Military-Industrial Complications

Wall Street Journal
Friday, June 20, 2008

Here we go again. American soldiers will have to wait even longer for new aerial refueling tankers after government auditors said Wednesday that the Air Force had broken its own rules in awarding the $35 billion contract to Northrop Grumman and EADS over Boeing.

The Government Accountability Office, Congress's investigative arm, agreed with Boeing that Air Force officials unduly gave extra credit to Northrop and EADS, or the European Aeronautic Defence & Space Co., for surpassing specification requirements for the tankers. The GAO also found that the Air Force miscalculated the costs of both the winning bid and Boeing's offering. The Air Force is now expected to request revised proposals from the two bidders and make a new selection.

The auditors didn't presume to decide which tanker was actually better, and neither will we. But what is clear is that this setback is a blow to U.S. troops, who are stuck fighting two hot wars with Eisenhower-era tankers while the companies continue their seven-year-old dogfight.

Not that you could tell from the cries of joy from some on Capitol Hill. "Boeing and the American people are the big winners in this decision," said Democratic Senator Maria Cantwell of Washington state, where Boeing's tanker, if chosen, would be assembled.

It's unclear, though, how American soldiers benefit from a delay in getting new versions of these flying gas stations. American taxpayers will also benefit little from prolonging the bidding process over a math error that amounts to a fraction of 1% of the total contract.

But Senator Cantwell did get the part about Boeing right. The Chicago-based company acknowledged all along that the competition was extremely tight; the basis of its protest was that a handful of decisions wrongfully tipped the scales in Northrop-EADS's favor.

We take that to mean that either tanker would fulfill the Air Force's needs, and that Boeing managers were trying to placate shareholders -- and perhaps save their own jobs -- by appealing to the GAO. While an appeal was certainly Boeing's right, it's quite the spectacle to watch Congressional doves pose as born-again nationalists for domestic political purposes.

Washington state's other Senator, Democrat Patty Murray, railed again Wednesday against what she called "handing billions of American defense dollars to a subsidized, foreign company focused on dismantling the American aerospace industry." Kansas Congressman Todd Tiahrt, a Republican, said it was "outrageous" to award the contract to a "foreign competitor."

Never mind that Defense Department rules explicitly state that companies from some countries, including EADS's home bases of France and Germany, should compete on equal footing with U.S. firms. Or that the Pentagon is barred from considering the effect of its procurements on domestic jobs.

Forget as well that EADS's partner, Northrop Grumman, is an American company. Or that Boeing would build much of its own tanker outside the U.S. Or that EADS would assemble its tanker in several states, including Alabama -- whose Governor Bob Riley was in our offices Wednesday, just before the GAO released its findings, talking up the potential for a new aerospace corridor in the Southeast.

The most important point is that looking beyond America's borders is essential if the country is to maintain the best possible fighting force. U.S. companies don't have a monopoly on the best military technology. Closing America's borders to foreign defense contractors could also make life harder for Boeing and other U.S. firms when they try to do business overseas. European leaders will be furious if the Northrop-EADS contract is canceled for what seem to be political reasons, and could retaliate with protectionism of their own.

All the more reason for the Air Force to wrap up the renewed tanker bidding quickly and decisively.