Government Contracts Monitor

Rep. Murtha to DoD: Dual Source the Tanker Contract

February 16, 2009

While visiting a Boeing facility today, U.S. Representative John Murtha (D-PA) reiterated his proposalto split the controversial $35 billion Air Force aerial refueling tanker contract between two competing offerors: Boeing and the EADS/Northrop Grumman consortium.

The Air Force originally awarded the contract to EADS/Northrop, but the Government Accountability Office sustained Boeing’s bid protest in June 2008, citing “significant errors” in the procurement process. In September 2008, Secretary of Defense Robert Gates put the resolicitation was on hold to allow the new administration to reevaluate the procurement.

In light of the military’s aging fleet of tankers, the pressing importance of aerial refueling to operations in Afghanistan, and the risk of additional protests, Rep. Murtha again called for an expedited procurement utilizing both Boeing and EADS/Northrop.

However, Secretary Gates – and others in the procurement community – are opposed to this proposition. The possibility of dual sourcing a $35 billion contract has clear downsides: there will be increased administrative costs due to monitoring both contractors; the Air Force will have to train personnel on two sets of tanker technology; and it will undoubtedly be more expensive to fund research and development for two tankers. Rep. Murtha responded to these criticisms, noting:

Our subcommittee is divided about that suggestion, the Secretary of Defense does not like that suggestion, but the point is, we don’t want another protest . . . I’m trying to convince the people who will make the decisions, ‘Let’s look at alternatives to just one producing the tanker.’

Is Dual Sourcing Worthwhile?

Rep. Murtha is not completely off the mark. This is not a normal acquisition: national and international politics have intervened and any hope that this procurement would be straightforward has been lost. If it takes procuring from two sources to complete this procurement, it may be in the public and airmen’s interest get it over with. With the tanker fleet in the condition it’s in, there is no time to lose.

Plus, dual sourcing has tangible upsides – (1) there is twice the potential for technology transfer; (2) it puts twice as many people to work in Washington (Boeing) and Alabama (EADS/Northrop) on “shovel ready” projects; and (3) if structured the right way, production costs could be limited and competition maximized (for example, by introducing competition into the production phase). Plus, “hedging” with a second contractor will insulate the Air Force from potential delays or technology failures for this crucial machinery.

This article was authored by Samuel Jack.