TOPICS > Nation

Air Force Tanker Contract Stirs Controversy

March 6, 2008 at 6:05 PM EDT
Loading the player...
An Air Force decision to award Northrop Grumman and its European partners a contract to build $40 billion worth of new aircraft is drawing criticism from U.S. producer Boeing as well as members of Congress. A Washington state congressman and a defense expert discuss the dispute.
LISTEN SEE PODCASTS

TRANSCRIPT

JIM LEHRER: Trouble over the Air Force decision to buy a new airplane. Ray Suarez has our story.

RAY SUAREZ: This is the tanker that Northrop Grumman and its European partners hope to make for the U.S. Air Force. The KC-45 is the next-generation of an existing military tanker, Grumman’s KC-30.

The Air Force announced Friday it plans to buy 179 of them. They’ll cost at least $40 billion.

GEN. DUNCAN MCNABB, Vice Chief of Staff, U.S. Air Force: The KC-45, built by Northrop Grumman, will provide our nation and partners the critical ability to reach across the globe and project our combat capability or our humanitarian friendship rapidly and effectively.

RAY SUAREZ: The Air Force picked the Northrop Grumman consortium, including the European giant EADS, over the U.S. manufacturer Boeing.

General Arthur Lichte is commander of the U.S. Air Mobility Command.

GEN. ARTHUR LICHTE, U.S. Air Force: I can sum it up in one word: more. More passengers, more cargo, more fuel to offload, more patients that we can carry, more availability, more flexibility, and more dependability.

And so, from my aspect, the team did tremendous work, and now we will take that and put it into the fight.

RAY SUAREZ: In Washington state, where the Boeing tanker would have been built, the announcement drew heated response from workers and their union.

LARRY BROWN, Political Director, Local 751: There’s a good chance that this program is going to be turned around and be built here at Boeing in America by American workers, as it rightly should be.

TOM WROBLEWSKI, IAM District President: This is an unjustified gamble which puts our Armed Services at risk. American taxpayers should be outraged because they deserve better. Are you outraged?

GROUP: Yes!

NORTHROP GRUMMAN PROMOTION NARRATOR: Mobile, Alabama, will be the home to the KC-30′s new assembly and production centers…

RAY SUAREZ: Northrop Grumman says this contract will bring jobs to the U.S. Sixty percent of the labor and parts building will happen here.

NORTHROP GRUMMAN PROMOTION NARRATOR: … and will also employ an additional 20,000 Americans.

RAY SUAREZ: Now the Pentagon’s purchase is coming under sharp congressional attack because it would give thousands of jobs to EADS and its subsidiary, Airbus.

House Speaker Nancy Pelosi.

REP. NANCY PELOSI (D-CA), Speaker of the House: … if we continue to outsource these contracts, we are exporting jobs out of our country. I mean, we will not have — let me say it another way — we will not have the industrial and the technological base necessary to ensure our national security because it will fade, it will diminish, it is not strengthened.

RAY SUAREZ: The Air Force insists it made the right decision.

JOURNALIST: And the foreign element? Do you think that you’re going to get some blowback from Capitol Hill about this?

GEN. ARTHUR LICHTE: This is an American tanker. It’s flown by American airmen. It has a big American flag on the tail. And every day it will be out there saving American lives.

RAY SUAREZ: Air Force officials also said jobs were not a factor in awarding the contract.

Reasons for concern

RAY SUAREZ: For more on all this, we get two views. Democratic Congressman Norman Dicks is from Washington state, where much of the Boeing aircraft would have been built. He's on the House Appropriations Committee.

Winslow Wheeler had a 31-year career as a staffer for both Republican and Democratic senators focusing on defense issues. He's now with the Center for Defense Information, a think-tank. His latest book is "Military Reform: A Reference Handbook."

Congressman Dicks, the Air Force says, for its part, that this was an open and fair procedure and that it yielded a pretty good aircraft. But you don't agree.

REP. NORMAN DICKS (D), Washington: No, Ray, I disagree very strongly with that. I am very, very shocked and surprised that the Air Force, after telling us for months -- they gave me a briefing in December of 2007 and said, "We want a medium-sized tanker to replace the KC-135R."

And instead of that, they went to a large tanker, the KC-30, which is a much bigger plane, even larger than our KC-10.

Now, Boeing had asked the Air Force at the start of these proceedings, "Do you want us to bid a larger plane? If you do, we will bid the 777." And they were discouraged from doing that.

Now, I think a smaller airplane in this situation is better, because over its lifetime it will use $15 billion less fuel than the A330. It will also have $5 billion to $6 billion less in maintenance.

And it is because the A330 is a bigger plane, it will clog up fields, it will need to have new military construction facilities for hangars. I mean, this is going to be very expensive.

And it hasn't been built. I talked to the Australian embassy tonight. They don't expect to get this plane operational until 2009. It had been promised in 2007.

Boeing has already delivered a tanker of the KC-767 vintage to Japan just a few weeks ago. And until last week -- I think until yesterday the EADS-Airbus tanker had not used its fuel -- its boom to pass fuel.

So I just think they made a terrible decision and a terrible mistake for the U.S. taxpayer and for jobs in our country.

Awarding the contract

RAY SUAREZ: Winslow Wheeler, you have an intimate knowledge of how this process works. Does it look like the Air Force followed its own guidelines when letting this contract?

WINSLOW WHEELER, Center for Defense Information: Right now, all we have is dueling press releases, Boeing and its advocates, Northrop Grumman and its advocates, the Air Force and its spokespeople.

We're about to enter a process where we're going to find out the details of this. What the Air Force says at this point is that it was a slam-dunk.

There are nine criteria. Northrop Grumman won on most, maybe even all of them. We don't know the details yet.

This competition was Boeing's to lose. It lost it. The contention that nobody told Boeing that the Air Force was after a bigger airplane really doesn't make any sense to me.

RAY SUAREZ: Well, why is that? Is it that they could change the proposal if they wanted? You heard Congressman Dicks talk about something almost akin to a bait-and-switch.

WINSLOW WHEELER: Boeing was at liberty to submit two bids, one for the smaller 767, one for the larger 777.

REP. NORMAN DICKS: And as I said, Winslow, they were discouraged from offering the 777. I have got a chart, which I'd be glad to share with you, Winslow, in December of 2007, three months ago, from Ken Miller, saying that they wanted a medium-sized replacement plane.

And nobody was talking about a large plane. A large plane has all kinds of problems: It's more expensive to operate. It's going to have greater greenhouse emissions. It's more expensive to maintain.

And the only reason that they could even bid a low price is because they received subsidy. And, you know, again, Senator McCain jumped into this last and said that they could not look at the subsidy issue, which I think is a big mistake, especially when the U.S. trade representative is bringing a case in the WTO on this very issue.

EADS under scrutiny from WTO

RAY SUAREZ: Well, how about that, Winslow Wheeler? Right now, the United States is pursuing EADS at the World Trade Organization for improper trade practices, at the same time as the United States Air Force is getting ready to buy billions of dollars of aircraft from them.

WINSLOW WHEELER: The contention is that Airbus gets a subsidy from its government sponsors in Europe. They respond to the WTO that Boeing gets a roughly equivalent subsidy from the American government for its defense contract...

REP. NORMAN DICKS: That is totally inaccurate, and Winslow knows better. They don't get any subsidy of the size, $2.5 billion...

WINSLOW WHEELER: If I could finish.

RAY SUAREZ: Let him finish, Congressman.

REP. NORMAN DICKS: I will, but it's just an outrage to hear him say that.

WINSLOW WHEELER: That's their contention. And it will be adjudicated not by Congress, but by the World Trade Organization.

There's a fundamental point that needs to be addressed here. The Air Force made a decision of its judgment, based on the criteria it put out there, which airplane did the best job for our Armed Forces. That judgment is going to be challenged, and we're going to learn, hopefully, lots of details about that process.

But their position right now is that on the nine criteria that they laid out there, that Boeing went into with its eyes open, that the best thing for the United States Air Force to do and for our fighting capability is to take the airplane with more payload and more range. And it's the best choice.

REP. NORMAN DICKS: It's not the best choice.

WINSLOW WHEELER: The criteria for where it's made is purely secondary. The object here is to get the best equipment at the best price to our Armed Forces.

Congressional involvement

RAY SUAREZ: Congressman, earlier in the program you heard your leader, Nancy Pelosi, the speaker, make an anti-outsourcing argument. You in other venues have talked about jobs and the loss of jobs in the United States.

Is there anything in our contracting procedures in the United States military to favor domestic companies and domestic producers for military hardware?

REP. NORMAN DICKS: No, there isn't. In fact, there are all kinds of provisions in our law that makes it more attractive to be a foreign country.

Now, in this situation, EADS gets subsidy from the European consortium. You've got the Barry Amendment on specialty metals, which the Europeans don't have to follow and American companies do. You have ITAR regulations, which the American companies have to follow, but the Europeans don't have to follow.

So there are a whole series of things that disadvantage American companies. And I think...

RAY SUAREZ: But if I understand you, Congressman, you're saying there should be, there should be a preference for Americans?

REP. NORMAN DICKS: I think Congress, the authorizers, have a job to do, to go and change some of these things to put this on a level playing field. American companies are losing these competitions and jobs overseas because of these regulations that have been put into place over the years.

RAY SUAREZ: But an American producer is still getting a piece of the action, right, Winslow Wheeler?

WINSLOW WHEELER: Northrop claims in its press releases that 60 percent of this aircraft will be American-made.

Boeing says it's a purely American-made aircraft. That's not entirely the case; it's 85 percent. There are substantial parts of this aircraft from Boeing made in Japan, Russia, United Kingdom, and other countries.

REP. NORMAN DICKS: But, Ray...

WINSLOW WHEELER: If we make this a one-way street, we're going to lose lots of jobs. Boeing sells to Europe a lot more than we buy from Airbus.

America defense exports to Europe are multiples of what we import from them. If we go down this road, we'll lose lots of jobs, and lots of those jobs will be at Boeing.

RAY SUAREZ: But, Congressman, are you prepared -- you're on the Appropriations Committee. Are you prepared to hold up this contract?

WINSLOW WHEELER: Well, that's up to Chairman Murtha and our committee, and we're going to have some more hearings on this. But I think there's a very strong sentiment on the Hill that we should reconsider this decision.

You know, the Air Force has the right to do its competition, but it's our decision to make the policy of our country about what we should do.

And I think protecting 44,000 jobs at 300 companies in the United States at a time when we're going into a serious recession -- as you noted, the stock market went down even further today. This is a time of economic uncertainty.

We need these jobs in the United States. And building these tankers and the aerial refueling equipment is one of the crown jewels of American technology. And I can't understand why we would give this away.

The Europeans would never in 100 years let us have a chance to bid on a contract of this magnitude in their country. So why should we do it?

RAY SUAREZ: Well, given what you know about the structure, Winslow Wheeler, does Boeing having a court of appeal? Is there one final shot that they get at this thing before it becomes a done deal?

WINSLOW WHEELER: Well, they'll get two shots. They'll get a shot with the Government Accountability Office after this briefing they'll get from the Air Force tomorrow. They will make a legal and political decision about whether they want to do a contract protest with GAO. That will take a year.

They also have another court in Congress. If Boeing wants to go down the road in Congress, we're in for a real food fight. Boeing has 40 states involved in the 767 contracting; Northrop Grumman has 49. That's not going to be a pretty thing to watch.

REP. NORMAN DICKS: Hey, Ray, by the way, you know...

RAY SUAREZ: Very quickly, Congressman.

REP. NORMAN DICKS: ... it's not the Boeing company. It's Congressman Norm Dicks, Congressman Tiahrt, Congressman Murtha. A lot of us have very serious concerns about what happened here.

And we're going to take -- we're going to review this, and we're going to do what's right for the American people.

RAY SUAREZ: Congressman Norm Dicks, Winslow Wheeler, gentlemen, thank you both.