The KC-X new aerial tanker program Request for Proposals (RFP) attracted a third bid this time around. U.S. Aerospace submitted one based on the Ukrainian made Antonov transport. The question that immediately comes to mind is can this team win, or will it be Boeing (BA) or EADS (EADS:P)?

Realistically the chances of this bid being selected are low. The companies had asked for a sixty day extension to work on their proposal. The Air Force already slipping the contract deadline one month to accommodate EADS refused the further two month slip. This would have pushed award into 2011 with the current planned date of mid-November this year already late enough. The U.S. has been trying to get a replacement tanker for the aging KC-135 since 2001.

U.S. Aerospace and its partner obviously felt their proposal could be improved with the extra two months but did go ahead an turn one in that they feel meets all of the Air Force requirements. At the same time in a recent filing with the Securities and Exchange Commission (SEC) U.S. Aerospace makes clear that the Air Force could easily reject them.

The company writes “For any or all of these reasons, the Air Force may not select our bid, may disqualify our bid, or may refuse to consider it on the merits, or at all,” based on myriad factors. These include not meeting requirements, not having qualified sub-contractors, not having necessary facilities or capabilities and even missing the deadline. They didn’t do that turning one in on time.

Of course all of this could be standard “Forward Looking Statements” meant to make clear to anyone investing in their stock that they are being conservative in their estimates. The stock was trading at 18 cents at the close on Friday.

Certainly they have offered a cost effective approach. The Air Force must consider if it meets their requirements and they have the ability to produce the systems to the necessary schedule. Certainly stranger things have happened in defense contracting.

Boeing (BA) submitted their proposal for the KC-X aerial tanker program a day after rival EADS (EADS:P) did. Today was the day it was formally due, EADS coming in a little early. The Boeing proposal stresses their cost and size benefits over competing EADS with their larger A330 based aircraft. Boeing is basing their bid on a modified 767 airliner with advanced avionics from the yet to enter service 787.

Also U.S. Aerospace and Antonov submitted their competing proposal after losing a bid to delay things sixty days. There total cost is under thirty billion for a contract the Air Force has estimated at $37.5 billion based on an aircraft cost of only $150 million each.

The Air Force plan is to award the contract in four months. The three bids may make the competition’s source selection last longer and may also raise the chance of a protest.

If the U.S. Aerospace / Antonov team wins it might get very interesting.

Update — Antonov is now a Ukrainian company, but in the days of the Former Soviet Union it made transports and utility aircraft for the “Russian” military, civil air companies and Warsaw Pact nations. My bad for being old school.

It came out today that there will be a third bidder for the Air Force’s new KC-X aerial tanker program. US Aerospace will propose a system based on Antonov platforms from Russia. There had been earlier rumors that the company would team with Ilyushin to offer a variant of the IL-86 airliner for this, but that had seemed to go nowhere.

Antonov makes large transport aircraft such as the AN-124 used to move outsize cargo across the world. According to US Aerospace they may offer a version of the AN-124 or an aircraft called the “AN-112″. The 112 is supposed to be based on earlier turboprop transport heavily used by the Soviet Union and its allies.

The submission of a third bid will change the competition quite a bit. A Russian based aircraft may certainly be cheap putting pressure on both Boeing (BA) and EADS (EADS:P) to review the cost of their proposals.

US Aerospace, similar to EADS, will assemble the aircraft in the U.S. and add the military specific equipment themselves. This will also include the flight refueling equipment.

They only have about two weeks to get a proposal together so if they do end up bidding it will be very interesting.

What less then a year ago seemed to be a program with only one company bidding, Boeing, now looks to have a chance to have three.

This program seems only to get more complicated.

Earlier this year in responding to questions about the delay to the submissions of proposals to July due to the accommodation for EADS (EADS:P) the Air Force said the contract will start in mid-November. Now word is coming out that the award won’t be made until “late November”. Critics have seized on this changes as a delay due to the decision to allow EADS to bid.

Technically this is a delay of several weeks from the original schedule. The chances though of the Air Force meeting that were low as it was very aggressive. It only gave them four months to review proposals and conduct the award. Even if they assumed the new proposals were similar to the last ones in 2008 that amount of time to conduct a source selection for a contract of this size may have been a little unrealistic.

This decision will spur EADS’ opponents and Boeing (BA) supporters to further their current war of words.

Here is a post I wrote at Defense Procurement News about Boeing’s (BA) decision to use the Augusta Westland 101 as the base aircraft for their new Presidential transport helicopter bid. It makes them look a little hypocritical on the whole EADS (EADS:P) role in KC-X.

EADS (EADS:P) had decided to go it alone with their own bid for the KC-X aerial tanker after former partner Northrop Grumman (NOC) decided the requirements favored Boeing (BA) too much. All that meant is that EADS would prime the contract but would probably find other companies, including U.S. ones, to sub for them. It is now being said by EADS that they have found at least one U.S. defense contractor to do “sensitive equipment”. The company is unidentified at this point.

This only makes sense as it allows Airbus to deliver a A330 aircraft or tanker to a U.S. facility to do the integration of the military equipment such as radios and defensive equipment. EADS is planning to do this with Lockheed Martin (LMT) on the Army’s new attempt at buying an Armed Reconnaissance Helicopter (ARH) and should do this for KC-X. Lockheed planned the same thing with Augusta Westland on the failed VH-71 program. By using an American company to do this sort of work it helps with security and technology transfer issues. It is also the reason that EADS North America exists.

Following reports last week that Boeing (BA) was considering not submitting a bid for the KC-X contract the company reiterated its interest today. The previous reports said that Boeing was concerned with the fixed price aspects of the contract but now the story is that the company believes EADS (EADS:P) due to its subsidies could assume more risk in their proposal.

It would be almost impossible now for the company not to bid due to all of the support it has gotten for getting the contract.

Last week reports started to come out that Boeing (BA) may not bid on the KC-X new aerial tanker program. This was due to concerns that the Air Force’s plans for a fixed price development and first production contract may not allow the company to make a profit.

Boeing has denied these reports and it would certainly seem strange for them not to after all of the arguing and noise about giving the contract to them for American jobs. There is though real concern that the contract may limit the ability of the winner to make money on it. In the past fixed price contracts for development often have not worked costing the contractor millions that it can only hope to make up on production.

It would be somewhat ironic that the Pentagon’s desire to limit their cost and exposure would cause even more delays to this critical program. One that is so critical that a sixty day delay in the RFP process has been attacked by legislators, media, retired military and unions.

In this report the Governor of Washington, Ms. Gregoire, and Senator Patty Murray make clear that awarding the KC-X contract to Boeing (BA) will protect jobs in that state. The two Democrats rightly point out that several thousand jobs at Boeing support the 767 program as well as supply parts and components to the company.

In another not surprise the two showed up at a rally with union members and local officials.

Once again the U.S. finds itself in this situation due to the severe reduction in the defense industrial base twenty years ago that leaves only Boeing and its competitor European company EADS (EADS:P). For there to be any chance at competition with a goal of saving money for the Pentagon the two have to bid against each other – jobs or not.

Boeing (BA) announced yesterday that they are forming a new division within the company called “Airlift and Tankers” (A&T). This group will have responsibly for the C-17 production and the hopefully capture of the KC-X and production of the KC-767 tanker.

Jean Chamberlin will be assigned as vice president and general manger of A&T.

The group will face serious challenges in the future if the KC-X is not won as C-17 production is winding down for the Air Force and the number of overseas sales is not large. There continues to be support in Congress to keep the C-17 going and if the KC-X contract does go to another source that pressure will only increase.

Good Luck to Ms. Chamberlin in her new job.