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Tanker Decision: Defense, Boeing And Northrop's Statements

Here is the Defense Department's official statement:

"Today, the Department of Defense notified the Congress and the two competing contractors, Boeing and Northrop Grumman, that it is terminating the current competition for a U.S. Air Force airborne tanker replacement.

Secretary Gates, in consultation with senior Defense and Air Force officials, has determined that the solicitation and award cannot be accomplished by January. Rather than hand the next Administration an incomplete and possibly contested process, Secretary Gates decided that the best course of action is to provide the next Administration with full flexibility regarding the requirements, evaluation criteria and the appropriate allocation of defense budget to this mission.

Secretary Gates stated, 'Over the past seven years the process has become enormously complex and emotional – in no small part because of mistakes and missteps along the way by the Department of Defense. 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.'

In making this decision, it was concluded that the current KC-135 fleet can be adequately maintained to satisfy Air Force missions for the near future. Sufficient funds will be recommended in the FY09 and follow-on budgets to maintain the KC-135 at high-mission capable rates. In addition, the Department will recommend to the Congress the disposition of the pending FY09 funding for the tanker program and plans to continue funding the KC-X program in the FY10 to FY15 budget presently under review."

Update: Here is Northrop Grumman's response. As you can imagine, the company--losing its lock on what could end up being the biggest defense contract ever--is not happy:

"We are extremely disappointed at the decision to terminate the current tanker competition, especially on behalf of our men and women in uniform who will now be denied a critically needed new tanker for years. The Department of Defense, as recently as last week, stated the urgency to replace the Eisenhower-era fleet of refueling tankers. With this delay, it is conceivable that our warfighters will be forced to fly tankers as old as 80 years of age. Northrop Grumman entered this competition in good faith and proposed the most modern, most capable tanker available, at the best value to the American taxpayer. While we understand, we are greatly concerned about the potential future implications for the Defense acquisition process."

And here is Boeing'sstatement, which is understandably more upbeat:

"The Boeing Company welcomes the Defense Department's decision and believes that it will best serve the warfighter in allowing the appropriate time for this important and complex procurement to be conducted in a thorough and open competition. This will assure delivery of the right tanker to the Air Force and serve the best interests of the American taxpayer. In the meantime, Boeing looks forward to working together with our customer and then offering a next-generation tanker that meets the long-term requirements of the men and women who will rely on this capability in future missions. In the meantime, the Boeing team will continue to support the Air Force in helping to keep the current

KC-135 fleet flying their missions safely and reliably."

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  • Based in Los Angeles, Jane Wells is a CNBC business news reporter and also writes the Funny Business blog for CNBC.com.

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