Calculated Ploy... Or Capitulation?

Representatives with Boeing KC-767 tanker team met with Pentagon officials Tuesday to go over specifications for the oft-contested KC-X contract bid... but there are murmurs Boeing may opt to cede the competition to rival Northrop Grumman and EADS.

Citing reports in an industry trade journal, the Wichita Eagle states Boeing may be considering withdrawing from the competition outright, in response to the Pentagon's revised list of criteria for the bid. As ANN reported, those specs, issued by the Pentagon last week, place greater emphasis on aerial refueling duties, and capabilities above and beyond the Air Force's original plan.

That bodes well for Northrop Grumman and EADS, whose KC-30 offers greater fuel capacity than the smaller Boeing KC-767. The KC-30 won the original KC-X bid in February, but Boeing protested to the Government Accountability Office on the grounds the Air Force showed favoritism to the larger aircraft, despite the fact the KC-767 more closely adhered to the Air Force's original proposal.

The GAO upheld that protest... and in July, the Pentagon threw open the bid once again, although on an accelerated schedule. The Pentagon also stripped decision-making authority from the USAF.

Boeing says it will wait for the Pentagon to release its final requirements for KC-X, before making a decision on whether to back out. Officials with the Department of Defense met with both Boeing and Northrop/EADS on Tuesday, ahead of the deadline this week for each party to submit their revised bids.

This could be a calculated ploy on Boeing's part; after all, Northrop/EADs made a similar threat to back out of the original KC-X competition in January 2007. Those parties later agreed to bid the contract, after the Air Force added language to the plan, that considered the KC-30's greater fuel capacity as a selection point.

Should Boeing opt out of the deal, it would leave the Pentagon with the admittedly easier -- but politically thorny -- choice to award the de facto sole-source contract to Northrop.

The Pentagon could also once again revise the requirements for KC-X to give Boeing greater parity, or time to develop a larger 777-based offering for the contract. Considering that Northrop/EADS already won a recent competition, however -- combined with the USAF's desperate need for new tankers to replace aging KC-135s -- it's less likely the DoD would take that route.

As for Boeing, it has other options, too. The company could protest the Pentagon's final Request for Proposals, or opt to bid for the contract anyway... hoping to either win, or force another stalemate on protest should Northrop win once again.

Kansas Congressman Todd Tiahrt, a staunch Boeing advocate, told the Eagle he met recently with Boeing executives and told them "one of the options they have to consider is just walking away from the deal."

But Tiahrt has a hole-card to play in that scenario, as well. Even if Northrop wins the second bid -- outright, or in competition -- the House and Senate defense appropriation committees "could just cut the funding off until they do it right," he said.

FMI: www.northropgrumman.com/kc45, www.af.mil, www.defenselink.mil, www.newglobaltanker.com