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Air Force awards $35 billion tanker contract to Boeing

John Dimsdale Feb 24, 2011

Air Force awards $35 billion tanker contract to Boeing

John Dimsdale Feb 24, 2011


Kai Ryssdal: Today the Air Force finalized of the biggest defense contracts ever. Boeing will be paid $35 billion to build nearly 200 air-to-air refueling tankers. It beat out EADS, the European aerospace defense consortium.

I said ‘finalized the contract’ more in hopefulness than in expectation. This is the third time the Pentagon’s tried to pick a winner in the tanker wars. The lobbying’s been fierce. Earlier today, at what you have to believe was later than the last minute, the governors of Alabama, Mississippi, and Louisiana wrote to President Obama, pointing out that an EADS win would have meant a boost for Gulf Coast jobs. They seemed to believe EADS would have built the tankers in Mobile, Ala. Boeing will hire in Kansas and Washington state.

Our Washington bureau chief John Dimsdale has been covering this story for years. And he’s not so sure we’re done.

John Dimsdale: This is a saga of corruption, competition, and patriotism in three acts. At least so far.

Nearly a decade ago, the Air Force gave Boeing a no-bid contract to replace a fleet of flying gas stations. It was a sweet deal for Boeing, but not for taxpayers. And that got Congress’s attention. And so did blatant corruption. The Air Force official who negotiated the contract was also arranging for a cushy job with Boeing. The Air Force yanked the contract and the former official went to jail. But Boeing really wanted that contract.

Gordon Adams: It’s totally sweet. This plane will go on forever.

Defense analyst Gordon Adams.

Adams: It’s not just the $35 billion. It’s all of the follow-on work. It’s the spare parts, it’s the supplies, it’s the repairs, it’s replacing the wing skins, it’s the next generation.

One other company really wanted that contract too. When the Air Force put the tanker up for competitive bid, Europe’s EADS got in the game. It draped itself in American flags, partnering with Northrop Grumman and picking a factory in Alabama. It worked. In 2008, EADS landed the contract. That was a shock for lawmakers like Norman Dicks, the congressman from Boeing’s then-home state of Washington.

Norman Dicks: I think it is wrong to outsource a contract of this magnitude to the Europeans. They would never do it for us.

When government investigators found the Air Force had skewed their scores in favor of EADS, the Buy America crowd in Congress made the Air Force reconsider. Start act three. EADS partner Northrop dropped out in disgust. And so did Boeing. But billions are billions and Boeing and EADS were soon back. Then Gordon Adams says the Air Force stumbled again.

Adams: Air Force has occasionally looked like the Keystone Cops here.

The Air Force handed each competitor a CD with information on the other’s bid. One thing is for sure, the Air Force is open to court challenges. So while those billions won’t flow right away, a lot of lawyers will have no trouble financing vacation homes.

In Washington, I’m John Dimsdale for Marketplace.

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