In Reversal of Fortune, Boeing Wins $35 Billion Aircraft Competition

After 10 years of competition and controversy, Boeing Co. emerged triumphant late today, beating out a European competitor to sell a new fleet of refueling tankers to the U.S. Air Force.

"We can tell you Boeing was the clear winner," Deputy Defense Secretary William Lynn told reporters at a Pentagon briefing.

The decision essentially is a reversal of the last competition, which the European Aeronautic Defense and Space Co., or EADS, won. The company was offering the Air Force a refueling tanker built on the Airbus aircraft.

After EADS was selected in 2008, Boeing protested to the Government Accountability Office, which sided with the U.S company. The Air Force was then forced to start over with a new competition.

Though Pentagon officials said that Boeing emerged ahead based on rigorous selection criteria, both aircraft were capable of serving the Air Force's needs.

However, since the difference in price was greater than 1 percent, and would have provided "substantial savings to the taxpayer," the Air Force decided not use what were called "non-mandatory" requirements.

The contract awarded to Boeing is for $3.5 billion for engineering and manufacturing development, though the entire potential contract to build 179 aircraft could eventually be worth more than $30 billion. Assuming the current contract moves forward, the Air Force will receive the first 18 aircraft in 2017.

When the Air Force in 2001 set off to replace its aging fleet of Eisenhower-era tankers, service officials cited the urgent need to buy new tankers because of safety concerns they feared could result in a fleetwide grounding of tankers, essentially crippling the military's ability to refuel aircraft in-flight.

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The original plan was to sole source a lease of 100 tankers to Boeing, but instead of resulting in a quick deal, the Air Force's plan set off a decade-long conflict involving the Pentagon, Congress and industry. Controversies surrounding the competition eventually sent a former Air Force weapons buyer and a top Boeing official to prison for breaking conflict-of-interest laws.

This time around, there have still been hitches, including clerical errors that resulted in the accidental release of proprietary information to two bidders. EADS has the option to protest the contract award to the GAO within 10 days.

Although the potential of protests still looms ahead for the military, officials seem convinced that this decision, after a decade, will stick. "This competition favored no one except the warfighter and the taxpayer," Lynn said.