February 28, 2011

The News Tribune: 40-year lifespan key to Boeing bid

Tanker contract: Rep. Norm Dicks pushed Pentagon to add time to total costs

ROB HOTAKAINEN; STAFF WRITER

LAST UPDATED: FEBRUARY 26TH, 2011 12:18 AM (PST)

WASHINGTON — When the Air Force awarded a $35 billion aerial tanker contract to Boeing on Thursday, military officials weren’t interested in knowing only how much it would cost the federal government to acquire 179 of the combat-ready refueling planes.

They also wanted to know how much it would cost to operate the planes over their entire lifespan, which is estimated at 40 years.

And that goes a long way toward explaining why Democratic Rep. Norm Dicks of Washington state, a 34-year veteran of Congress and a longtime expert on defense issues on Capitol Hill, called Thursday “the happiest day in my professional life.”

After the issue of lifespan costs arose at a congressional hearing in 2008, Dicks helped engineer a change in how the Air Force evaluated the bids between Boeing and its competitor, the European Aeronautic Defence and Space Co., or EADS, the parent company of Airbus.

“I got them to change the life cycle costs from 25 years to 40 years,” Dicks said. “When you take 179 planes, and with the Airbus burning 24 percent more fuel than the Boeing plane, that’s a big number. It could range from a $4 billion to $10 billion difference. That had to help them in a big way.”

The aerial tankers are essentially flying gas stations that allow other aircraft to refuel in mid-air, rather than having to land at fuel bases. Air Force officials want to replace the aging current fleet of 600 or so, built in the 1950s and 1960s. The entire fleet could be replaced in the next 20 years with additional contracts that could push the final price tag to $100 billion.

Boeing’s win is a big victory for 70-year-old Dicks, the top-ranked Democrat on the House Appropriations Committee’s defense subcommittee. Dicks, known by some on Capitol Hill as “Mr. Boeing,” has received tens of thousands of dollars in contributions for his political campaigns from company sources over his career.

Dicks pressed the issue at the 2008 congressional hearing after learning that the Pentagon was using a 25-year time frame to examine costs. After the hearing, the defense subcommittee voted to require the Pentagon to consider the cost of operating the new tankers over the longer 40-year life cycle.

A year ago, when the Air Force put the tanker contract out for bids, officials made clear that a winning bid would involve much more than price.

“Price is very important, but it is not the only criteria. ... It is actually possible to have a higher price and win this competition,” Deputy Defense Secretary William Lynn said at the time.

In announcing Boeing’s win at the Pentagon on Thursday, Air Force Secretary Michael Donley said the selection process “took into account mission effectiveness in wartime and life-cycle costs as embodied in fuel efficiency and military construction costs.”

In a conference call with reporters, a top Boeing official said the life-cycle costs were key to winning the contract, which is projected to produce 50,000 jobs nationwide, many of them in Washington state and Kansas.

Asked specifically about the change that Dicks pushed through, Dennis Muilenburg, the president and chief executive officer of Boeing Defense, Space and Security, said it was “an important part of the overall equation.”

EADS officials said Thursday that they will review the decision closely before deciding whether to file an appeal.

Boeing, meanwhile, said it plans to deliver the first 18 aircraft by 2017. The company has large manufacturing facilities in Washington, Kansas, Missouri and another plant slated to open this year in South Carolina. The Boeing tanker will be based on a 767 airframe built at its factory in Everett and converted to military use at its Wichita, Kan., facilities.

Rob Hotakainen: 202-383-6000 rhotakainen@mcclatchydc.com blog.thenewstribune.com/politics


Link to the original News Tribune article
New York Times: Air Force's shifting rules helped Boeing
Los Angeles Times: How one lawmaker gave Boeing a boost in tanker contest

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