WASHINGTON Northrop Grumman Corp. and European Aeronautic Defence and Space Co. beat out Boeing Co. to win a $35 billion order from the Air Force three months ago.
Yet the contract to build 179 aerial refueling tankers is hardly a done deal.
The surprise selection of a team that includes EADS the parent company of Boeing's rival Airbus has ignited a backlash among unions representing Boeing workers, lawmakers from Washington, Kansas and other states with Boeing plants and "Buy American" proponents in Congress.
They have pinned their hopes on the Government Accountability Office, which will rule on Boeing's protest of the massive military contract by June 19. While the Air Force is not bound by the GAO review, the decision will shape the tug-of-war on Capitol Hill and potentially determine which company walks away with the high-stakes award.
A ruling that finds problems with the Air Force selection would give critical ammunition to Boeing's congressional supporters as they try to block funding for the contract or force a new tanker competition. And that could position Boeing to capture part or all of the deal.
But a GAO ruling that upholds the award would leave Boeing backers with little justification to overturn the order. To be sure, the Boeing side wouldn't just abandon the fight, yet it would be an uphill effort.
"The outcome here is so unsettled that nobody knows where this will end up," said Loren Thompson, a defense industry consultant at the Lexington Institute in Virginia.
Further complicating matters is last week's ouster of the two top Air Force officials over mistaken nuclear shipments, leaving the service ill-equipped to answer difficult questions it may soon face about the contract, Thompson said.
The Air Force is under intense pressure to prove that it ran a fair competition after a procurement scandal in 2003 sent a top Air Force acquisition official to prison for conflict of interest and led to the collapse of an earlier tanker contract with Boeing.
The current contract is the first of three Air Force deals worth as much as $100 billion to replace its entire fleet of nearly 600 aerial refueling tankers over the next 30 years. With so much at stake, both sides have poured money into lobbying, advertising, media campaigns and blogs, though neither will say how much they've spent.
Boeing has been running full-page ads in Washington, D.C., publications, including some that cover the defense industry. The Chicago-based company has also tapped several of its lobbying firms, including the Gephardt Group, to press its case.
Los Angeles-based Northrop has hired former Sens. Trent Lott, R-Miss., and John Breaux, D-La., to argue its position. And its ad campaign has hit radio stations and trade publications inside the Beltway and local newspapers in places where its tanker work would be done.
Northrop's message is clear: Its tanker will create American jobs. Northrop estimates the contract would support four new factories and 48,000 jobs with 230 U.S. suppliers, including more than 1,500 new positions in Mobile, Ala., where the tanker would be assembled.
Northrop which currently has 1,228 Utah employees has said 220 jobs would be added in Utah with the contract, both in Northrop's operations and with four supplier companies. Boeing has 739 employees and 236 suppliers and vendors in Utah.
A Boeing tanker would support 44,000 new and existing jobs at Boeing and more than 300 U.S. suppliers, the company says. Boeing would perform much of the work in Everett, Wash., and Wichita, Kan.
On Capitol Hill, supporters have echoed Boeing's claim that the Air Force biased the tanker competition to favor the larger plane offered by Northrop and EADS, even though it had originally asked for a medium-sized aircraft. Boeing's backers also maintain the Northrop/EADS team had an unfair advantage since the U.S. trade representative has filed a complaint with the World Trade Organization charging the European Union with providing illegal subsidies to Airbus.
The EU has filed a similar complaint with the WTO, accusing the U.S. government and several states of providing unfair support to Boeing.
Lawmakers are holding off moving on any major tanker-related legislation until after the GAO ruling. Still, a massive fiscal year 2009 defense policy bill passed by the House does include a provision requiring the Air Force to review the impact of subsidies on the tanker competition if the WTO rules against the EU.
The bill would also prohibit the Pentagon from awarding future contracts to companies that benefit from illegal subsidies and require it to consider the impact of contracts on U.S. jobs.