Changes in bidding rules spell win for Boeing

When a European company offered a larger tanker than Boeing for a lower price in 2008, the Air Force grabbed what seemed like a bargain. But aviation analysts say Boeing won a rematch this week because the government’s preference had shifted to a plane with fewer bells and whistles but one that could be much cheaper to operate in the next few decades. The changes in the bidding rules for one of the Pentagon’s richest contracts were relatively subtle, making the $35 billion award to Boeing on Thursday a surprise for the company’s executives.

In the end, the proposed size of the aerial fueling plane offered by Boeing’s rival, the European Aeronautic Defense and Space Company, or EADS, seemed to work against it. And Boeing may have won, several analysts said, because its jet could save billions of dollars more in flying costs than any discounts EADS might have offered on its sticker price. Under the change, the Air Force agreed to project the cost of the fuel used to power the tankers over a 40-year period, rather than 25 years. Air Force officials have said that the lengthier projections made sense, given that many of its tankers have already been operating for 50 years.

EADS, bidding with Northrop Grumman, won the earlier contest only to have government auditors block the award after Boeing filed a formal protest. The auditors found that the Air Force had been too subjective in evaluating the bids and had given EADS too much credit for some of the extra features of its plane.
(New York Times)