Military Contracting

The Air Force decision to award an Airbus/Northrup Grumman team a $35 billion (23 billion euro) contract over US rival Boeing is still sending off ripples in the US political establishment.

The decision on Friday, Feb. 29, to give the contract for refuelling tankers to Airbus, a subsidiary of the European Aeronautic Defense and Space company (EADS) came as a complete surprise to both US defense contractor Boeing -- which was heavily favored to get the contract -- and US lawmakers alike.

With follow-up contracts, the deal could eventually be worth $100 billion.

Concern for US jobs

But while European political and industry leaders are celebrating the decision, US lawmakers have expressed outrage -- particularly senators from the states of Washington and Kansas. Those are the home states of Boeing plants, and they stand to take the hardest economic hit from the lost deal.

Lawmakers from those states wrote to Defense Secretary Robert Gates on Monday demanding an explanation.

"The Airbus contract is a European Stimulus Plan subsidized by the American taxpayer," wrote Senator Patty Murray of Washington. "We need to be investing in the American aerospace industry and the high-wage, high-skill jobs it supports."

Now, the US Congress has said it would examine the military's decision on the contract, lawmakers said.

"The Air Force's decision to award the contract for a much-needed modernization of the nation's aerial tanker fleet to Northrop Grumman and Airbus raises serious questions that Congress must examine thoroughly," House Speaker Nancy Pelosi said on Tuesday, March 4.

'Subsidy for the French government'

"Given the ramifications of this decision for the United States, the Air Force must explain to Congress how it meets the long-term needs of our military and the American people," she said.

Pelosi, who leads the Democratic Party majority in the House of Representatives, said among the questions lawmakers should examine are the implications for US national security of choosing "an aircraft supplied by a foreign firm" and the effect on the country's employment and "technological base."

It is unimaginable that an enormous deal like that would go to a foreign concern, concurred Paul Shearon of the International Federation of Professional and Technical Engineers.

"We are talking about well-paid, highly valued American jobs. In this case we are using our tax dollars to buy subsidized products. It is a subsidy for the French government,” he said.

Boeing seeks clarification

Shearon quantified the number of US jobs endangered by the deal at 40,000.

Meanwhile, Boeing on Tuesday said it had asked the Air Force for an "immediate" explanation for its decision to reject Boeing's bid. As of Tuesday, Boeing said it had not yet received a briefing on the decision, and pointed out that the Air Force had said a briefing would occur on or after March 12.

It called the delay "inconsistent with well-established procurement practices."

"A delay of this length in the formal debriefing is unusual," Mark McGraw, Boeing vice president of the 767 tanker programs, told AFP news service.

In addition, the candidates in the ongoing presidential primaries have jumped on the issue.

Boeing history may have played role

Presidential candidate Barack Obama expressed shock at the deal. Hillary Clinton said she found it incomprehensible that Airbus – a company charged before the World Trade Organization with receiving illegal subsidies – would win the contract.

However, some observers say Boeing itself is partly to blame for the loss. In 2003, the company received a leasing contract for refuelling tankers, but it was revealed that the head of Pentagon purchasing at the time had been offered a lucrative job at Boeing. The affair cost then-Boeing CEO Phil Condit his job.

What's more, the Airbus refuelling tanker is said to be superior to that of Boeing.

Still, no one expected Airbus to get the contract, acknowledged Owen Cote, an international security expert at the Massachusetts Institute of Technology (MIT).

"It was a shock that Airbus got the deal; especially for the politicians, for congressmen- and women in Washington.”

Unlikely deal will be reversed

He believes it is possible – but not likely -- that the deal could be overturned with enough political pressure.

"It is possible that with political pressure, the decision could be reverseed,“ he said. If the Democrats win the presidential election, that scenario would be even more likely, Cote said.

"But I think the worst-case scenario for Airbus is that the decision will be put off, maybe by a year. But it probably won't be overturned.”