Deal of the Century: Is Anyone Paying Attention?

Issue Brief

The newly seated Democratic Congress is about to commence its first big budget debate, focusing on whether the Bush Administration really needs $100 billion in “emergency supplemental appropriations” to cover the cost of the war in Iraq. It will be a bitter, divisive debate. Meanwhile, across the river from Capitol Hill, the Pentagon is gearing up to pick the supplier of its next-generation aerial refueling tanker. That program will cost just as much as the Iraq supplemental, but almost no one on Capitol Hill seems to be paying attention.

Well of course, you say, but Americans are dying in Iraq — over 3,000 in four years of fighting. Well guess what? If the Air Force doesn’t get started on replacing its decrepit fleet of tankers, the nation could lose 3,000 soldiers per day in its next war. Air power is the main reason why no U.S. soldier has been killed by enemy aircraft since the Korean War, but you can’t sustain U.S. air power in distant war zones without tankers. So if the 500 Eisenhower-era tankers that make up 90% of the aerial refueling fleet get grounded due to metal fatigue or corrosion, U.S. soldiers are in deep, deep trouble.

The Air Force is supposed to release its final Request for Proposals (RFP) in the tanker competition next week, leading to a summer selection between rival teams led by Boeing and Northrop Grumman. Boeing is offering a tanker version of its 767-200 airliner, which sells to commercial customers for about $120 million. Northrop Grumman, teamed with the parent company of Airbus, is offering a modified A330 wide-body that sells on the commercial market for about $160 million. The Airbus plane costs more because it is much bigger than the Boeing plane. Being bigger, it can also carry a lot more fuel — about 20% more, according to Northrop.

It can also carry more cargo, or passengers. And therein lies the one issue that could be a show-stopper in the long-running struggle to get started on tanker modernization. The RFP will describe a next-generation tanker similar to the existing KC-135 — a plane that was developed half a century ago. That plane can carry half a dozen standard cargo pallets or passengers, but it basically is a tanker. The Air Force seldom uses it for other missions. Some people in the logistics community say the next tanker should be more, that it should be a versatile plane with much greater cargo capacity. Both the Boeing and the Northrop offerings can carry more cargo pallets than the legacy plane — up to 19 in the case of the 767, up to 32 in the case of the A330 (the number you can carry depends on how far you’re flying, and how much fuel you deliver).

The show-stopper is that unless the RFP states an ambitious cargo-carrying requirement, Northrop Grumman’s A330 isn’t competitive given its higher cost to buy and operate. The Wall Street Journal reported on Monday that Northrop is threatening to drop its bid if the selection criteria are not modified, which would mean no competition and maybe no program. Air Force leaders are furious, because they feel they have bent over backwards to accommodate Northrop. Northrop is just as mad, saying it has spent years developing a bid that may have no impact other than driving down the price of Boeing’s winning entry. The Air Force argues that if the plane it buys is too big then it won’t be able to afford all the tankers it needs, and it will not be able to use foreign airfields efficiently. Northrop says the goal of buying a multi-mission plane has been jettisoned at a time when the joint force needs more flexibility in its air fleet. With so much at stake, you’d think Congress would be paying closer attention.