Pigs on the Wing–The Aerial Refueling Tanker Contract Dispute Continues
The battle to build the Air Force’s next generation of aerial refueling tankers continues to fuel wasteful lobbying and insider dealing in Washington D.C. The $35 billion deal is as closely contested as ever, which is no surprise given the amount of money at stake. Defense Industry Daily’s initial valuation of the program in January 2007 predicted the contracts could exceed $100 billion.
A new round of bidding is currently underway, pitting perennial contender Boeing against new challenger EADS, who partnered with Northrop-Grumman in the first round. The latter withdrew in early March, 2010 over its concerns that the Air Force’s criteria favored Boeing. EADS, the parent company of European aerospace giant Airbus, submitted its bid at the end of April, 2010.
The project remains stalled in a political quagmire and contains a number of policy implications. The latest controversy centers on the role of European government subsidies to EADS and Airbus. Boeing argues that these subsidies are “illegal and directly distort competition.” In support of Boeing, Sen. Sam Brownback (R-Kan.) and Rep. Todd Tiahrt (R-Kan.) introduced the bicameral “Fair Defense Competition Act” on May 13, 2010,which would require the Department of Defense to take World Trade Organization (WTO) decisions into account when reviewing the bids. Specifically, the bill aims to add the cost of any alleged subsidies on top of a company’s bid, if the WTO rules the subsidies violate international trade laws.
The WTO ruled in March, 2010, that the EADS planes were partially developed with illegal subsidies. A similar suit is pending against Boeing, but willnot be resolved in time to impact the tanker contract process. If the Brownback-Tiahrt bill is enacted, disputes over subsidies will almost certainly proliferate. Nearly every major military contractor, whether in the U.S. or abroad, has received government funding at one point or another.
A weaker version of the Brownback-Tiahrt language is attached to the fiscal year (FY) 2011 National Defense Authorization Act (H.R. 5136), which passed the House in late May and is currently under consideration in the Senate. Rather than requiring general adherence to WTO rulings, the provision requires the Pentagon to “submit an interim report, discussing the impact of government subsidies on the KC-X competition.”
The coalition formed against the EADS bid epitomizes pork-barrel politics. A series of Boeing press releases note the anticipated economic benefits of the contract for particular states. Kansas stands to benefit the most; winning the tanker contract would reportedly bring 7,500 jobs and $388 million to the state. Arizona, California, Iowa, Michigan, Ohio,Texas, and Washingtonwould gain hundreds of jobs each, and tens of millions of dollars. The pressure brought to bear against the EADS bid is so extensive that the company has been reluctant to disclose its American partners, lest pro-Boeing politicians attempt to muscle them out of the deal.
Defense appropriations have long been plagued by self-serving politics. An additional bureaucratic hurdle on top of an already warped web of regulations and politicking will only complicate the process further, ensuring not only more wasted taxpayer dollars but also potentially raising concerns over the quality of the finished product.Apparently an open, transparent competition, with the best, most cost-effective product winning,is too much to ask.
– Scott Atherley
