Boeing vs. Airbus/Northrop: $35 billion tanker deal up for grabs - again

It looks like the Pentagon is poised to try for a third time to award a $35 billion contract for 179 airborne refueling tankers. This contract, which could ultimately be worth $100 billion by 2030, is going out to two bidders: Boeing (BA), and EADS' Airbus subsidiary in partnership with Northrop Grumman (NOC). The competition pits Boeing workers in Washington state and Kansas against Northrop employees in Alabama.

The previous two attempts to bid out this contract have resulted in failure, but the Air Force is hoping the third time will be the charm. The first one, in 2003, was tainted when it turned out that Boeing's then CFO offered Darleen Druyun, then the Air Force's number two acquisitions official, a job at Boeing even as she was involved in awarding the tanker contract. The second failure took place last July when presidential politics and a June 2008 Government Accountability Office report detailing "significant errors" in awarding the contract combined to scuttle the deal.

How will the Air Force attempt to make the process work right this time? It is going to publish the 373 mandatory requirements for bidders and will award the contract on a so-called "best value" comparison of price and nonprice factors such as maintenance costs and overall cost of ownership. And the Pentagon will make its announcements anonymously to prevent bidders from lobbying individual decision-makers.

It will take until the summer of 2010 to complete the process. The Request for Proposal made public on September 25 will be followed by 60 days of comment by bidders and Congress. The final RFP -- modified in response to all this commenting -- will be released after that, and the bidders will have 60 days to submit their bids. Four months later, the government will award the contract.

While it is likely that this bid will get caught up in politics -- particularly next year -- it would be nice if the winning bidder was the one that offered the best product for the Air Force while employing the most American workers.

Peter Cohan is amanagement consultant, Babson professor and author of eight books including, You Can't Order Change. Follow him on Twitter. He has no financial interest in the securities mentioned.

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