The House of Representatives winding down the lame duck session voted today to pass legislation forcing the Pentagon to take into consideration in source selection whether one of the bidders has an unfair competitive advantage. While not naming any names the law is oriented towards EADS (EADS:P) bid for the new KC-X aerial tanker program. The law has little chance of being considered in the Senate anytime in the next few days.
This is fallout from the World Trade Organization (WTO) ruling earlier this year that EADS had received illegal subsidies from European nations. This was mainly in the form of “launch aid” loans that would only be paid back if the aircraft were profitable but also included tax breaks and infrastructure funding. The Pentagon has made clear that U.S. procurement law and regulation do not allow these types of rulings to be a factor so Boeing (BA) supporters in the House and Senate have been making efforts to change the law so that EADS will not have a “competitive advantage”.
The WTO has also made a ruling against the European counter claim against Boeing that it had received some aid from the U.S. government.
The KC-X is in this situation as there are currently only two Western companies that are able to build this aircraft. In order to gain any competition with a goal of cost savings Boeing and EADS must be considered. A wild card attempt by U.S. Aerospace teamed with Ukrainian manufacturer Antonov was not considered.
If you think Congress is upset about EADS think about how they would react to an Antonov win no matter how cost effective or capable it would have been.
Until the Air Force makes its source selection decision known this kind of fighting will continue. Protests by the loser are also to be expected as the KC-X saga enters its tenth year.