US Military Tanker Bids Nearing Completion? (EADSY, BA)

A process begun in 2000 might be coming to a close. European aircraft maker EADS (OTC: EADSY), builders of the Airbus planes, is readying its final bid to build a new tanker for the US Air Force. Competitor Boeing Co. (NYSE: BA) has already submitted its final bid for the long-delayed aircraft.

We covered the story in July, when it appeared that final bids were being sought and that a decision would be coming in November. Ah, if were only that simple.

Following its preliminary review of the bids in November, the US Air Force sent its assessment of the bids to the wrong company. EADS received comments on Boeing’s bid, and Boeing got the Air Force’s comments on EADS’s bid. The comments included pricing information of which both companies are highly protective. With a contract worth a nominal $35 billion at stake, the Air Force has delayed awarding the contract again, until early in 2011.

Officials at both companies said that they didn’t review the assessments once the error was discovered, saying that doing so would have been unethical. That’s a good one. The reason it’s taking more than 10 years to award the contract is that Boeing was accused of bribery when it won the first bid, and the Government Accountability Office found irregularities in the next bidding round, won by EADS.

Whatever. Regarding its final bid, Boeing claims that it meets all 372 bid requirements for the tanker. The Boeing aircraft will be based on its 767 model.

EADS would build its tanker on its A330 Airbus model, and the company says that its tanker will also serve as medical evacuation plane or a troop transport, and has a larger fuel capacity so it can fly further and refuel more planes. Boeing is not impressed, calling the Airbus plane “oversized”, according to Bloomberg.

Airbus planes have won tanker bids from the UK, Australia, Saudi Arabia, and the United Arab Emirates. Boeing has won bids from Japan and Italy.

Regardless of what the two competitors are saying now, the loser will have a good case to make given the misdirected assessments. Political pressure from congressional delegations from Alabama, where EADS would build the tankers, and Washington, where Boeing’s plants are located, will also figure into the final decision. In the immortal words of Yogi Berra, “It ain’t over `til it’s over.”

Paul Ausick