking. This is something that smaller, more tactical aircraft like the KC-130 cannot handle. Without including both companies there will not be a competition and the U.S. may as well go sole source to Boeing. The lease was overturned for many reasons not least price and no competition.

This is the conundrum faced over such contracts. Limited demands for certain types of products limit the number of producers. They become more important to a country for jobs forcing even more pressure on them winning contracts. If there was a wider supplier base then there would be less pressure to win these big contracts which only happen occasionally. The Defense Department and Air Force must tread a fine line considering the world's economic condition.