The continuing air tanker saga

Boeing's loss of the Air Force tanker contract continues to make waves. Perhaps the Northrup Grumman/EADS proposal is better. Perhaps the embarrassment that resulted from Boeing's unethical conduct in 2003 was a factor. That said this could still hurt John McCain:
McCain advisers lobbied for European plane maker

WASHINGTON (AP) -- Top current advisers to Sen. John McCain's presidential campaign last year lobbied for a European plane maker that beat Boeing to a $35 billion Air Force tanker contract, taking sides in a bidding fight that McCain has tried to referee for more than five years.

Two of the advisers gave up their lobbying work when they joined McCain's campaign. A third, former Texas Rep. Tom Loeffler, lobbied for the European Aeronautic Defence and Space Co. while serving as McCain's national finance chairman.

[.....]

"The aesthetics are not good, especially since he is an advocate of reform and transparency," said Richard Aboulafia, an analyst with the aerospace consulting firm Teal Group. "Boeing advocates are going to use this as ammunition."

McCain, a longtime critic of influence peddling and special interest politics, has come under increased scrutiny as a presidential candidate, particularly because he has surrounded himself with advisers who are veteran Washington lobbyists. He has defended his inner circle and has emphatically denied reports last month in The New York Times and The Washington Post that suggested he helped the client of a lobbyist friend nine years ago.

He has also cast himself as a neutral watchdog in the Air Force tanker contract, one of the largest in decades.

And McCain himself is getting some of the blame.

But Boeing supporters already have begun to accuse McCain of damaging Boeing's chances by inserting himself into the tanker deal.

One of them, Rep. Norm Dicks, D-Washington, said the field was "tilted to Airbus" because the Pentagon did not weigh European subsidies for Airbus in its deliberations -- a decision he blamed on McCain. Everett, Wash., is where Boeing would perform much of the tanker work, and Dicks is a senior member of the House Appropriations defense subcommittee.

In December 2006, just weeks before the Air Force was set to release its formal request for proposals, McCain wrote a letter to the incoming defense secretary, Robert Gates, warning that he was "troubled" by the Air Force's draft request for bids.

The United States had filed a complaint with the World Trade Organization alleging that Airbus unfairly benefits from European subsidies. Airbus in turn argued that Boeing also receives government support, mostly as tax breaks.

Under the Air Force proposal, bidders would have been required to explain how financial penalties or other sanctions stemming from the subsidy dispute might affect their ability to execute the contract. The request was widely viewed as hurting the EADS-Northrop Grumman bid.

The proposed bid request "may risk eliminating competition before bids are submitted," McCain wrote in a December 1, 2006, letter to Gates. The Air Force changed the criteria four days later.

Dicks said the removal of the subsidy language was a "game-changer" that favored EADS over Boeing.

This has become an issue for both the right and the left. As Jazz explained here the right is enraged that a defense contract would be given to the French. The left is enraged that good union jobs would be outsourced to France.

Update

It would appear that St John received some cash from EADS after his intervention.

McCain, the presumptive GOP presidential nominee, played a crucial role in blocking the deal to build air tankers from going to U.S.-based Boeing, instead paving the path for EADS to score the loot. He framed his decision as an example of political integrity; Boeing has previously been exposed of contract abuse. But a review of campaign finance donations and lobbying records suggests that money and personal lobbying may have also been in play.

On January 15, 2007, McCain appeared at Alabama Gov. Bob Riley's gubernatorial swearing in ceremony and formally called for multiple bidders in the tanker deal. The push for an open process had only one true beneficiary, however, and that was the Northrop Grumman/EADS consortium, which was poised to be Boeing's sole competitor.

A day after McCain made his proclamation, the contributions began to flow. John Green, a lobbyist for EADS donated $2,100 to the senator's presidential campaign. Ten days after that, Michelle Lammers, the "Chief of Staff" for EADS North America, gave $250 to the McCain campaign. It was her first political contribution ever. Less than a month later, the long-time head of EADS' government affairs program, Samuel Adcock, made a $2,100 donation to McCain. And eleven days later, Ralph Crosby, the head of EADS North America, donated $2,300 himself.

Update II

I agree for the most part with this editorial in my local paper, The Oregonian today.
Boeing's stinging defeat on air tankers

From a purely provincial viewpoint, it's disappointing that the Air Force picked a European supplier over Boeing to build its next generation of refueling tanker aircraft.

The $35 billion contract would have created 44,000 jobs in the United States, most of them in the Northwest, according to Boeing. The company's failure to secure the deal becomes even more painful when you consider that it could grow to more than $100 billion, making it one of the biggest military purchases in history.

But the Air Force appears to have acted properly. It based last week's decision not on what's best for Boeing and the Seattle area, but on what's best for the nation and its defense.

Predictably, a furious outcry has arisen from politicians in Washington state and Kansas, where most of Boeing's manufacturing occurs. Air Force officials, however, counter the backlash with a convincing argument that they chose the better offer, one that will produce a better, bigger airplane at lower cost to U.S. taxpayers with delivery sooner than Boeing can offer.

Concerns about lost jobs in the United States also are being overstated in this controversy. The winning bidder is a partnership between America's Northrop Grumman and the parent company of Europe's Airbus, known as EADS. It says the new tanker will be assembled in Alabama and outfitted with General Electric engines, also built mostly in this country, supporting a total U.S. work force of about 25,000.

Boeing backers also warn there's risk in outsourcing sensitive defense contracts to foreign entities. This argument ignores the global nature of military procurement in an age when Boeing and other U.S. companies sell military aircraft and other defense hardware worldwide.

For its part, Boeing complains that the bidding process was flawed and skewed toward the EADS-Northrop combine. Congress should look into those complaints and make sure the competition was fair and open.

But Boeing needs to do some self-examination, too. The company could have locked up the tanker deal several years ago if it hadn't been for a procurement scandal that led to prison terms for a former Air Force official and a top Boeing executive, along with the departure of the company's chief executive.

Does the latest Boeing setback reflect a company that still has lessons to learn? Does it suggest arrogance, overconfidence or flagging competitiveness?

Amid all the protectionist rhetoric, those are worthwhile concerns for America's legendary aircraft manufacturer.