EADS Will Not Protest Boeing Tanker Contract

March 7, 2011
Aerospace giant says competition saved U.S. taxpayers $16 billion.

A near-decade battle between two aerospace titans ended Friday as Europe's EADS said it would not contest rival Boeing's win of a $30 billion U.S. Air Force tanker contract.

But in a parting shot after the controversy-marred fight for the huge aerial refuelers, EADS -- parent of Airbus -- said its competition had saved U.S. taxpayers $16 billion, and questioned whether Boeing would make any money with its cut-price bid.

"EADS North America has decided not to protest," Ralph Crosby, chairman of the regional unit, said at a news conference in Washington. "We determined that, one, the outcome was determined by the rules; two, there was no basis for protest," Crosby said.

After a lengthy contest that saw results scrubbed and the deal rebid twice, on Febr. 24 the U.S. Air Force awarded the $30-plus billion contract for up to 179 aerial refueling tankers to Boeing, calling the U.S. bidder "a clear winner."

According to EADS, Boeing's bid was priced at $31.5 billion, while the EADS bid was 11% higher at $35 billion.

Under the terms of the process, a differential of more than 1% meant that price, and not other non-mandatory details in the two companies' proposals, would decide the contest.

EADS had the right to protest the decision with the Government Accountability Office within 10 days of the contract's award.

Crosby noted that the Defense Department had altered the requirements in the final request for proposal to focus on "mere replacement" of the aging Boeing tankers it currently runs rather than on "modernization."

"In the end, the tanker with the greatest capability wasn't selected," he said.

Allowing mid-air refueling of fights and bombers, the tankers are crucial in projecting the U.S. military's power around the world.

Crosby said EADS had offered an "aggressive" price to win the contract, but that "this outcome was ordained by a very, very aggressive price from our competition."

The Air Force originally began discussing the deal with Boeing alone on a pricey leasing basis in 2001, a deal that sparked political controversy and eventually saw two key people involved jailed for corruption.

It was then turned into a competitive bid process which pitted home-grown Boeing against the European giant -- which argued it would build its jets inside the United States, adding American jobs rather than European ones.

That was not enough in the final deal, but EADS said it had saved U.S. taxpayers $16 billion by competing against Boeing.

Asked whether Boeing chose to not make money in order to keep a competitor out of North America, Crosby said: "It is certainly a logical conclusion to draw from the decrease of the price. You have to ask Boeing what their strategy was."

Bill Barksdale, Boeing's tanker program spokesman, said that the company would deliver a "best value" aircraft.

"We are proud to have been selected to produce the most advanced, capable, and efficient next-generation aerial refueling tanker for the Air Force at the best value for the taxpayers," Barksdale said in an email interview.

"We understand the importance of this effort to our customer and the country and stand ready, along with our nationwide team of suppliers, to go to work on the new KC-46A program."

Commenting on Boeing's plan to test-fly its tanker in 2015, with delivery of the first 18 by 2017, Crosby highlighted that the EADS-Airbus tanker was already flying.

"We stand ready with a fully operative system if they fail" to deliver their tanker in time, he said.

EADS NA chief executive Sean O'Keefe said that the Defense Department determined the company was "a fully qualified prime contractor" and the competition had boosted its abilities to vie for U.S. military contracts.

Copyright Agence France-Presse, 2011

See Also:

Tanker Wars: Why Boeing Won

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