Boeing To Protest Air Force's $35B Deal

Says Process of Awarding Contract Marred By Inconsistency In Requirements, Costs And Treatment Of Data

(AP)  Boeing Co. on Monday said it will formally protest a $35 billion Air Force contract awarded to European Aeronautic Defence and Space Co. and Northrup Grumman Corporation.

The Chicago-based aerospace company "found serious flaws in the process that we believe warrant appeal," Boeing's chairman and CEO, Jim McNerney, said in a statement.

Boeing's protest, to be filed Tuesday, compounds existing pressure on Air Force officials to explain their decision to award the high-stakes deal to a European company instead of an American one.

There has been fierce backlash on Capitol Hill, led by lawmakers from Washington, Kansas and other states that would have gained jobs had Boeing won. Air Force officials have said the impact on American jobs was not one of their criteria for awarding the contract.

Air Force officials will testify before House and Senate committees on Tuesday.

Sen. Patty Murray, D-Wash., praised Boeing's decision to protest the contract.

"The Air Force's short-sighted decision to place the future of America's aerospace industry and national security in the hands of an illegally subsidized foreign competitor is simply wrong for America," she said.

Murray called on Congress to look into the ramifications of the Air Force's decision on national security and the U.S. economy.

The contract to replace 179 air-to-air refueling tankers is the first of three Air Force awards worth as much $100 billion to replace its entire fleet of nearly 600 tankers over the next 30 years.

Following a debriefing by Air Force officials on Friday, Boeing questioned the fairness of the competition, citing "inconsistency in requirements, cost factors and treatment of our commercial data."

The company argued that the Air Force changed its method for evaluating the two tankers even after issuing a request for proposals. These changes allowed a larger tanker to be competitive even though the Air Force originally had called for a medium-sized plane. Air Force officials have indicated that the larger size of the tanker offered by the EADS/Northrop team helped tip the balance in its favor.

"We didn't think they wanted a bigger plane," Jim Albaugh, head of Boeing's Integrated Defense Systems unit, said last week. Albaugh said this is why Boeing based its offering on Boeing's 767, noting that "we were discouraged from offering the 777," a bigger aircraft that would have been more comparable to the winning bid.

Once Boeing files its protest, the Government Accountability Office will have 100 days to issue a ruling. A protest could delay execution of the tanker contract by nearly a year, according to Loren Thompson, a defense analyst with the Lexington Institute, a think tank.

In a statement, Northrop Grumman said the tanker competition was "the most rigorous, fair and transparent acquisition process in Defense Department history."

The Air Force selection of EADS, the European parent of Boeing rival Airbus, and Northrop Grumman of Los Angeles came as a major surprise. Boeing has been supplying refueling tankers to the Air Force for nearly 50 years.

With anger mounting on Capitol Hill, top Air Force officials - including Air Force Secretary Michael Wynne, Air Force Chief of Staff T. Michael Moseley and Sue Payton, the Air Force's assistant secretary for acquisition - are scheduled to testify this week at a series of congressional hearings.

"This is one of the worst decisions I've ever seen," said Rep. Norm Dicks, a Democrat from Washington State, which is home to many Boeing jobs. Dicks said he will work to block the decision or push for a new tanker competition.

The EADS/Northrop Grumman team plans to perform its final assembly work in Mobile, Ala., although the underlying plane would mostly be built in Europe. It would also use General Electric Co. engines built in North Carolina and Ohio. (Northrop Grumman estimates a Northrop/EADS win would produce 2,000 new jobs in Mobile and support 25,000 jobs at suppliers nationwide.)

Boeing would have performed much of the tanker work in Everett, Wash., and Wichita, Kan., and used Pratt & Whitney engines built in Connecticut. The company said a win would have supported 44,000 new and existing jobs at Boeing and more than 300 suppliers in more than 40 states. But even if Boeing had won the deal, critical parts of its tankers would have come from other countries, including Japan and Italy.

Sen. Richard Shelby, R-Ala., said he remains confident that the GAO will uphold the Air Force decision and added that he want to "keep the Congress out of the procurement business."

Thompson said Boeing will have a tough time overturning the Air Force decision. "This was the most rigorous and complete weapons award that the Air Force has done in modern times," he said.

According to data and reports reviewed by The Associated Press, corporate claims of contract irregularities and improprieties are rejected more often than not by the GAO. Of the 1,327 bid protests lodged with the GAO in 2006, just 249 got as far as an official decision. And in 71 percent of those cases, the office sided with the government and denied the complaint.

Boeing's shares fell $2.22 to $74.38 Monday. And Northrop's shares fell 62 cents to $78.39.

[tool105]

I do know that airbus will assymble their plane in mobile alabama creating over 2000 jobs in my home state. not to mention they would be useing american made engines and wheels and brakes how many more american jobs would that create? also I might add that I''m a machinist and I''ve personaly made a lot of different parts for airbus and have seen a big increase in their parts because it is cheaper for them to have it made here instead of europe.It''s been a long time since I"ve done any thing for boeing they took alot of their work outside the u.s.

[tool105]

I would love to see cbs do a story to look at both airbus and boeing and find out exactly how much of each of their planes would actualy be made here in america? 68% of boeing''s new dreamliner is built in other countries because of cheap labor not only that boeing outsourced alot of the design work to engineering firms outside the u.s. me personaly I beleive boeing is just a sore looser, I mean they are saying that an american company should get the contract but just how much of the plane would actualy be made here in the u.s.?

[roysan76]

Things that make you go hmmmmmmmmmmmm.

A couple of McCain''s campaign staff were employed as lobbiests for EADS (parent company of Airbus). I''m not accusing him of any skullduggery, but it does get the thought processes moving along.

[wardoglrs]

If you cant see why Mccain should''nt be in the white house you have a problem this guy will finnish the usa off. Wake the Fup. You people are stupid like sheep. And soon when Russia & China come to the usa then you will know what pain & misery you threw around the world feel''s like. Your country is comming to an end. Everyone knows whats about to happen to the usa except the usa...Bye Bye american pie. Say hello to the illegals for me too.

[photogeezer]

An earlier news story said Boeing came up short on all five chief criteria, I suppose for whatver fuel tanker aircraft are suppposed to do. It was in my local paper, so probably a UPI or AP story, since my paper fired much of its news staff.

[photogeezer]

Anyone think to ask why Boeing failed to meet the design criteria called for in the specs? Is there any blame for corporate CEO''s who make stupid business decisions that are borne on the backs of workers? Why did Toyota have to be the one to come up with a workable hybrid, and not GM or Ford? Any outcry when Berreta got the contract for the military''s pistol? Anyone think that maybe it was a better product?

[sjc_1]

The deal was rigged from the start, get over it. This was and is more political than procurement. There have been lots of deals in the past done for foreign relations reasons, here is just another one.

[chrisl45]

John McCain is willing to die for America. He was an American POW in Vietnam for over 5 years. When he was shot down by a Russian SAM John broke his leg because it hit his control panel, and he broke his arms when the parachute came out. When he landed, he was bayonetted in the abdomin and foot. He had his bones broken many times by the Vietnamese. It wasn''t until the leader (Ho Chi Min) of that country died and the eyes of the world were on the POWs that things got better. John used to have his arms tied behind his back and hung from a wall. After John turned down a early release offer from the Vietnames he was starved and eventually beaten for 4 days. During those 4 days he tried to commit suicide. On one occasiion because John sat down instead of facing a wall he had his leg broken. John, today, cannot raise his arms over his head without pain. No one who knew John while he was in Vietnam has said no ills of him. John McCain is a true American hero. In this competitive world, we all live in things are always argued about. So, why come down on John because he tauts a fight pork barrel policy.

[chrisl45]

John McCain did not block anything. Yes, John argued about it, but the reason for the earlier failed contract was two people went to jail! A woman in the Air Force chain was hired by Boeing. She had knowledge of the tanker dealings. John McCain would never be involved in any dealing which might slow down US defenses. Tankers are used to supply fuel to aircraft and give the US a global reach. If EADS really gets the US contract will they turn down big profits from countries that support terror.

[newz4i]

"McCain helped block an earlier tanker contract with Boeing and prodded the Pentagon in 2006 to develop bidding procedures that did not exclude Airbus."

The Bush/McCain policy of four more years of the selling of America. IT''S TIME FOR CHANGE !! !! !! !! !! !! !!

[lochlan-2009]

Just because a company says it is American or their offices are in America, doesn''t mean that it''s workforce is in America. I am real disappointed that the journalists did no research into telling us how many Americans are employed by each company and how many employees are outsourced. I''m pretty sure Boeing outsourced their IT department just last year. It''s messed up but we are now the country for cheap skilled labor (especially with our worthless dollar, and the fight for high paying jobs). Case and Point, BMW is stepping up it''s workforce in the U.S., European companies are starting to increase their American work force because of the cheap and skilled labor here.
On another note, Boeing has been caught, more times than I can count, doing their fair share of political bribing and scams at the expense of the tax payer. It would sure be interesting to know what Boeing bid for the job.
Do journalists even work anymore? Where is all this information? I CAN DO IT MYSELF!!!!

[chrisl45]

(1)Aerbus is owned by EADS. 5% of EADS is owned by Russia, and 7 and 1/2% is owned by the United Arab Emerits.
(2)The Boeing employees in question are bound by law from selling technology to countries that sponsor terrorism.
(3)The front page of the Los Angeles Times says that Northrup threatened to drop out of the competition if the US Airforce did not change how the aircraft would be evaluated. That''s a "Wait and Switch" way of doing things. Reference: Patty Murray on the US Senate floor.

[grumpas]

We shouldn''t even be considering a contractor outside the US. That should be off limits period end of story. Especially when we have qualified contractor''s who are more than capable here in this country and especially when the economy is a mess. We are talking about the most sensitive military equipment here folks. The Bush Administration is the one who keeps harping on keeping us safe from terrorist''s then allows foreigners to build our aircraft??????? What is wrong with this picture that hasn''t been wrong for 7 years now????

[fstop100]

BIG SNAFU what else is new.

[dogband]

School Lunch programs are held to BUY AMERICAN, yet we drop $35 B to a european country to build jets for our Air Force.

Holy ***.

FUBAR

[mudrose-2009]

What happened to the "Buy American Act"? Individual consumers can decide to buy from foreign companies, but our government with tax payer dollars should be required to buy American unless the product can not be made locally, and then there should be incentives for someone to try and produce it locally. Our economy is in the toilet and the Government decides to create more jobs overseas. This seems pretty consistent with our current administration. Not sure I can ever vote for another republican (and I was a republican for 20 years).

Posted by timetrips1

You, Pewlosi and the rest of the Dimnowits keep on humming that tune. Actually, the jobs were going to Alabama and those people down there were all looking forward to a big surge in employment. But you listen to Pewlosi and the rest of the numbnuts up there stirring up crape so they can win an election and really destroy the economy. Yup, Pewlosi and the rest of them all know what they''re talking about. Poor Alabama is gonna get screwed thanks to her.

[timetrips1]

What happened to the "Buy American Act"? Individual consumers can decide to buy from foreign companies, but our government with tax payer dollars should be required to buy American unless the product can not be made locally, and then there should be incentives for someone to try and produce it locally. Our economy is in the toilet and the Government decides to create more jobs overseas. This seems pretty consistent with our current administration. Not sure I can ever vote for another republican (and I was a republican for 20 years).

[jeff-fla]

-I think that the message was loud and clear to Boeing. Make a better mouse trap and we''''ll buy it. The best way to teach a manufacturer of anything is to buy someone else''''s merchandise. Should we buy the Air Bus? Not for any reason but neither should we knuckle under to sub standard or over priced vehicles. We needn''''t tell Boeing that we were going to buy their jet all along. Let''''s go over to Air Bus and kick some tires. I love it when salesmen call me back in a few days with a sweeter deal where someone had to take a pay cut off their 7 figure salary. It''''s better in my pocket than theirs. A Chevrolet will get you just as far as a Cadillac. You just won''''t look as wealthy. Hey, America!! You''''re not.

Posted by maxify55

This is really not so.
Being a manufacture of parts for the government. You have to follow many guidelines. You can not sell parts that are not to standard. Oversea companies do not have to follow the same guidelines. This way they can make parts much cheaper.

Example. Non Gov to Gov cost. Non Gov. $1.00, Gov $6.00. The standards paper work cost $5.00 a part

Cost or no cost. We should keep all government paid work here in the U.S.A.

[armydog2]

US military planes being built outside of the USA. Way to go george!

[crater7]

ONCE AGAIN THIS ADMINISTRATION CONTINUES TO OUTSOURCE OUR JOBS TO FOREIGN COUNTRIES, NOW IT''S NATIONAL SECURITY AT RISK. THE WHOLE COUNTRY SHOULD BE PROTESTING. WHAT''S NEXT? WHY NOT LET THEM BUILD OUR SECRET SPY PLANES TOO. WHO KNOWS, THEY MAY BE ALREADY BUILDING THEM. WHERE IS SIDNEY ON THIS ISSUE?