McCain questions Pentagon tanker competition rules

By Andrea Shalal-Esa

WASHINGTON (Reuters) - U.S. Senator John McCain, whose investigation helped derail an earlier $23.5 billion Air Force plan to lease and buy 100 Boeing Co tankers, has raised serious concerns about the Pentagon's latest attempt to replace its aging fleet of KC-135 refueling aircraft.

In a letter to Defense Secretary Robert Gates dated October 29, McCain asked a series of detailed questions about how bids for the program would be evaluated, how decisions were made about requirements for the new airplanes, and whether the new rules would favor mostly smaller airplanes.

A copy of the letter was obtained by Reuters.

Northrop Grumman Corp and its European partner, Airbus parent EADS, won the last competition with their larger A330-based tanker, beating out the smaller 767-based tanker offered by Boeing.

Northrop has complained that the draft rules for the next competition, released by the Air Force in late September, are give Boeing and its smaller plane an unfair advantage.

Boeing and its supporters, meanwhile, question why the Air Force has decided to disregard a preliminary World Trade Organization ruling that found that Airbus benefited from

billions of dollars of illegal subsidies.

Boeing supporters argue the subsidies give Northrop and EADS an unfair cost advantage in the U.S. competition.

In his letter, which echoed concerns McCain raised in an interview with Reuters in October, the senator questioned why the Air Force decided to focus on fuel-rate usage and military construction costs when assessing total ownership costs, instead of including the broader costs generally considered.

He asked how the planned process would assess the relative developmental and integration risk among the offerings, noting that Congress recently passed an acquisition reform law aimed at minimizing discovery of problems late in the process.

McCain also asked how the Air Force decided which of the previous 800 requirements to make mandatory or non-mandatory, and whether the Pentagon's Joint Requirements Oversight Council had been involved in those decisions since it had validated the same requirements that underpinned the last competition.

Northrop has argued that the Air Force's decision to pare the requirements to 373 mandatory ones and 93 non-mandatory ones puts significant issues like the fuel offload rate for the airplanes on the same level with less serious issues like the water flow rate in on-board toilets.

Finally, McCain asked Gates to explain how he intended to ensure "robust, independent oversight" of the competition, given the history of the program.

Defense analyst Loren Thompson of the Virginia-based Lexington Institute first reported McCain's letter in a column published on Monday, saying he had weighed in "on Northrop's side," but the letter's content was not disclosed until now.

Thompson also raised a potential conflict of interest in a November 6 blog posting. He said employees of the Government Accountability Office, which rules on federal contract protests, were recently organized by the International Federation of Professional and Technical Engineers union, which is part of the AFL-CIO and represents 85,000 white collar workers, including some at Boeing.