A (seemingly) never-ending story

By Dorothy Ramienski
Internet Editor
FederalNewsRadio

The seemingly never-ending saga over the Pentagon’s desire to get a new tanker has taken a few new twists in recent weeks.

Earlier this week, DoD officials suggested that it could be years before a contract is awarded if a new administration decides to start the whole process over.

This after Defense Secretary Robert Gates said his agency had decided to postpone awarding the contract until the next President takes office.

On Wednesday’s Daily Debrief, hosts Christopher Dorobek and Amy Morris spoke with Richard Aboulaifia, Vice President of Analysis with the Teal Group, who explains why the delay of the deal was probably a good idea.

The problem is the relatively short time schedule. If they really wanted to get it done by December, that would be pulling out all the stops, and the ultimate results might just be that it would be picked apart by the next Congress [and] next Administration, so, basically, why bother rushing and devoting all resources to something likely wouldn’t survive very long into the new year.

Aboulaifia says one of the main problems has to do with the politics involved.

One possible way of basically getting around that situation is to effectively throw it in Congress’ hands and say, “Hey, we’re willing to restart the program, you just have to find a way forward.” [In] the recent markup of the House Appropriations Committee, they recommending moving to a much greater number of tankers which could pay the way, conceivably, for a split buy of both tankers.

So, could both Boeing and the Northrop Grumman/European Aeronautic Defence and Space (EADS) partnership now get something out of the deal after fighting over it for years?

Aboulaifia says, while some might think it’s a good, short-term solution that would get the Air Force its tankers, it could also be incredibly wasteful.

It’s a very good argument for buying both, but this is such a partisan competition — one side almost purely Republican and the other side almost purely Democrat — this might be the only way forward.

That partisanship could play a big role in how the deal is handled after the election. Aboulaifia says Senator John McCain would make the contract a very high priority and might push for Grumman, while Senator Barak Obama could favor the unionized Boeing or remain relatively neutral.

It would, in either event, probably come down heavily on Congress to decide, but there’s such a log-jam there. The Democrats and . . . the Republicans who don’t like foreign products are on one side, and then you’ve got a very strong and very aggressive delegation from the South pushing very strongly for the EADS team.

If the solution is to take tankers from each company, Aboulaifia says the cost of the program will change.

You’re establishing all of the infrastructure, the training, the logistics associated with two — not quite the same planes, but similar ones. The only upside would be that if you’re re-capitalizing at a rate of 36 per year, rather than 14, even though you’ve got to establish all that up front expenditure, you’re still getting tankers faster. So you can replace the older ones quicker — and that would save some money.

There has also been talk of starting over. This, Aboulaifia notes, would cause headaches for the contractors, but could break the impasse in Congress.

EADS wanted to establish a plant down in Alabama — that would conceivably die and who knows when they would have a good industrial window of opportunity to do that. The 767 from Boeing is definitely on borrowed time. Basically, they need some kind of order in the next couple of years . . . otherwise the line goes cold. So it would be really expensive . . . but starting over might be the way to break that log-jam. And it gives Congress some kind of incentive to get moving and come up with some kind of bipartisan approach to re-capitalization.

Since the contract is fairly massive, Aboulaifia says the fight will continue.

Right now, the Program of Record for KCX is 179 planes, which is nothing to ignore. It’s substantial. All 500 planes, however, will almost certainly be replaced by a group of different types [and] that leaves one or two others. From a contractor’s standpoint, once you become the incumbent in the tanker market, it’s not really clear there’s room for another. So, your critical skills in building that kind of plane might just lost if you don’t get those contracts.

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