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Boeing, Northrop Grumman Clash Over Tanker Contract

May 6, 2008 at 6:20 PM EDT
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Aircraft companies Boeing and Northrop Grumman are locked in a battle for an air tanker contract from the U.S. Air Force. The fight has stretched from courtrooms to Capitol Hill, as legislators representing the companies' respective districts join the fray.

GWEN IFILL: A big-dollar Air Force decision that has sparked fights on Capitol Hill and between defense contractors. Congressional correspondent Kwame Holman prepared this report.

KWAME HOLMAN: Across the Internet and in full-page ads, a war has raged in recent weeks. Two worldwide aviation giants, Boeing and Northrop Grumman…

AD NARRATOR: The highly versatile KC-30 carries 25 percent more fuel than the KC-135.

KWAME HOLMAN: … have battled over whose plane would make the best air refueling tanker for the U.S. military. It’s a question the Air Force believed it settled on February 29th.

MICHAEL WYNNE, Secretary of the Air Force: Ladies and gentlemen, we are pleased to announce that the development and procurement of up to 179 new KC-45A tanker aircraft is awarded to Northrop Grumman Corporation.

KWAME HOLMAN: But Boeing has filed a protest claim to the Government Accountability Office saying it did not receive fair evaluation. Boeing says its air refueling tanker to be converted from 767 passenger planes is better than Northrop Grumman’s, and the Air Force itself indicated that at a post-decision briefing.

Boeing Vice President Mark McGraw.

MARK MCGRAW, Boeing: I was expecting to get wire-brushed pretty good during that debriefing. But at the end of the briefing, frankly, I felt I had just heard the winner’s brief. I mean, they loved our airplane. We had many more strengths than our competitor.

KWAME HOLMAN: Boeing’s protest has forced Northrop Grumman to freeze work on their $35 billion tanker contract until June, while the Government Accountability Office reviews the Air Force’s selection process.

Northrop Grumman says that delays its tanker, urgently needed by the military, as the two companies engage in expensive lobbying of members of Congress, which ultimately could override the Air Force decision.

Ronald Sugar is chairman of the board of Northrop Grumman.

RONALD SUGAR, CEO, Northrop Grumman: In terms of lobbying expenses, it’s really ironic. We put our best effort into this job, considerable resources to provide the Air Force with what we thought was absolutely the best airplane and giving the best design.

We’re not sitting here trying to win the job. We’ve won the job already. Our important message is to get the facts out about what we are and what we are not.

Congress takes sides

Ronald Sugar
CEO, Northrop Grumman
Let's set the record straight. First of all, this is an American company. The contract is going to Northrop Grumman. Sixty percent of the jobs are going to be here in the United States.

KWAME HOLMAN: Boeing supporters in and out of Congress have highlighted that Northrop Grumman's new tanker would be converted from French-made Airbus passenger planes. Airbus is a subsidiary of EADS, the European Aeronautic Defence and Space Company.

Kansas Congressman Todd Tiahrt was vehement.

REP. TODD TIAHRT (R), Kansas: This is a bad decision, and it appears that the Air Force had to bend over backwards to give this work to the French company, EADS.

KWAME HOLMAN: And in Washington state, home to Boeing's main production facility, Boeing workers joined in.

TOM WROBLEWSKI, President, IAM District Lodge 751: American taxpayers should be outraged, because they deserve better. Are you outraged?

KWAME HOLMAN: Supporters say Boeing's plant near Seattle is the nation's only true air tanker manufacturer and giving the tanker contract to Northrop Grumman would be a mistake.

SEN. PATTY MURRAY (D), Washington: I continue to be shocked.

KWAME HOLMAN: Washington Senator Patty Murray.

SEN. PATTY MURRAY: We're giving a foreign company, owned by foreign countries, the capability, the research and the development of the absolute backbone of our entire military air fleet.

And it means that, 10 years from now, should we have a disagreement with the country that's controlling the Airbus platform, we won't be able to build that line up again. Those workers will go away; they'll do something else. They'll be re-skilled. They'll retire.

SEN. RICHARD SHELBY (R), Alabama: She's being very parochial, and she knows that, as I would be. She's looking after her constituents there in Seattle, Washington, area.

KWAME HOLMAN: Senator Richard Shelby of Alabama.

SEN. RICHARD SHELBY: There will be winners and losers in this. Alabama would win jobs; Florida would win jobs; Cincinnati -- I mean, Ohio would win jobs; North Carolina, a lot of other states. But there will be other places that will lose jobs, Kansas, Washington state.

RONALD SUGAR: Let's set the record straight. First of all, this is an American company. The contract is going to Northrop Grumman. Sixty percent of the jobs are going to be here in the United States.

KWAME HOLMAN: The Northrop Grumman jobs would be centered in Mobile, Alabama, where the European Airbus A330 passenger planes would be assembled and converted into refueling tankers.

Northrop's Sugar says, if the contract stands, Mobile will become the hub of a new aerospace corridor across the southeast.

RONALD SUGAR: We will have 230 suppliers in the United States supporting this job. We will create 48,000 new direct and indirect jobs as a result of this.

We are not unmindful of the fact that American content is important. And all the critical military modification work, everything that's sensitive, will be done in the United States by American citizens, Northrop Grumman people.

KWAME HOLMAN: And Sugar says his company's tanker simply is better than the one Boeing offered.

RONALD SUGAR: The aircraft we have is a much more modern aircraft. It just appeared, from the evaluation criteria, as we were told them by the Air Force, that we scored superior in four of the five categories.

KWAME HOLMAN: And the Air Force agreed.

GEN. ARTHUR LICHTE, Commander, Air Mobility Command: 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.

Charges of 'changed parameters'

Gen. Ronald Fogleman (Ret.)
Boeing consultant
[The Air Force] changed these parameters so that a bigger aircraft could compete. And I think, at that point, the process started to become flawed.

KWAME HOLMAN: But Boeing says Northrop's plane is bigger and more expensive to operate than the Air Force needs. It also charges that the Air Force changed its criteria in order to keep Northrop's larger tanker in the running because it wanted to make sure there would be two bidders.

In 2005, under pressure from Senator John McCain and others in Congress, the Air Force had to abandon a sole-source tanker contract to Boeing after a contract-steering scandal.

A former senior Air Force official went to prison, as did Boeing's chief financial officer. Boeing's chief executive officer was forced to resign, and the company was fined $600 million.

Boeing does not say those problems hurt its bid this time, but it does say a large tanker, like Northrop Grumman's, wasn't what the Air Force originally asked for.

MARK MCGRAW: In the end, it was very surprising to hear all this talk of, you know, "more, more, more" and "bigger is better," because we had not gotten any of that throughout the process.

GEN. RONALD FOGLEMAN (Ret.), Boeing Consultant: They changed these parameters so that a bigger aircraft could compete. And I think, at that point, the process started to become flawed.

KWAME HOLMAN: Retired General Ronald Fogleman commanded the U.S. tanker and cargo fleet and served as Air Force chief of staff in the 1990s. He's now a consultant to Boeing.

GEN. RONALD FOGLEMAN: I think this is the wrong decision for the United States taxpayer, the United States Air Force, and for the troops who are going to have to operate and fly this airplane in the future.

KWAME HOLMAN: Fogleman says the larger size of Northrop Grumman's tanker is a liability.

GEN. RONALD FOGLEMAN: When you start going into countries and trying to negotiate for bed-down of tankers, these countries are not interested in having their taxi ways and their ramps destroyed by heavyweight airplanes.

And by their very nature, tankers are heavy. It's just that, in this case, you've got one that's over 100,000 pounds heavier than the other. And so what will happen is you will have fewer and fewer places that you can put this.

KWAME HOLMAN: One of Fogleman's successors as commander of the cargo and tanker fleet agreed. In an e-mail to the NewsHour, retired General John Handy said the Northrop Grumman tanker is so large, it will likely displace fighters, bombers and other aircraft at forward-operating bases.

GEN. RONALD FOGLEMAN: Historically, in the model, we've always used 50 feet, wing tip to wing tip.

KWAME HOLMAN: The amount of distance between the airplanes?

GEN. RONALD FOGLEMAN: You've got support equipment. You've got loaders, unloaders, people, fuel trucks, all this moving around.

So what they did is they decided that they would change that 50 feet to 25 feet. If you use 25 feet, then you could get more of these big airplanes onto that ramp space. I think that was a foul.

KWAME HOLMAN: Is it dangerous?

GEN. RONALD FOGLEMAN: What happens is the kids that are out there who are working 12 hours and 16 hours a day, you've just given them an added dimension of a way that they can have an accident.

You know, is it more dangerous? Sure. I mean, 50 feet versus 25 feet, it's more dangerous.

Northrop claims better design

Gen. Gregory Martin (Ret.)
Northrop Grumman consultant
Once you start putting those systems together, what you find is, when you put it in the hands of the operator, they start finding new ways to do the job with this platform that you hadn't imagined when you first built it.

KWAME HOLMAN: But in a letter to Boeing, the Air Force said a ground rule change to 25 feet more accurately reflects operations at constrained bases.

And, the Air Force says, the Northrop's tankers' increased range mean it can bed-down at airfields far from the action.

Retired Air Force General Gregory Martin, now a Northrop Grumman consultant, is among the retired officers who say General Fogleman's concerns are overblown.

GEN. GREGORY MARTIN (Ret.), Northrop Grumman Consultant: I think we have over-dramatized that.

KWAME HOLMAN: He says the Northrop Grumman tanker is more sophisticated than Boeing's and has upside potential that can't yet be seen.

GEN. GREGORY MARTIN: Once you start putting those systems together, what you find is, when you put it in the hands of the operator, they start finding new ways to do the job with this platform that you hadn't imagined when you first built it.

You sort of built it from your frame of reference of the way you used to do business. But when you put the new tool out there, all of a sudden, the people that are expert begin to find new ways to do stuff.

KWAME HOLMAN: Boeing hopes for the selection to be reversed appear to be slim. In recent years, fewer than a quarter of such protests have succeeded.

But even if the GAO endorses the Air Force's decision, Boeing supporters in Congress say they might put further hurdles in the way of awarding the air tanker contract to Northrop Grumman.

GWEN IFILL: Generals Fogleman and Martin will answer your questions about the tanker debate. Send them to our Web site at