A Twist in the Boeing-Airbus Tanker Saga

New Pentagon specs devised in an ultra-transparent process still make it unlikely that a Boeing bid will win. Will a political deal be the next step?

By Dean Foust

When the Air Force on Sept. 25 released the specs for a fleet of 179 new refueling tankers it hopes to purchase—a prized order that could be worth $35 billion to the winning aircraft maker—analysts who pored through the documents quickly declared that the Pentagon's new requirements favored one bidder: the consortium led by Airbus and Northrop Grumman (NOC).

There's one problem for the Airbus camp: With the tanker contract having become heavily politicized, many Washington insiders believe the Air Force's efforts to create an open and transparent competition will be all for naught and that the lucrative contract will eventually be split evenly between the Airbus team and archrival Boeing (BA). "The Air Force worked real hard to create a fair competition, but the political genie is out of the bottle," notes Loren Thompson, a veteran defense analyst for the Lexington Institute, a Washington think tank. "If they don't come up with something that satisfies all parties, they may never get a single tanker."

Such an outcome would be a blow to the Airbus-Northrop team, which won the initial contract last year but saw that decision voided when Boeing and its congressional supporters accused the Air Force of a bidding process that was too opaque and arbitrary. The military didn't make the same mistake again. Indeed, many analysts praised the Pentagon for being meticulous this time in how it drafted the requirements for the KC-X tanker.

Exacting Criteria

While the first set of specs listed 808 requirements—of which only 37 were mandatory—the Air Force is far more exacting in its latest specs. The new "request for proposal" (RFP) lists 373 mandatory requirements—every one of which Airbus and Boeing must meet or be disqualified. In addition, the Air Force added 93 criteria that, while not mandatory, are nonetheless desired, and it spelled out how much extra credit each bidder could receive for delivering on these extra features or capabilities.

While the new RFP included far more detail, analysts say it effectively leads to the same conclusion: The wish list set out by the Air Force plays to the strengths of the Airbus-Northrop consortium, which plans to build its tankers using the same platform as the Airbus A330, a civilian aircraft flown by many commercial airlines. The Air Force specs put a premium on the ability of each tanker to fly long distances and carry heavier loads of fuel—two criteria that would seem to rule out the Boeing KC-767, the smaller of the Chicago-based manufacturer's two available offerings. And while the Air Force wants the new tankers to be nimble enough to take off and land on the 15,000-foot runways common at newer military bases, it also now wants the refueling aircraft to be able to navigate the short, 6,000-foot runways found on bases in places like India and the Philippines. That's 1,000 feet less than the original requirement and a condition Boeing's other potential candidate, a tanker based on its larger 777 commercial jet, would have trouble meeting.

What's more, the Air Force is demanding delivery of the first "preproduction" versions of the tankers roughly 18 months after it picks the winner next July. And at the behest of Defense Secretary Robert Gates, the Pentagon is now stipulating that it will pay a negotiated "not-to-exceed" price for each tanker—a condition it hopes will spare it the cost overruns common with the old "cost-plus" contracts.

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