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Boeing Vs. Northrop Tanker Feud Intensifies as End Nears

Updated: Feb. 17, 11:35 a.m.

Randy Belote likens the battle over a contract for the Air Force’s next generation of aerial refueling tankers to the movie “Groundhog Day” — in which a weatherman played by actor Bill Murray repeats the same day over and over again.

For years Northrop Grumman has been engaged in a seesaw competition with rival aerospace giant Boeing over the estimated $35 billion defense contract.

“It just keeps coming back,” said Belote, Northrop’s spokesman. The bidding ordeal, which one defense source estimated has already cost the involved companies hundreds of millions of dollars, has drawn in some of the top lobbying firms in town as well as key lawmakers and officials in two administrations.

The protracted drama, however, may soon be coming to a close with the Pentagon expected to shortly seek final proposals for the fleet of in-air refueling tankers.
As a result, Northrop Grumman and its allies have been waging a last-ditch public relations campaign and engaging in hardball political tactics to change the bidding process that it claims is tilted in favor of its rival.

The company’s chances, however, were set back this week with the death of Rep. John Murtha (D-Pa.), who was chairman of the Appropriations Subcommittee on Defense. Murtha had floated a deal in which both companies would split the tanker-refueling contract. The possibility that Murtha could be replaced as subcommittee chairman by Rep. Norm Dicks, a Democrat from Washington state, where Boeing plans to make the tanker, could doom any chances of Congress approving a dual-award contract. Dicks has long been a vocal supporter of the Boeing bid.

Now Northrop executives are warning they probably won’t be able to compete for the project based on requirements set out in a draft version of the Request for Proposals released last fall.

“If the RFP isn’t rewritten, Northrop can’t bid on it,” Belote said.

It wasn’t that long ago that the prospects for Northrop Grumman were far rosier, particularly after Boeing was rocked with a contracting scandal that resulted in two of its executives being sent to jail. Boeing developed the original refueling tankers and was expected to build the replacements until the scandals, which prompted the Defense Department to freeze the contract.

In 2008, the Pentagon shocked many in the defense community when it awarded Northrop and its European partner, EADS, a contract to build 179 refueling tankers, which were to be based on aircraft built by Airbus, a French-based EADS subsidiary. Boeing challenged the contract and the Government Accountability Office agreed, sending the Pentagon and both companies back to the drawing board. Even though the Northrop-EADS plan was to assemble much of the tanker project in the United States, critics complained about using taxpayer dollars to pay a foreign company to help build planes.

To improve its chances, Northrop Grumman is relying in part on its allies on Capitol Hill, including Alabama’s Congressional delegation, whose Members favor the company’s proposal because the tankers would be assembled in the city of Mobile. Last week, Sen. Richard Shelby (R-Ala.) took the attention-grabbing action of slapping holds on 70 presidential nominees, citing the unfairness of the refueling tanker bid process. Shelby has since lifted holds on all but three nominees, who are involved in defense acquisition.
Meanwhile, officials from four Gulf states — Alabama, Mississippi, Florida and Louisiana — recently formed the Aerospace Alliance, which has been underwriting a $200,000 media campaign aimed at convincing lawmakers and other officials in Washington, D.C., to split the refueling contract.

One alliance ad states that “while the long fought battle over who will build the next Air Force refueling tanker continues, thousands of American jobs hang in the balance.”
The spot urges officials to accept “a dual-source competitive procurement for the new tanker” — in which both companies would share in the production of the tankers.

Neal Wade, director of the Alabama Development Office, described the ads as part of an “informational campaign” that is being promoted by both public and private efforts. He said the four states each contributed $25,000 to the alliance, with private-sector interests chipping in the rest. Wade said Northrop Grumman made a financial contribution to the alliance, but he did not say how much. Belote, the Northrop spokesman, would not confirm if his company had contributed to the effort.

Meanwhile, Mobile Mayor Samuel Jones took a more personal approach, delivering a letter intended for President Barack Obama when he visited the White House in January with the U.S. Conference of Mayors.

In the letter, posted on the Aerospace Alliance Web site, Jones urged the president to support a “dual award” plan and noted that Murtha had offered a similar solution.
The Pentagon, however, appears determined to move ahead with its current plans. Defense Secretary Robert Gates told the House Armed Services Committee recently that while he welcomed competition, he planned to proceed with the refueling tanker even if Northrop Grumman pulled out.

“It’s been delayed too long,” Gates told the committee. “We need to get this thing started.”

Boeing spokesman Bill Barksdale said the company was ready to submit its proposal. Unlike its rival, he said, Boeing was not running a public lobbying campaign.
“We have been playing it very quietly and behind the scenes,” he said.

Behind the scenes, Boeing has employed a powerful lobbying force that spent $16.8 million last year on trying to influence federal lawmakers, according to lobbying disclosure records filed with Congress. The company has also relied on the help of some of the top lobbying shops in town, including Akin Gump Strauss Hauer & Feld, McBee Strategic Consulting and the Podesta Group.

Northrop Grumman, which shelled out $15.1 million on lobbying last year, also has some politically connected outside help, including the Breaux Lott Leadership Group and Elmendorf Strategies. EADS disclosed spending $2.2 million on lobbying in 2009 and hired a number outside firms, including Quinn Gillespie & Associates, Fierce, Isakowitz & Blalock and the Livingston Group.

“There are a lot of heavy hitters behind this one,” said Loren Thompson, chief operating officer of the Lexington Institute, a libertarian-leaning think tank that studies military issues.

He said Boeing in particular beefed up its government affairs team after it lost the tanker contract in 2008.

Thompson noted that Boeing hired Tim Keating as executive director of government affairs. Keating had previously been vice president for global relations for Honeywell and before that was managing partner of the former lobbying firm Timmons and Co. In 2009 Boeing recruited David Morrison to be vice president of government relations. Morrison had been a principal at the Podesta Group and staff director for the House Appropriations Subcommittee on Defense.

“Boeing’s Washington office used to be a backwater,” Thompson said, noting that Keating has brought “energy and quality” to the operation.

Some of Northrop Grumman’s supporters have complained that Boeing is being favored by the Obama administration because the president and his chief of staff, Rahm Emanuel, are from Chicago, where Boeing is now headquartered.

But Boeing spokesman Barksdale said he didn’t see the decision as “based on geography,” adding, “we’ve got to come up with a great offer.”

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