Undoing tanker deal would hurt industry, Northrop Grumman executive warns

Northrop Grumman Corp.'s top executive warned Thursday that any congressional effort to undo the Air Force decision to give his firm and the European parent company of Airbus a contract for aerial refueling tankers would have long-term implications for the Pentagon and the defense industry.

In his first extended interview about the contract since its announcement Feb. 29, Chief Executive Officer Ronald Sugar said lawmakers should resist efforts to revise acquisition laws and apply them retroactively to skew the tanker contract in favor of Boeing Co., the losing bidder.

"The idea of having a congressional pre-emption of regular order and process would set a very, very damaging precedent for procurement," Sugar said. "It would fundamentally undermine the integrity of the entire procurement process and that's much more important than who wins a contract." Sugar, whose company is the third largest U.S. defense firm, said congressional actions to overturn or scrap the contract would inject uncertainty into future Pentagon contract awards.

"What does a general or an admiral ... do on the next competition?" he said. "How does he perform a competition where he thinks he's following the rules, yet he's looking over his shoulder?"

On Tuesday, Boeing filed a formal appeal with GAO, which has 100 days to review the Air Force's decision. "Let the process play out," Sugar said. "I would hope the Congress would not make laws in parallel with that."

Boeing's supporters are weighing legislative options for overturning the contract to build 179 tankers, worth as much as $40 billion. Some possibilities include strengthening "Buy America" laws and revising acquisition regulations to require the military to consider the impact on the U.S. industrial base when awarding a contract. "It's like the Patriots versus the Giants and the outcome didn't come out in favor of the highly favored, and, therefore, what we should really do is to change the rules after the game," Sugar said. "That's not American; that's not the American way."

Sugar and other company officials are building a coalition of their own and hope to counter what they believe is a groundswell of opposition based on false information about the contract and its effect on U.S. jobs.

"The main thing here is not to have some kind of a stampede of emotion based upon misinformation that creates actions which really undermine the basic process of acquisition," he said. In recent days, Northrop Grumman and Airbus parent EADS have claimed their tanker would create 48,000 jobs in 49 states, based on Labor Department projections.

During the competition, Northrop Grumman initially estimated 25,000 new jobs, using a more conservative Commerce Department tool. Boeing has said building its tanker would result in 44,000 jobs. But both planes would contain foreign parts and would rely on work done overseas.

"The world is a global supply chain," Sugar said. "There has been no major U.S. defense program in recent years that I know of that does not have substantial international content."

Sugar rejected assertions, such as those made last week by Rep. Norman Dicks, D-Wash., a staunch Boeing supporter, that the Air Force wanted a larger plane than it specified to Boeing.

"They don't tell us what plane they want; they define requirements," Sugar said. "We're big boys, they're big boys. Our job is to figure out how we can best innovate with what we offer to meet the needs of the requirements."

In his view, the Air Force conducted the most open competition in his 40 years in the industry, Sugar said. "This is not something where a couple of people in a dark room said, 'We're going to give the plane to Northrop," he said. "This was an extraordinarily vetted process."