Sep 26 2006

Air Force calls for tanker bids

The Associated Press

By Matthew Daly

Companies hoping to build a new generation of refueling tankers must show how they could overcome difficulties that might arise from a pending international trade dispute, the Air Force said Monday.


Restarting a competition for a lucrative contract to build at least 100 planes, the Air Force said "treaty compliance" is among the criteria that interested companies must meet.


The language is a reference to a dispute before the World Trade Organization involving U.S.-based Boeing Co. and European jet maker Airbus SAS. The United States has complained that Airbus receives subsidies from European governments. Airbus in turn has argued Boeing also receives government support.


Chicago-based Boeing and European Aeronautic Defence and Space Co., the majority owner of jet maker Airbus, are the leading contenders for the tanker contract, potentially worth more than $20 billion.


EADS has teamed with Los Angeles-based Northrop Grumman Corp. on its bid and plans to build the KC-330 plane in Mobile , if it wins the work. The Boeing planes would be built in Washington state.


A contract for the project could be awarded as soon as next year. The tanker program has been on hold for more than two years, after Boeing lost the contract amid an ethics scandal.


In recent days, Alabama lawmakers have objected to inclusion of language referring to the WTO trade dispute in the proposed bidding criteria. They say such restrictions would unfairly hurt the EADS-Northrop team.


Sen. Richard Shelby, R-Tuscaloosa, called inclusion of the WTO provision in the draft proposal "an unprecedented move that unfairly tilts the playing field -- perhaps eliminating competition before it even begins. If we are to continue to procure the best military equipment available for our war fighters at the best value for our tax dollar, it is imperative that we preserve a fair and open competition."


Airbus has received billions in subsidies from European governments over the years, and Boeing supporters in Congress have argued that the European company should have to account for advantages that such subsidies give it in competing for Pentagon contracts.


The Pentagon "must necessarily account for the advantage that these illegal subsidies have given the company, especially because they have come at the cost of U.S. jobs," said Rep. Norm Dicks, D-Wash., whose district includes thousands of Boeing workers.


But EADS backers, pointing to state and federal support for Boeing, say the military should not get involved in a complex trade dispute and should focus specifically on the tanker contract.


Sen. John McCain, R-Ariz., a leading critic of the tanker deal, has also raised questions about the WTO language, which he says could reduce competition.


Northrop Grumman, which has teamed with EADS for the tanker projects, said in a statement it was interested in bidding on the program, but only in what it called a "fair and open" competition.


"The injection of any issue into this competition that favors one of the bidders over the others is inconsistent with these assurances and does not represent fair and open competition," said Randy Belote, a Northrop spokesman.