ACT III: DAMAGES

After Obama took office, there was scarcely an official left in the Pentagon or the Air Force who’d worked on the tainted deal. At Boeing, EADS, and Northrop Grumman, the executives calling the shots had moved on. New administration officials who would be deciding on the tanker fleet weren’t there when the Air Force decided to buy new planes. To inherit this decision would mean taking charge of a time bomb.

In early 2009, the easiest thing to do was cut the fuse. Except the Air Force still needed tankers. It had been eight years since Ted Stevens’s back-door funding maneuver, and there wasn’t a single new plane in the fleet. Meanwhile, the United States was still fighting two wars on the other side of the planet.

The system was broken. The Air Force had seen what came with the best intentions of best-value purchasing. Amid charges of political favoritism and professional ineptitude, officials’ only choice was to make the next contract protest-proof. To do that, they stripped the evaluation of any subjective judgments. The fewer gray areas in the contract, the fewer pitfalls.

In late 2009, the Air Force released its draft request for proposals: As long as each bidder’s plane met every one of 372 technical requirements, the company with the lowest price won. It was precisely what EADS and Northrop had wanted to avoid—a price shootout.

In procurement parlance, the term was “lowest price, technically acceptable.” At Northrop Grumman, executives called it “a race to the bottom,” believing that cost was the predominant evaluation factor over capability. The Air Force’s approach didn’t appear to favor the larger Airbus plane. Northrop thought the Air Force would end up with a less capable and less dynamic tanker. The request for proposals “clearly favors Boeing” and its smaller plane, said Wes Bush, the new CEO at Northrop.

To sidestep another costly and protracted fight, some had hoped the Air Force might strike a politically expedient compromise: buy some tankers from EADS/Northrop and some from Boeing. The biggest backer of the seemingly Solomonic solution was John Murtha, the Pennsylvania Democrat who chaired the influential Defense Appropriations Subcommittee in the House, himself a master of the pork barrel.

In late January 2010, Murtha had routine surgery to remove his gallbladder. A week later, he was in intensive care suffering from complications. Murtha died on February 8, and with him went any hope of a compromise.

Then, in a twist of fate that sent chills through the boardrooms at EADS and Northrop, Murtha was replaced as committee chairman by a man presumed hostile to their team: Norm Dicks, the “congressman from Boeing.” A month later, Northrop officially bowed out of the competition.

Eleven years after the KC-135 crash in Germany underscored the importance of fixing this problem quickly, the Air Force was back where it had started—with no viable alternative to buying the planes from Boeing, and probably a more expensive plane at that. With Northrop out of the race, Boeing was theoretically free to raise its price. Whereas once a full competition had seemed like a nice idea to the Air Force, now it was essential.