The Defense Dept Delays The Refueling Tanker Decision
Wednesday, September 10, 2008PAUL KANGAS: The race between Boeing (BA) and Northrop Grumman (NOC) to win a lucrative defense contract has hit another speed bump. The Defense Department again delayed a decision on a contract to purchase airborne refueling tankers. It had planned to make a final decision by January. But as Stephanie Dhue reports, the seven-year-long contract dispute will continue.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: As if real wars in Iraq and Afghanistan aren't enough, Defense Secretary Robert Gates is also in the middle of a lobbying war. On one side Boeing, on the other the team of Europe's EADS and Northrop Grumman for what could be a $100 billion deal to provide refueling tankers to the Air Force. Today, Gates retreated from the battle and left the decision to the next administration.
ROBERT GATES, DEFENSE SECRETARY: We cannot complete a competition that would be viewed as fair and competitive in this highly charged environment.
DHUE: Boeing welcomed the news, while Northrop was concerned about the impact of further delay. Alabama Senator Richard Shelby's state stands to gain jobs from an EADS/Northrop contract. He says the Defense Department put business interests ahead of military needs.
SEN. RICHARD SHELBY (R), ALABAMA: Our tankers, some of them are close to 50 years old, will they last a few more years by gluing them together? I'm sure. But sooner or later the Air Force is really going to have to face up to making the decision and staying with it.
DHUE: The Pentagon's decision gives Boeing another chance at the contract. But one of the company's biggest critics could be the next president. Five years ago, as chairman of the Senate Armed Services Committee, John McCain threw out a tanker deal with Boeing, because there was no competition. Still, former Assistant Secretary of Defense Larry Korb expects the deal to be less politicized next time.
LARRY KORB, SENIOR FELLOW, CENTER FOR AMERICAN PROGRESS: This deal has been so messed up so many times that so many people are going to be looking on it, and it's going to be very hard not to make the best cost-benefit decision.
DHUE: But with billions of dollars on the line, jobs at stake, and a political issue of European control, defense analyst Brett Lambert expects the lobbying battle to intensify. He also expects a compromise.
BRETT LAMBERT, MANAGING DIRECTOR, CIVITAS GROUP: Politically, what's acceptable is a split buy, smaller tankers from Boeing, larger tankers from Northrop and EADS. And it'll cost the taxpayer several hundred million more, but given how this process has gone, that's probably where we're going to end up.
DHUE: Experts predict it will be next summer at the earliest before the new administration makes a decision on the tanker contract. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
