Analysis: Who will win the Air Force tanker contract?

Tuesday - 7/13/2010, 9:08am EDT

Richard Aboulafia, vice president, Teal Group

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By Vyomika Jairam
Internet Editor
FederalNewsRadio.com

The Pentagon has started the long and hard process of choosing a $35 billion winner in the competition to replace mid-air refueling tankers for the Air Force. Three companies submitted bids for the massive contract. First, EADS and then Boeing. Now a third team has entered. It's a pair that includes the cash-strapped U.S. Aerospace and former Soviet plane maker Antonov.

The contract has repeatedly attracted headlines, not only for the price tag, but because of the numerous bids and re-bids over allegations of unfair practices and bribery for nearly 10 years. The contract awarding process has suffered from over-politicization, according to Aviation industry analyst and Teal Group vice president Richard Aboulafia.

"The big central tragedy of this contract is that it hasn't done the concept of an independent procurement authority any favors. In an ideal world, when it comes to the Pentagon procurement of weapons systems, you have people in a room able to make decisions in a vacuum basically, just sitting there going through the numbers, saying 'Well, this is the best for the warfighter at this price, let's go with it,'" Aboulafia said.

"Instead, we have achieved the exact opposite goal, where I suspect an awful lot of their recommendations and opinions are being disregarded by the politicians, as a result, in the end it's never about capabilities, it's almost always about jobs or something like that."

And the surprising U.S. Aerospace/Antonov bidding team is just the latest twist in the tale, according to Aboulafia.

"We're surprised if there's a single human being on the planet who takes the whole thing seriously from their standpoint," Aboulafia said. "As a matter of fact, the planes that they are offering for this particular competition are the exact opposite of what the Pentagon says it wants. The Pentagon says it wants an off-the-shelf commercial derivative of the jetliner, just like Airbus and Boeing make for airline use, and what Antonov is offering is a high-wing dedicated military cargo plane that is extremely specific for that use. And then, of course, there's the issue of U.S. Aerospace which somehow managed to acquire the name U.S. Aerospace a few months ago. You think it would have been taken."

So why even consider submitting a bid if they are such a long-shot? Aboulafia thinks the team, which is financially in tatters, was after any publicity and attention it could get. "So, mission accomplished!"

Boeing and EADS have both been after this contract for the better part of a decade. Boeing was originally awarded the contract in 2004, but it was canceled after Boeing was found to have bribed government officials. EADS, then partnered with Northrop Grumman, was awarded the contract next, but that too was canceled after Boeing challenged.

"At the end of the day, this is the most politicized and partisan defense contract," Aboulafia said. "So as long as they both did their homework, and I'm sure they both did an admirable job, at dotting the i's and crossing the t's, making sure the Pentagon knows they've got a good, respectable plan, it's all going to come down to politics."

With Boeing being heavily aligned with Democrats, and EADS with a stronghold on Southern Republicans, Aboulafia suspects that this time around there will be challenges again, regardless of who is awarded the contract.

"The problem isn't with technical execution here, that's kind of the irony. Most of the other troubled Defense programs have had issues with cost over-runs and with technical execution, making it happen. We haven't even gotten to that phase yet, and we probably won't have problems when it gets to that phase," Aboulafia said.

"What is new and different, and actually in some ways is a major step backward, is the seriously partisan nature of this contract."

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