Dark-horse team enters bidding for Pentagon tanker contract

The Pentagon entered the home stretch to replace its fleet of 1950s-era Air Force refueling tankers with three bids turned in by Friday’s deadline.

The bids for the $35-billion program to build the planes used to refuel U.S. fighter jets and bombers in mid-flight included expected ones from Boeing Co. and Airbus parent European Aeronautic Defense & Space Co., or EADS, two of the world’s largest aerospace giants.

But they also included a last-minute surprise entry from a dark-horse team: small, cash-strapped U.S. Aerospace Inc. of Santa Fe Springs and former Soviet Union plane manufacturer Antonov of Ukraine.

It was the latest twist in the Pentagon’s decade-long attempt to hand out one of the largest military contracts in U.S. history.


The Pentagon has been trying to replace its fleet of 415 refueling tankers since 2001. The contract has twice been awarded — and twice canceled amid accusations of backroom politics and discriminatory rule-making.

A final decision on the winning bidder to replace 179 of the 415 KC-135 aircraft currently in the Air Force’s fleet will come “sometime in the fall,” said Col. Debra Millett, an Air Force spokeswoman. Industry analysts expect the contract will be awarded in November.

“This a not a calendar-driven event,” Millett said. “We want to make sure we make the right decision.”

Boeing won the first contract in 2004, but it fell apart because of an ethics scandal that resulted in prison terms for a former high-ranking Air Force official and a former senior Boeing executive.


The competition was re-launched and EADS, then teamed with Century City’s Northrop Grumman Corp., took home the contract in 2008. It was a major upset because Boeing had built all of the tankers in the current fleet.

But that decision was later overturned after the Government Accountability Office found that the Air Force mishandled the competition by neglecting to credit Boeing for some of its plane’s capabilities.

The Pentagon launched the latest competition in February, claiming that it was unbiased and less complicated than in the past. About a month later, Northrop pulled out of its partnership with EADS, claiming that the specifications for the plane favored Boeing.

Boeing’s bid Friday was based on a modified 767 commercial passenger jet. The Chicago aerospace manufacturer said in a statement that its offering would come at the “lowest cost to the taxpayer.”


Boeing said that if it won the contract, it would add 50,000 U.S. jobs, spread among more than 800 suppliers in more than 40 states. The company said California would gain about 4,500 jobs with nearly 100 companies.

When Northrop left, EADS decided to go at it alone after getting a 60-day extension on a May 10 deadline. Its bid, through its EADS North America operation, was a variation of an Airbus A330 commercial jetliner.

That modified refueling tanker already is being used by the Royal Australian Air Force, the company said.

EADS North America said its bid would create about 48,000 U.S. jobs, including about 5,200 jobs for 41 companies in California.


The latecomer, U.S. Aerospace and Antonov, asked the Pentagon on Wednesday for an extension on the deadline for submitting its bid but was denied.

U.S. Aerospace said in a Securities and Exchange Commission filing Friday that its bid was based on an Antonov AN-112KC cargo jet.

“Our plan is that the aircraft components will be built by Antonov Company in Ukraine, with final assembly by us in the United,” the filing said.

Antonov did not respond to requests for comment.


Recent SEC filings reveal that U.S. Aerospace is running low on cash and is behind on state and federal income taxes.

But John C. Kirkland, an attorney for U.S. Aerospace, said the company believed that it could win the competition because its plane was much cheaper than the others and was the only one specifically built for military purposes. He said U.S. Aerospace’s plan would result in 20,000 U.S. jobs and 50,000 jobs in Europe.

“I find it hard to take seriously,” Peter Wilson, senior defense analyst with Rand Corp., said about the U.S. Aerospace-Antonov bid. “It bordered on the bizarre that a company would come in at this late hour and think they have a chance to win. We’re talking about a competition that’s taken almost 10 years.”

The competition comes down to EADS and Boeing, Wilson said. Both companies have launched major marketing and lobbying campaigns to snag the contract.


In addition, the World Trade Organization has begun investigating whether the U.S. and the European Union have provided illegal subsidies to Boeing and EADS.

At the end of June, the WTO ruled that Europe had paid illegal subsidies to EADS subsidiary Airbus. A ruling on Boeing has yet to be handed down.

“Can you imagine what will happen if the WTO rules against Boeing? Both will be howling that the other side had an unfair advantage,” Wilson said.

“So, it’s hard for me to believe this will be resolved anytime soon,” he said. “I have a feeling we’ll be talking about the tanker competition this time next year.”