Congress, Boeing riled by huge defense contract for foreign firm

The Air Force wants a new version of its refueling plane, and it hired a French firm to help supply 179 of them. Now, many in Congress want a do-over.

The contract, at $35 billion, is no small potatoes. It is, in fact, one of the biggest contracts the Pentagon has ever awarded.

But with the domestic economy slumping and with the sting of France's opposition to US policy in Iraq fresh in memory, lawmakers are asking how it is that America's own Boeing Co. did not prevail in the competitive bidding process. Some have expressed concern that the Air Force may have been biased against Boeing because of a previous refueling-plane scandal, while others have decried the loss of new jobs at home.

Clearly, in giving the contract last week to a partnership of Northrop Grumman Corp. and European Aeronautic Defence and Space Co. (EADS), a French concern that owns Airbus, the Air Force surprised many. Boeing had been favored to win it, triggering suggestions that the service changed the rules midway through the process or simply made the wrong call.

"We are hemorrhaging manufacturing jobs to foreign countries already, so I cannot imagine why ... our government would decide to take 44,000 American jobs, good jobs, and give them to the Europeans," said Sen. Patty Murray (D) of Washington, where an award to Boeing would have been a huge boon. "Instead of securing the American economy and our military while we are at war, we are creating a European economic stimulus plan."

Pentagon officials note that Paris-based EADS is a subcontractor, with Los Angeles-based Northrop considered the prime contractor. During fiscal year 2006, the Pentagon awarded contracts to foreign suppliers totaling about $1.9 billion, or less than 1 percent of all defense contracts, officials say.

Congress cannot change the decision, which Air Force officials say followed all rules and regulations. But it does hold the purse strings to the Air Force budget and could effectively shut down the program. That would leave the Air Force, which says it must begin replacing its "Eisenhower-era" refuelers, in the lurch.

"It's absolutely critical ... to move forward now on this program," said Sue Payton, head of acquisition for the Air Force, during a March 5 House hearing. The aerial tankers allow Air Force aircraft to refuel while aloft – a vital capability.

But lawmakers, including Rep. John Murtha (D) of Pennsylvania, who sits on the Appropriations Committee, have expressed a willingness to tinker with the service's budget if not satisfied with the Air Force's explanation for the decision.

Procurement of new aerial tankers for the Air Force has an unsavory history. In 2003 Sen. John McCain (R) of Arizona derailed an Air Force deal with Boeing to lease tankers from the company at an inflated price. Several people lost their jobs or went to jail as result.

Thus, the bid process for this contract was done with utmost care, say service officials. A decision to go with Northrop Grumman-EADS was the best one based on key "performance parameters."

Boeing is asking to be briefed immediately about why it did not prevail, and company officials expressed anger that the Air Force initially said it couldn't meet until March 12. That meeting is expected to be rescheduled.

Boeing representatives have criticized the deal, hinting at bias within the Air Force against the firm. They said they believe the military perceived Boeing to be a "higher risk" and so went with the other bidder. Boeing, which intended to use its 767 airframe to build the tankers, complained that it has more experience than the Northrop-EADS duo, which hasn't before built tankers together.

Not everyone is unhappy. Sen. Jeff Sessions (R) of Alabama says he believes the Air Force simply went with the best competitor. His state, though, stands to benefit: Mobile may get up to 2,000 new manufacturing jobs.

During a separate hearing with Air Force officials, Senator Sessions noted that the Northrop-EADS deal would lead to 25,000 new American jobs created across 230 companies in 49 states.

"I believe the Air Force conducted the most transparent and open bid process perhaps in the history of this kind of procurement," he said. "The complaints have come down from some who didn't win. I think that's a bit late."