Tanker Wars: The Saga Continues

In a boon to the state of Washington, lobbyists, and the political rags where they buy advertising, the GAO ruled in Boeing's favor today in the tanker contract dispute.

The Air Force awarded the contract to Northrop-Grummann and its European partner EADS back in February. And despite much huffing and puffing about a legislative fix, Boeing's Congressional backers had failed to do anything about the decision. So the GAO protest was probably Boeing's last shot. Had the ruling gone the other way, the fight would have fizzled, and tanker development would have started down in Alabama. Now it's back into the ring.

Technically, the Air Force could tell the GAO to buzz off. The ruling is just a recommendation to take another look at the bidders based on a review of the contracting process. The full decision is not published, but the GAO summarizes it in this brief assault on the English language. Essentially, the complaint is that the evaluation criteria were a moving target and that the Air Force got the life-cycle costs wrong. Most significantly, the GAO claims that the estimated military construction cost for the EADS tanker was too low, and that without this error, Boeing's plane is cheaper. Apparently the expenditure in question is the expansion of hangers to accommodate bigger tankers.

The Air Force could dispute all these arguments and say it's sticking with EADS. But the ruling is political gold for Boeing. To avoid an uproar on the Hill, the Air Force will have to do what the GAO recommends and reevaluate the bids. I bet it will then change sides and pick Boeing's tanker. The Northrop crowd will resist, but the GAO has given the Air Force cover. Picking Boeing is the quickest way now to get tankers.

Here's my long-winded discussion of tanker politics from March.