Key Current Issue in Transatlantic Procurement: The Tanker Deal Christopher Yukins Associate Professor of Government Contract Law The George Washington University Law School _________________________________________Brussels September 2008

2 October 2004 Shocker Ex-Air Force Official Gets Prison Time: Boeing Received Special Treatment in Procurement Washington Post, October 2, 2004

3 Timeline Jan. 30, 2007Air Force announces RFP for KC-X Jan. 30, 2007Air Force announces RFP for KC-X Feb. 29, 2008Air Force chooses NG/EADS KC-45A Feb. 29, 2008Air Force chooses NG/EADS KC-45A Mar. 7, 2008Air Force debriefs Boeing on losing bid Mar. 7, 2008Air Force debriefs Boeing on losing bid Mar. 11, 2008Boeing files protest with GAO Mar. 11, 2008Boeing files protest with GAO Apr. 2, 2008GAO denies AF & NG motions to dismiss Apr. 2, 2008GAO denies AF & NG motions to dismiss June 18, 2008GAO rules on protest June 18, 2008GAO rules on protest Sept. 10, 2008DoD defers competition, post-election Sept. 10, 2008DoD defers competition, post-election

4 The Bids Boeing KC-767 Northrop Grumman/EADS KC-45A

5 Air Force Announces a Winner for KC-X Air Force Selects Northrop Grumman-EADS KC-45A Air Force Selects Northrop Grumman-EADS KC-45A Contract worth $35 billion over 25 years Contract worth $35 billion over 25 years Up to 179 aerial refueling tanker aircraft Up to 179 aerial refueling tanker aircraft Initial 4 SDD aircraft for $1.5 billion Initial 4 SDD aircraft for $1.5 billion Lots 1-5 valued at $10.6 billion Lots 1-5 valued at $10.6 billion Remaining contract value to come from options on lots 6-13 Remaining contract value to come from options on lots 6-13 General Arthur Lichte on the selection—its about MORE: “More passengers, more cargo, more fuel to offload, more patients that we can carry, more availability, more flexibility and more dependability.” “More passengers, more cargo, more fuel to offload, more patients that we can carry, more availability, more flexibility and more dependability.”

6 Media/Public Relations Response: Boeing Boeing Theme: It doesn’t add up Boeing Theme: It doesn’t add up Full-page ads in major newspapers Full-page ads in major newspapers Focuses on Boeing’s strengths vis-à- vis 5 RFP evaluation factors Focuses on Boeing’s strengths vis-à- vis 5 RFP evaluation factors Less flash and more substance Less flash and more substance Website/Blog Website/Blog Public Relations Public Relations Multiple press releases with fact sheets each week Multiple press releases with fact sheets each week

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9 Media/Public Relations Response: Northrop Northrop Theme: Why We Won Northrop Theme: Why We Won Ads focus on the “merits” Ads focus on the “merits” Highlights strengths of KC-45A Highlights strengths of KC-45A Position papers on each issue Position papers on each issue Heavy emphasis on jobs Heavy emphasis on jobs Website/Blog Website/Blog Homepage devoted to issue Homepage devoted to issue Public Relations Public Relations NG began countering Boeing’s “misinformation” campaign with its own fact sheets and press releases NG began countering Boeing’s “misinformation” campaign with its own fact sheets and press releases

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13 GAO Protest Boeing protest to GAO under Competition in Contracting Act Boeing protest to GAO under Competition in Contracting Act Summary of Boeing Argument Summary of Boeing Argument Impermissibly applied selection criteria Impermissibly applied selection criteria Disregarded the RFP Disregarded the RFP Violated Federal Acquisition Regulation Violated Federal Acquisition Regulation GAO decision June 18, 2008 GAO decision June 18, 2008 Accepted key Boeing arguments Accepted key Boeing arguments Success rate for GAO protests: Success rate for GAO protests: Between 16%-29% yearly rate from Between 16%-29% yearly rate from % in % in 2007

14 Battle on Capitol Hill: Key Actors House of Representatives Two-Pronged Approach Two-Pronged Approach Legislation to Kill Deal Legislation to Kill Deal Change Pentagon Rules for Future Change Pentagon Rules for Future Vocal Critics Vocal Critics Duncan Hunter (R-Cal.): Buy American Advocate Duncan Hunter (R-Cal.): Buy American Advocate Todd Tiahrt (R-Kan) and Norm Dicks (D-Wash): Boeing States Todd Tiahrt (R-Kan) and Norm Dicks (D-Wash): Boeing States Legislative Action Legislative Action Issue could have been revisited in appropriations/authorization process Issue could have been revisited in appropriations/authorization process Senate More subdued response SASC: no response in markup Senators Levin (D-Mich) and Warner (R-Va) opposed legislative measures to overturn contract, especially prior to GAO ruling Senators from Boeing States Joint letters from Washington and Kansas Senators to President and Joint Chiefs criticizing deal

15 Secretary Gates’ Sept. 10, 2008 Announcement “... [W]e have been engaged in discussions with the competing companies on changes to the draft RFP [request for proposals] that would address the findings and recommendations of the GAO's review of the Boeing protest.... It is my judgment that in the time remaining to us, we can no longer complete a competition that would be viewed as fair and objective in this highly charged environment. The resulting ‘cooling off’ period will allow the next Administration to review objectively the military requirements and craft a new acquisition strategy for the KC-X.”

Conclusion