Mobile mayor urges Obama to adopt dual tanker buy

WASHINGTON Fri Jan 22, 2010 11:50am EST

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WASHINGTON Jan 22 (Reuters) - The mayor of Mobile, Alabama, is urging President Barack Obama to reverse the Pentagon's current plan and instead buy billions of dollars of aerial refueling planes from both Boeing Co (BA.N) and Northrop Grumman Corp (NOC.N) as a major job creation program.

Buying tankers from both vendors would create nearly 100,000 jobs across the United States and would help retire the existing fleet of 50-year-old tanker planes seven years earlier than planned, Sam Jones said in a letter to Obama that he delivered during a meeting at the White House with other city mayors on Thursday.

Jones said the resulting airplane orders could pull many U.S. states out of the current economic downturn in much the same way that weapons orders helped pull the United States out of the Depression of the 1930s.

"The KC-X air tanker contract will be one of the largest single military contracts ever to be awarded by the United States Department of Defense, and you can make it one of the department's largest jobs projects as well," Jones told Obama in the letter.

Northrop and Europe's EADS EAD.PA won a projected $35 billion contract for 179 tanker planes in February 2008, and planned to assemble and build the planes in Mobile.

But the Pentagon canceled the deal after government auditors upheld a protest filed by Boeing, and Northrop has told the Pentagon it will not bid for the work this time around unless major changes are made to draft rules for the competition that were released last year.

Jones said the Pentagon could generate huge savings by continuing competition between the two companies, eliminating $9 billion in maintenance costs for the old tankers, and cutting operating costs by at least $6 billion.

Total savings were projected to be between $29 billion to $45 billion in coming years, more than offsetting the cost increase of developing two new airplanes, he said.

Jones underscored the number of jobs that would be created in states hard hit by the economic downturn.

Redirecting the Pentagon's plan to buy tankers from just one company would also avoid a "long sole source, heavily litigated and politically messy procurement process that is sure to only produce additional controversy," he said.

Air Force Chief of Staff General Norton Schwartz said this week that the Air Force may make some changes to the "financial arrangements" for the competition, but said the requirements would remain largely unchanged.

Schwartz said the Air Force planned to release the final terms for the competition within a month after the release of the Pentagon's fiscal 2011 budget on Feb. 1. (Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn)

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