- The Washington Times - Thursday, April 9, 2009

Defense Secretary Robert M. Gates plans to try again this summer to pick a defense contractor to build a badly needed replacement for the Air Force's 50-year-old fleet of aerial refueling planes.

However, after nearly a decade of failed attempts, many of the factors that hobbled previous tries persist. Members of Congress worried about jobs in their districts exert a heavy influence, and a fierce rivalry exists between plane makers Northrop Grumman Corp. and Boeing Co. over the $35 billion contract for 179 planes.

In releasing his fiscal 2010 spending plan Monday, Mr. Gates indicated he is wary of pitfalls that doomed past contracts and said he plans a fair competition that could withstand the legal challenges that overturned an award last year.

Some powerful lawmakers have proposed splitting the job between Boeing and Northrop to speed up production. With the current fleet of KC-135 jets entering old age, the pressure to start building new planes, also known as tankers, has grown more intense.

“It has got to work,” said Todd Harrison, a defense budget analyst at the Center for Strategic and Budgetary Assessments in Washington. “The tankers have got to be replaced.”

Mr. Gates canceled the last competition between Boeing and the team of Northrop and Airbus parent European Aeronautic Defence and Space Co. (EADS) in September, saying he wanted to let a new administration decide the politically thorny issue.

That decision was the latest delay in the tortured life of the tanker-replacement program. A plan to lease planes from Boeing was halted in 2003, and a top Pentagon official went to jail for favoring the Chicago-based company.

A contract award to the Northrop-EADS team last year was overturned after the Government Accountability Office concluded the Air Force unfairly had penalized Boeing's smaller plane.

Mr. Gates imposed a “cooling off” period in the fall to quell the rancorous dispute in Congress and the defense industry. Under his plan, the Pentagon would issue guidelines for a new plane and solicit bids this summer.

A Pentagon spokesman said there was no timeline yet for the new bidding.

Mr. Gates said Monday that a decision could withstand a legal challenge if “we structure this fairly and we carry out the process by our own rules.”

He also rejected a proposal to split the contract between the two teams, an idea pushed by Rep. John P. Murtha, Pennsylvania Democrat and chairman of the House Appropriations subcommittee that oversees defense spending. Mr. Murtha says two assembly lines could speed production to 24 planes per year. Mr. Gates said the same could be done with one supplier.

A Murtha spokesman said a split contract is still an option despite Mr. Gates' opposition.

There are other signs that lawmakers will be heavily involved in a new contract award.

Sen. Richard C. Shelby, Alabama Republican, last week held up President Obama's nomination for the top Pentagon weapons-buying post because he wanted assurances a new tanker contract won't be awarded on price alone.

Northrop's aircraft, which would be assembled at a new factory in Mobile, Ala., is bigger but also costs about $30 million more per plane than the Boeing jet.

Boeing supporters in the company's industrial bases of Washington state and Kansas also are mobilizing after Mr. Gates' announcement. Sen. Patty Murray, Washington Democrat, spoke with Air Force Secretary Michael B. Donley on Monday to say she hoped the new competition would be “a fair and transparent process,” according to her spokeswoman, Alex Glass.

Both Los Angeles-based Northrop and Boeing welcomed the new competition. Northrop spokesman Randy Belote said the company likely would offer the same proposal based on the Airbus A330 passenger-jet frame. Boeing will wait until the Pentagon issues its contract guidelines before discussing its bid, company spokesman Dan Beck said.

Some analysts have suggested Boeing may propose a bigger plane after the Air Force indicated last year it wants a larger jet that can carry more fuel.

Loren Thompson, a defense analyst with the Lexington Institute, said the Pentagon was repeating some of its previous mistakes by not consulting the companies enough as it drafts its requirements. That will leave the new competition vulnerable to more protests from losing companies that claim they were treated unfairly.

“I think we are looking at years of delay until any planes are bought,” Mr. Thompson said.

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