EADS won't protest U.S. tanker contract
12:56 pm ET 03/04/2011 - MarketWatch Databased News
NEW YORK (MarketWatch) -- Netherlands-based EADS said Friday that it would not protest a $30 billion U.S. contract to build the next generation of Air Force aerial-refueling tankers awarded to Boeing Co., laying to rest a decade-long dispute.
"We put our best effort into this," said Sean O'Keefe, chief executive of EADS North America. "In our view, the Department of Defense had altered its requirement from being a modernization to one that merely required the replacement of the existing KC-135 aircraft."
In the end, Boeing was able to offer a tanker price below what EADS offered, O'Keefe said, speaking at a news conference.
The Pentagon announced its decision last Thursday, surprising most industry watchers, who expected the deal to go to EADS, citing its lower price and additional capabilities beyond the requirements.
But Chicago-based Boeing lowered its bid. In addition, its 767 platform also met the requirements and would likely have a smaller life-cycle cost, the Air Force said. Read more about the tanker award.
Boeing received an initial fixed-price contract of $3.5 billion to develop and build 18 KC-46A tanker planes to be delivered by 2017. The value of the total program is more than $30 billion -- the first of three phases to eventually replace more than 400 aging KC-135 Stratotankers, some of which are more than 50 years old. Read about some of the risk in the tanker award.
The program could ultimately be worth more than $100 billion after pricing in 50 years of revenue for parts and services.
EADS could come back and bid on the later phases of the program.
Last month marked the third time the Air Force awarded the contract, which was revoked from Boeing in 2004 following a procurement and leasing scandal involving company personnel and Air Force officials.
The contract was handed out a second time in 2008 to EADS and its partner at the time, Northrop Grumman Corp. -- only to lose it after the U.S. Government Accountability Office sided with Boeing's claim that the bidding process had been flawed.
Northrop later dropped out of the competition altogether.