EADS will not protest tanker contract to rival Boeing

By Chris Cermak Mar 4, 2011, 23:56 GMT

Washington - Airbus parent European Aeronautic Defence and Space Co (EADS) said Friday it will not challenge the Pentagon's decision to hand a more than 30-billion-dollar tanker contract to US rival Boeing Co.

Boeing was on February 24 awarded the lucrative deal to build 179 of the next generation of US Air Force refuellers, one of the largest contracts in the Defence Department's history. EADS was debriefed on the decision by Pentagon officials this week to let them decide whether to protest the award.

'The basis for protest does not exist,' EADS's North America Chairman Ralph Crosby said in a press conference, bringing to a close a decade-long controversial bidding war for the contract to replace the Air Force's 1950s-era fleet of KC-135 tankers, built by Boeing.

Ultimately, Crosby said EADS was simply beaten on price, but he questioned whether their US rival could make a profit on their bid. Boeing had taken a 'win at any cost' mentality in an effort to 'keep their competitor off the shores of the United States.'

Boeing's total offer came in at 31.5 billion dollars, while EADS proposed a cost of 35 billion dollars over the life of the programme, Crosby said, adding that EADS could not have produced a viable plane at a lower price.

Boeing and EADS had been in a fierce competition for years to win the contract, sparring publicly and with expensive advertising. EADS had spent about 200 million dollars trying to win the bid, Crosby said, while both companies touted their planes as superior and the best deal for the military.

'The Air Force looks forward to the long awaited recapitalization of its air refueling fleet,' it said in a reaction, noting both companies had 'long-standing relationships with the department, that we expect will continue.'

The competition also became intensely political on both sides of the Atlantic. A spokesman for German Chancellor Angela Merkel last week said the contract's award to Boeing meant a chance had been missed to improve US-EU relations.

US politicians also took opposing sides as the two companies proposed to build their tankers in different parts of the United States. EADS had proposed to assemble its planes in Mobile, Alabama, drawing the support of southern Republicans.

The Pentagon has twice failed in its 10-year effort to award the contract for the KC-46A. A leasing programme with Boeing collapsed amid scandal in 2004.

The Pentagon awarded the contract to an EADS-Northrop Grumman partnership in 2008. But the Government Accountability Office, the investigative arm of Congress, partially upheld a Boeing protest, ruling that errors had occurred in the evaluation process, effectively requiring the Pentagon to hold a new competition.

EADS chief executive Sean O'Keefe told reporters there was nothing to fault in the Pentagon's process this time around, though EADS complained that the parameters set for the competition launched last year had always been tipped in favour of Boeing's smaller tanker.

O'Keefe said the tanker competition had allowed EADS to gain a foothold in the United States and vowed to compete for other US military contracts in the future.

EADS' bid had shown that 'we are competitive for any contract, of any size, at any place, on any level,' O'Keefe said.