Boeing-Northrop tanker war rages in media and Congress

( AP )- Northrop Grumman Corp and Boeing Co escalated their war of words on Wednesday over a $35 billion contract for 179 U.S. Air Force refueling aircraft that Boeing argues it should have won -- not Northrop and Europe's EADS.

The two sides have been fighting for the contract for years, but last month's decision by the Air Force to award the deal to Northrop and EADS, the parent of Europe's Airbus, did anything but end the debate. Airbus is Boeing's chief rival in the commercial sector.

Instead, it has sparked a whole new battle that is being waged in the hallways of Congress and the media.

Northrop issued a press release on Wednesday accusing Mark McGraw, head of tanker programs for Boeing, of making "a number of false assertions" in a letter to the editor of the New York Times and said it wanted to set the record straight.

It said the Air Force preferred the size and capability of the A330-based tanker it offered and stressed that its plane had been built, flown and tested. In contrast, Northrop said, the 767 variant offered by Boeing involved parts of various other 767 models and has not yet been built.

McGraw's letter accused the Air Force of changing the terms of the process in midstream to favor Northrop and its Airbus A330-based tanker, and not informing Boeing.

A day earlier, the Wall Street Journal published an editorial citing what it called "misguided calls on Capitol Hill for 'patriotism' in defense procurement."

Rep. Todd Tiahrt, a Kansas Republican, has proposed banning manufacturers from countries whose governments fail to spend at least two percent of gross domestic product on their own defense, from U.S. military contracts.

Tiahrt represents Wichita, where Boeing has a large plants that would have done work on the Air force tanker.

The Journal said any such legislation would bar companies from most of Europe and was certain to invite retaliation that could harm Boeing and other defense contractors, who have huge overseas sales. Other lawmakers have threatened to block funding for the Northrop contract.

"What's really going on is a familiar scrum for federal cash, with politicians from Washington and Kansas using nationalism as cover for their pork-barreling," the Journal wrote in its editorial.

Air Force acquisition chief Sue Payton said the process was "incredibly open and transparent and rigorous" and that both bidders had "a lot of opportunity to communicate with us."

For now, the Air Force has stepped back from the limelight to allow the Government Accountability Office, the arm of Congress that hears contract disputes, to review whether the service followed the rules when it made its tanker decision.

The GAO has until June 19 to announce a ruling.

Lawmakers are arguing over which of the two bids would have created more jobs, but the Pentagon says employment is simply not part of the acquisition decision under current laws.

Employment levels could be considered in defense acquisitions, but first Congress would have to change the law, Pentagon chief weapons buyer John Young said this month.

Both sides are briefing congressional aides on their respective proposals -- and how the Air Force evaluated them.

Air Force documents viewed by Reuters show that both companies received similar ratings in five evaluation areas, but Northrop's tanker was judged to be "advantageous" in four of the five.

Its scores were bolstered by superior aerial refueling capability, better marks for management of other programs, and studies which showed the Northrop tanker could accomplish a designated war scenario with 22 fewer tankers.

The documents revealed some weaknesses in the Northrop proposal, including concerns about adequate lighting for nighttime refueling operations, software integration and the defensive capabilities of the tanker, but evaluators said these issues could be resolved during the development phase.

Boeing's bid got lower marks due to concerns about its performance on other programs and the likely cost of developing the new 767 variant. Specific figures were redacted from the documents, but they indicated it would cost over $1 billion more to develop the Boeing tanker and Northrop's first four aircraft would be ready much earlier in the development phase.

Northrop is staffing a "war room" at its Washington office where its officials keep in close touch with suppliers and track every editorial and article written about the deal.

After an initial lower-key approach, Northrop officials are now challenging any "misstatements" they come across. Last week Northrop Chief Executive Ron Sugar went public to defuse what he called the "jingoistic" reaction to the contract.

An earlier sole-source deal for 100 Boeing 767 tankers collapsed in 2004 amid a procurement scandal that sent two former Boeing executives to jail.

John Hamre, deputy defense secretary under President Bill Clinton who now heads the Washington-based Center for Strategic and International Studies, said the politicians should step back and let the GAO make a dispassionate decision.

"In this instance we should rely on experts -- held to a rigorous standard of objectivity and discipline -- to decide what we need," Hamre wrote in a memo dated March 17.

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