More Decisions at the Tanker Corral

The New York Times has weighed in on, and I can’t believe nobody is called it this yet, "Tankergate." No, there’s no hint of scandal, but surely this thing needs a catchy name? Tanker-Water? Chapatanker? Tankerpot Dome? I’ve already chronicled the available G2 on the decision making associated with awarding the Air Force Tanker to "the team that isn’t Boeing." Well it appears that it’s time for a new round of decisions for the home team.

Boeing received a detailed briefing from the Pentagon on Friday about why its bid fell short. Now it must decide by Wednesday whether to file a formal appeal.

The company and its allies in Washington have already made a number of arguments. Among them are that too many American jobs are being lost overseas, and that sensitive military contracts should not be in the hands of a foreign company.

The debate about the impact on American jobs is a murky one, because large manufacturing projects typically involve operations in many parts of the world, regardless of which company has a contract.

If Boeing tries to reverse the decision, it could find itself in a difficult position, accused of further delaying critically needed equipment in a time of war.

Boeing could also be forced to revisit the corruption scandal in 2004 that derailed a $20 billion deal for the company to lease refueling tankers to the Air Force. Two Boeing executives went to jail as a result, and the chief executive stepped down.

The parent of Airbus, known as EADS, and Northrop Grumman proposed a tanker made from a refitted A330 jetliner that could carry more fuel than the rival proposal, a modified Boeing 767. It also offered more flexibility for carrying cargo, transporting troops, airlifting refugees and delivering humanitarian aid.

Boeing, the heavy favorite to win the contract, having built earlier tankers, promised a new boom but did not build a prototype. One analyst who followed the contest said that Boeing, based in Chicago, seemed arrogant and offered a plan that Air Force officials thought would deliver only 19 tankers by 2013 compared with 49 by the Airbus team.

What to do? What to do? Meanwhile, unnamed analysts point out a couple of unwanted truths about the reality of how things really work in the land of big defense contracting. This on jobs.

Boeing said its bid would create or support 44,000 American jobs. The Airbus team’s figure was 25,000 jobs in 49 states. Both numbers are impossible to verify. Industry analysts point out that, employment claims aside, the manufacturers have a profit motive in building the planes with as few workers as possible.

In fact, no layoffs are expected at the Boeing plant in Everett, Wash., where the 767 is assembled, as a result of losing the contract. On the contrary, the company is hiring workers because of a $255 billion backlog for jetliners. Airbus, too, has a huge backlog.

And this on that whole pesky competition thing.

With the award to the Airbus group, Mr. Kutler, the defense company investor, said: “The Defense Department is sending a message: on major contracts, don’t be assuming we have no other options. It’s a global marketplace.”

Another crucial question is how such big contracts will be awarded in the future given the indications that many American officials seem to favor competition, but only if American companies win.

So it appears there is a rumble in the making here. In this corner is the Air Force, who it appears made the mistake of following the letter of the law in awarding a contract to the company who promised more for less.

In this corner we have the bloodied former champ, who, having not won in the ring is now considering the path taken by all those companies that were similarly trounced by Microsoft along the way. If you can’t beat ‘em, sue ‘em.

Tags: AirForce Tanker Contract, Tankergate, Tankerpot Dome, Tanker-Water, Chapatanker, Boeing, EADS