Mobile, Alabama and the Sordid History of the Air Force Refueling Tanker Deal

EADS KC-45 Refueling TankerCorruption, suicide and bungling are three of many negative terms connected to the Air Force effort to acquire new refueling tankers.  This sordid history dates back to 2001 when the Air Force announced its intention to lease 100 new tankers from Boeing for $20 billion.

In May 2003, the Pentagon chief arms buyer approves the lease four days before he retires.  Sen. John McCain promptly criticizes the arrangement and calls it a “sweet deal” for Boeing that will cost taxpayers more than the alternatives.

In November 2003, Boeing fires Chief Financial Officer Mike Sears and Vice President Darleen Druyun.  Boeing said Sears had improperly offered Druyun a job while she was an Air Force acquisitions officer in charge of the tanker project.  One week later, Boeing CEO Phil Condit “resigns.”  Sears and Druyun later go to prison.

Early in 2004, Secretary of Defense Donald Rumsfield cancels the Boeing tanker leasing deal.

In September 2005, American-based Northrop Grumman teams up with EADS (European Air Defense Systems) to participate in the competition to replace the Eisenhower-era tankers.

In January 2007, the Air Force issues a “final” request for tanker bids.  A few months later, Boeing and Northrop submit bids.  In October, The Air Force’s number two acquisition official, Charles Riechers, is found dead in his home of an apparent suicide.  Riechers was working on the tanker program and was under scrutiny while awaiting Senate confirmation for another job.

In January 2008, Northrop confirms that the tankers will be built in Mobile should the Los Angeles-based company win the bidding.  The next month, the Air Force awards the $35 billion contract for 179 tankers to Northrop/EADS.   Jubilation reigns in Mobile, Alabama.

Boeing promptly files a loser’s whining protest.  The aerospace giant brings its considerable political clout to bear, attempting to convince the government that whining constitutes substance.  Three months later on March 10, 2008, the General Accounting Office upholds the Boeing protest, citing “significant errors” in the process.

Later in 2008, Secretary of Defense Robert Gates cancels the Northrop award and says the Pentagon will rebid the contract.  But he removes control over the process from the Air Force, saying his office will make the decision.  The Pentagon then releases a draft request for another round of bidding.

Within days, Boeing complains that it may bail out of the bidding unless it gets additional time from the Pentagon to consider its offer.  The Defense Department yields to Boeing and delays the competition, effectively punting the decision to the Obama Administration which will take office in four months.  President Obama asks Robert Gates to stay on as Defense Secretary and Gates agrees.  Gates returns control over the process to the Air Force.

During this time frame, the idea of a split purchase is being discussed as the best way to get new tankers quickly into the air.   Despite opposition from Secretary Gates, the proposal to split the purchase between Boeing and Northrop gains traction when Rep. John Murtha, the powerful head of House Appropriations Defense Subcommittee voices support.  Murtha later backs off on including this split requirement in legislation but says he will try again in the next session of Congress.  Mobile leaders embrace the idea of a split purchase as the best way of being guaranteed at least a piece of the action.

In January of 2010, Murtha enters a hospital for gall bladder surgery.  In what is usually routine laparoscopic surgery, Murtha’s large intestine is “nicked” during the procedure and an infection sets in.  Murtha dies a few days later and with him the best chance of a split contract.

In March 2010, Northrop withdraws from the competition, saying the bid specifications are slanted in Boeing’s favor.  EADS then decides to go it alone and submits a bid without Northrop as a partner.  Boeing submits its bid the next day.  Secretary Gates says the competition will be decided before the end of the year.  Then later he says that most likely it will be 2011 before the decision is made.

And last month, inept Air Force officials mistakenly release confidential proprietary information to both contestants on the other’s bid.  Heads roll in the Pentagon.  And the basis for a protest by the loser of the next award has been provided compliments of the clowns in the Pentagon bureaucracy.

So where does all of this leave Mobile, Alabama?  An EADS win would firmly establish Mobile as an aerospace manufacturing center and provide thousands of jobs.

The diplomatic Mobile Chamber of Commerce President Win Hallett told us: “It’s not often you’ll see economic developers spending a decade working a new industry prospect. But that’s precisely what we’ve been doing since 2001 when the Mobile Area Chamber first began courting EADS, and its bid to build aerial refueling tankers in Mobile. Throughout the highs and lows one thing remains constant, and that is EADS North America is offering the U.S. Air Force an operational, capable and valuable aircraft in the KC-45; and there are thousands of American workers all along the Gulf Coast who have the skills needed to build this military plane.”

Will lightning strike Mobile, Alabama again?  Stay tuned.

William Bruce is an author, business broker and newspaper columnist on the Gulf Coast.  He currently serves as president of the American Business Brokers Association.

About William Bruce

President, American Business Brokers Association / Business Broker and Accredited Business Intermediary assisting business buyers and sellers with the transfer of ownership since 1986 / Author: How to Buy a Business.
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4 Responses to Mobile, Alabama and the Sordid History of the Air Force Refueling Tanker Deal

  1. Craig Denson says:

    I hope EADS North American wins this project! I was Project Recruiter for the State of Mississippi when this project first started. I can’t say enough great things about this company and its leadership. Ralph Crosby is one of the most professional and sincere people I have ever worked with. Although Mississippi didn’t get the project our Governor and Congressional delegation got behind Mobile as they won the site selection process. This project will add many jobs for Mississippians on our Gulf Coast with a great company. I also had the pleasure of working with Eurocopter, a highly successful division of EADS NA, as they selected Mississippi as their site for the new helicopter facility several years ago. Good luck to them on this very important project.

  2. Craig, thanks so much for sharing your perspective. I think it’s an uphill battle for Mobile and EADs, but in this project, stranger things have happened. Your experience with the company and its leadership is encouraging.

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