[Congressional Record (Bound Edition), Volume 154 (2008), Part 4]
[House]
[Pages 4695-4700]
[From the U.S. Government Publishing Office, www.gpo.gov]




THE NATIONAL RAMIFICATIONS OF U.S. AIR FORCE'S DECISION TO AWARD TANKER 
               CONTRACT TO EUROPEAN AEROSPACE CONSORTIUM

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 18, 2007, the gentleman from Washington (Mr. Inslee) is 
recognized for 60 minutes as the designee of the majority leader.
  Mr. INSLEE. Madam Speaker, Mr. Tiahrt of Kansas and I, and others may 
join us later, have come tonight to talk about an important issue with 
large national ramifications, and that is the decision by the United 
States Air Force to decline a contract for our next extremely important 
tanker and to give it to a consortium, a very significant portion of 
which will be manufactured in Europe through a consortium in part with 
EADS and the Airbus company in Europe.
  I represent an area north of Seattle with thousands of Boeing 
workers; so obviously this is an important issue in my district. 
Certainly the hometown team is Boeing.
  But our discussion tonight will be about why all America ought to be 
very concerned about this decision for several reasons. And it is an 
obvious situation where there is very significant employment in my 
district that any Congress person would be concerned about that, but 
what we want to talk about tonight are the national ramifications and 
why we believe this is a very, very injurious decision that needs to be 
reversed one way or another.
  For background in this regard, the very able and really spectacularly 
performing aircraft, the KC-135, that for decades have provided the 
very backbone of our United States Air Force capability, will soon be 
at some point entering their obsolescence. Herculean efforts have been 
put forward to keep those great airplanes in the air, but at some point 
we've got to have a new airplane, and we know that that is the case.
  So we have been engaged in an effort to provide another replacement. 
A good United States product, Boeing, competed with subcontractors 
across the United States for a 767 airframe that we believed was 
perfect for the task, and by all information provided, the Air Force 
would provide the capability that was needed by the Air Force.
  Unfortunately, the Air Force has decided to reject an American 
contractor on this extremely important contract. And obviously it's 
important for dollars. It's a $40 billion contract, with a ``b.'' That 
is a significant contract. But of more importance to Americans are the 
job and employment prospects, and obviously that's important in the 
aircraft industry. If we see what has happened recently in the last 
decade, we know why it's important to think about this issue.
  If I can refer to a chart showing the decline in teal or blue, this 
shows United States aerospace industry employment from 1979 to 2007. We 
have suffered a very, very significant decline, just about 50 percent 
of employment jobs in the United States compared to what we had in 
1983, a peak year. Now, that has corresponded with the rise of the 
Airbus aircraft deliveries that have gone up, as indicated in these red 
bars, pretty much every year since about 1979. So we have had a 
significant loss of employment in the United States already in our 
aerospace industry. It has been in sync with the rise of Airbus sales. 
And we respect competition in America and should not decry or shrink 
from competition, and we would congratulate Airbus in a legitimate 
competition in any of these sales. But we point this out to show that 
we have already suffered a significant decline of thousands of jobs in 
the United States. So now we have a situation where that loss will be 
exacerbated by this decision should it stand.
  Now, what is at stake here potentially could be 44,000 American jobs. 
Predictions are in that range of jobs that would have been involved in 
this contract. We know that we get different stories about where the 
Airbus employment will be. I want to point out one of the curious 
things, if I can. We get certain different viewpoints about where the 
jobs would be if, in fact, this contract is ultimately granted to 
Airbus. I note a newspaper article here in Les Echos, and I may 
mispronounce that, in Europe when Airbus talked about the employment on 
this contract. The article says that 76 percent of the employment 
associated with this tanker contract would be European and only 21 
percent would be combined United States and Canadian content. That's in 
the article as publicized in France. In the United States, the rather 
large public relations effort that has gone on through Airbus, in fact, 
says it will be 50 percent in the United States. So it appears, at 
least in one instance, Airbus suggests that only 21 percent of the 
product in this tanker will be in the United States, and in America 
they suggest it will be about 50 percent. Some could chalk that up to 
hyperbole, salesmanship, but it means tens of thousands of jobs to 
Americans across this country, not just in the Seattle area where I 
reside but contracts across this country. We think that's significant 
and it's unfortunate. So this is a very significant thing that we are 
here to talk about tonight. It's not only employment but it's 
capability as well.
  So we are going to talk tonight about the ramifications of this 
decision, why we think it was inappropriately made, and what we may 
consider to reverse this decision.
  And with that I would like to yield to the gentleman from Kansas (Mr. 
Tiahrt), who been a stalwart and a champion on educating our colleagues 
about the importance of this, something we are going to talk about 
tonight at some length, which is the favorable treatment of Airbus by 
the European governments and why this has skewed this particular 
contract.
  Mr. TIAHRT. I thank the gentleman from Washington for yielding. And I 
also want to thank Mr. Inslee for his leadership in trying to bring 
some common sense to the procurement process down at the Department of 
Defense.
  Madam Speaker, Americans are outraged by the Air Force outsourcing 
our national security to the French. This contract award to a foreign 
manufacturer is wrong, and it makes us less, not more, secure.
  As my chart to the left here shows, we should have known that we had 
a problem when the President's helicopter replacement, the VH-71, went 
to a foreign manufacturer. We should have suspected it again when the 
light utility helicopter went to a foreign manufacturer. And now with 
the KC-X program going to be a manufacturer, it's as plain as the nose 
on your face. We have three of the last four major contract awards now 
going to foreign suppliers.
  Here's how this works: The Department of Defense and the Air Force 
really have bent over backwards to give this contract to the French, 
but they've been very sly. They first, as a foreign supplier, find an 
American front company, and then they employ tactics like waiving 
regulations that our Department of Defense gladly awards them. They use 
illegal subsidies. They employ illegal subsidies. And then they buy 
into defense contracts, knowing that further on down the line, there 
won't be the ability to have an American manufacturer beat them out in 
any competitive bid. And then further, as was pointed out by Mr. 
Inslee, they make promises in their proposals, and then the contracts 
are awarded by the Department of Defense, but they change their mind 
about the work content and they keep the work in Europe.
  Let me just talk for a brief minute about why this was such a shock 
when this contract went to a foreign supplier. The Air Force tanker 
roadmap is a chart that was given to us by the Air Force. I sit on the 
Defense Subcommittee of Appropriations, and in December of last year, 
December of 2007, this was the chart that they said was their roadmap 
to replacing the tankers. On the left-hand side here, we have 2006. 
This is where this chart begins, fiscal year 2006, and it runs out to 
fiscal year 2007.
  They have two tankers in our stock now. They have two versions of the 
KC-135. They have the older KC-135Es, which are the first ones to go 
out of the inventory. Next we're going to replace the KC-135Rs. ``R'' 
stands for the

[[Page 4696]]

re-engine version of the KC-135. And at the bottom, we have our very 
largest tankers, the KC-10s, built on a DC-10 airframe, almost as large 
as a 747. But that's the larger airframe. This is the medium-range 
tankers, according to the Air Force.
  The KC-135s, as you can see, in 2006 we started to take them out of 
the inventory. And as time goes on, you can see this little yellow 
triangle getting smaller and smaller. That means the KC-135s are going 
to Davis-Monthan Air Force Base into what we call the ``bone yard.'' 
They're no longer flying.
  We're still flying the KC-135s. The average age is about 45 years of 
age, and they need to be replaced. We have then the KC-10s. They're the 
newer version and the larger tanker.
  So what the Air Force told us is that they were going to replace this 
KC-135 medium-sized tanker over the next 15 years. Actually, it's going 
to run about 20 years with all that's said and done on the current 
schedule. But we were supposed to start out here in 2011 by having them 
first delivered.
  So when the contract was awarded, did we get a replacement for the 
KC-135? No. The Air Force bought an airplane larger than the KC-10. So, 
naturally, everybody was shocked all across America. And then when they 
found out that the KC-10 replacement is the KC-30, a variation of the 
Airbus A330, a French airplane, they were shocked and outraged. We're 
outsourcing our national security to the French.
  So what is behind this decision? How could this possibly have 
happened? Well, if you look at the contract scenario, we find out that 
there were waived regulations, waived regulations by our own Department 
of Defense. They waive them for our NATO allies. And if you go to the 
Defense Federal Acquisition Regulations, paragraph 225, it will tell 
you which of the 20 nations have waived regulations when they bid on 
defense contracts. Those 20 nations include the four ownership nations 
of Airbus and the parent company of EADS. They include the United 
Kingdom. They include Spain. They include France, and they include 
Germany. These are the regulations that are waived, and they're very 
costly, very expensive.
  Let's just look at the first one on the list here: Cost Accounting 
Standards. Now, Cost Accounting Standards say basically that you have 
to include all the costs that it takes to make a product that you're 
going to supply to the Department of Defense. And if you miss a cost or 
shift costs in and out of a contract, it could be a violation of the 
Cost Accounting Standards with very high penalties. It could be 
determined that it was fraud, and people could go to jail. Or it could 
be determined that you tried to give the government the slip on some 
data, and you would be barred from doing business with the Federal 
Government.

                              {time}  1800

  You can't shift cost on cost accounting standards. They are very 
costly to comply with. You have to have people hired to keep track of 
all costs. They must track them, compare them, report them as far as 
their relationship with schedules. If you don't have to do it, like 
EADS, in the case of this tanker, then it's much cheaper as far as your 
proposal. So cost accounting standards were waived by the Department of 
Defense for EADS, but they were required by the Boeing Company.
  Now what does this mean for the Boeing Company? It means they have to 
include all their costs, including health care costs. Health care costs 
that they pay for their employees, workmen's compensation costs that 
they pay to cover the employees are all included in these costs. They 
have to be included in their proposal. If you don't do it, it is a 
violation of the cost accounting standards.
  But those costs are not in the EADS proposal. Health care costs, 
workmen's compensation costs are picked up by the government, so they 
don't have to pay for those. Again, that gives a lower bid to EADS for 
this kind of a cost.
  Mr. INSLEE. Will the gentleman yield just for a minute?
  Mr. TIAHRT. I would be glad to yield.
  Mr. INSLEE. I want to point out about this cost. Even under the Air 
Force's own accounting, even with these what you may consider rigged 
accounting standards that Mr. Tiahrt talked about, even under the Air 
Force's accounting standards, they concluded that the 767 is about 24 
percent more fuel efficient than the Airbus product. You're going to 
save massive amounts on fuel over the lifetime. In fact, the Air Force 
estimated the Airbus product will burn $30 billion more fuel over the 
lifetime, even under the rigged accounting standards.
  So the point is that we need the Air Force from a taxpayer standpoint 
to be looking at the operational cost. We just had the executives of 
the five biggest oil companies today. Those oil prices are not going 
down any time soon. If anywhere, they are going up.
  So this is why we are saying that the country, not just the place 
these planes are made, but the whole country has a stake in this to 
really look at the operational costs on that.
  Thanks for yielding, Mr. Tiahrt.
  Mr. TIAHRT. You make a very good point about the net cost to the 
taxpayer. Getting back to these accounting standards which you are 
pointing out, the net cost is very high to the taxpayer. If EADS 
violates the cost accounting standards, we will never know it because 
they don't have to report it. And the cost of reporting this, the 
Boeing Company had to include. So it's really a difficult time for any 
American company to compete with a European company when you waive this 
first standard.
  The next standard is a specialty metal standard, called the Berry 
amendment. This is where our manufacturers are required to track from 
the time a metal is mined from the ground and processed, until it's 
riveted onto an airplane. Tracking. That means people are sitting 
somewhere at a desk and they are spending time trying to keep track of 
who is processing this and what procedures were put in place. It's very 
costly. But it was waived for the European manufacturers by our 
Department of Defense in DFARS 225, that's the Defense Federal 
Acquisition Regulations again.
  The next one that was waived by the Buy American provisions. Buy 
American provisions basically say 50 percent of this product has to be 
made in America. Now the goal in this proposal for Northrop Grumman, 
the EADS proposal, said 58 percent was their goal. If you look at 
previous contracts with the Department of Defense, like the light 
utility helicopter, which EADS also won, their goal there was 65 
percent. But they had some American suppliers in there that were 
included in the bid, and as a second thought EADS said, well, we have 
got a production line in Europe. Things are going pretty well. We think 
we will just keep this work here.
  So there are companies in Kansas that were cheated by this. There was 
a Spirit Aerospace Manufacturing, which lost the fuselage of the 
helicopter. There was Command Aerospace, which lost the floor board of 
the helicopter. Then there was ICE, Incorporated, which lost the wire 
harnesses for the helicopter. All American work content in the proposal 
that was then awarded as a contract and then that work was pulled back 
to Europe.
  When I asked the Army about this in an open hearing, their response 
was, well, we have no enforcement mechanism to make sure that these 
jobs remain in America. No enforcement mechanism. So we waive these 
kind of standards and regulations that would allow us the knowledge of 
where these jobs are actually going. And we will never know.
  Mr. INSLEE. If the gentleman will yield.
  So do I take it that in the current situation we would be issuing a 
contract for up to $40 billion with no enforcement mechanism to enforce 
the American content situation. Is that a fair statement?
  Mr. TIAHRT. That is exactly right. This is a question that has been 
put directly to not only the Army, but also the Secretary of Air Force 
and the head of procurement for the Air Force. It's common knowledge 
over in the Pentagon they tell us these things and we evaluate them 
based on these jobs being in America, and low risk, but

[[Page 4697]]

then there is really no way of enforcing if these companies decide to 
keep the jobs in Europe.
  If you look at this very same contract, the air refueling tanker 
contract, the first five airplanes are currently planned to be built in 
Toulouse, France. Then they are going to change the manufacturing 
procedure and start taking parts and shipping them to Mobile, Alabama, 
to assemble them. This is a similar scenario to the light utility 
helicopter. When it came time to ship those jobs to America, they 
decided to keep them in Europe.
  There's no guarantee in this contract that has been awarded by the 
Air Force that says, yes, you plan on doing this in Mobile, Alabama, 
but there's no enforcement mechanism to make sure the jobs actually 
come to America.
  Mr. INSLEE. That's most disturbing because of that experience and 
because of reading that in France, they tell the French they are going 
to have 76 percent of the jobs in Europe. Then they come over in 
America and tell us they will maybe have 50 percent. This is one 
reason, just one of the reasons this contract has to be reviewed.
  I want to mention one now just before I yield to Mr. Loebsack for a 
moment. There is another aspect of this that is outraging Americans, 
and certainly is in my State, and that is that we are issuing this $40 
billion contract to a company that essentially one of the partners that 
the American Government itself says is acting illegally. Because 
according to our U.S. Trade Representative, who has initiated a legal 
action against these companies for receiving illegal subsidies, illegal 
subsidies that violate international law, and by extension, violate 
United States law, at the same time we have taken this almost 
unprecedented action to bring a case in the world courts, the World 
Trade Organization, against their illegal subsidies. That is one agency 
of the United States Government. Sort of the ``cop on the beat'' 
blowing the whistle. And at the same time, another agency, the Air 
Force of the United States Federal Government is bailing them out of 
jail and giving them a $40 billion contract.
  That is hard to explain to any American, particularly those in the 
300 companies around this country in 40 States that are going to be 
losing jobs as a result of this. If this isn't a case of the left hand 
not knowing what the right hand is doing, one hand attempting to 
sanction these illegal subsidies, and I think anybody who reviews this 
would conclude there would have been billions of dollars of illegal 
subsidies to Airbus over the years, we will talk about those in detail, 
and then to turn around and reward them with $40 billion. They ought to 
be receiving a sanction from America, a punishment from America, some 
type of slap on the wrist, at least. Instead, they get $40 billion of 
taxpayer money. This is wrong by any sense, the code of the West, 
international trade treaties. This is something we all ought to be 
united about.
  With this, I would like to yield to Mr. Loebsack from the great State 
of Iowa, who has a concern about this.
  Mr. LOEBSACK. Thank you very much. I would like to thank the 
gentleman from Washington for organizing this Special Order hour on the 
award for the contract to build the next generation of air refueling 
tankers. I want to thank everyone who's here at this point speaking on 
this issue.
  Needless to say, I was deeply disappointed that the KCX refueling 
tanker contract was not awarded to the Boeing team. Rockwell Collins of 
Cedar Rapids, Iowa, is a part of the Boeing bid and would supply the 
aviation and electronic sub systems on the KC-767 advanced tanker. The 
State of Iowa has a well-earned reputation, I believe, as a leader in 
innovation, and Rockwell Collins is at the forefront of the cutting 
edge technological development for which our State is known.
  With 9,200 employees in the Cedar Rapids-Iowa City corridor, Rockwell 
Collins is the largest employer in the Second Congressional District in 
Iowa. The Boeing bid would bring 1,600 high-paying jobs to Iowa, most 
of them in the Second Congressional District, and would invest over $60 
million annually in the State.
  Equally important, it would put a program that is absolutely vital to 
our national security and the readiness of our armed forces in the 
hands of highly skilled Iowans and American innovators and 
manufacturers. I think that is an absolutely critical point to make.
  Rockwell Collins employees are hardworking, they are dedicated, and 
they are highly qualified workers. They work each day to provide the 
men and women who wear our country's uniform with the equipment and the 
tools they need to safely carry out their mission. I am a member of the 
Armed Services Committee and I know the importance of the aerial 
refueling tanker to our ability to support, equip and provide medical 
care to our deployed men and women in uniform.
  As the Representative of Iowa's Second Congressional District, I know 
firsthand the impact of putting thousands of jobs and tens of millions 
of dollars into Iowa. In light of this and our country's current 
economic state, I find it difficult to believe that the Air Force has 
elected to ship thousands of jobs overseas by awarding a key component 
of the United States Air Force to a heavily subsidized European 
industry.
  The aerial refueling tanker contract award must serve the interests 
of the American people and American national security. I repeat that. 
It must serve the interests of the American people and American 
national security. The awarding of the tanker contract to Northrop 
Grumman and EADS will force the Iowa Air National Guard to use scarce 
resources to construct new hangars in order to accommodate the larger 
size of the EADS planes. The estimated cost for the construction of the 
new hangars would be roughly $45 million.
  Moreover, the runways currently used by the Iowa Air National Guard 
are not able to withstand the weight of a fully loaded EADS tanker. 
Thus, new ramps and runways would have to be constructed. The total 
cost incurred by the Iowa Air National Guard to house the Northrop 
Grumman EADS plane would be roughly $50 million to $60 million.
  I fear that the awarding of this contract to a non-U.S.-based company 
would not only send tens of thousands of American manufacturing jobs to 
Europe, it would put important defense manufacturing expertise in 
foreign hands. I am especially concerned that this would leave our 
country perilously dependent on foreign contractors for our most 
important national security needs. And this is unacceptable.
  The aerial refueling tanker is critical to our national security. We 
all know that. I strongly believe that American defense should be in 
the hands of American workers. I urge the GAO to carefully evaluate 
Boeing's petition and to assure that our men and women in uniform have 
the best value and the best performing equipment.
  I thank the gentleman from Washington for allowing me to speak.
  Mr. INSLEE. We thank the voice of Iowa. This is important across the 
country. The jobs that Mr. Loebsack is talking about losing would not 
have been lost if the Air Force had considered the fact that these 
companies are receiving these illegal subsidies. And it's not just we 
three Congressmen talking about it, it is the executive branch of the 
United States, which has fully evaluated this and come to the 
conclusion these were illegal subsidies.
  These were not just small. They received $1.7 billion in launch aid 
to develop the new A-350. They received $3.7 billion in launch aid for 
the A-380. That is why our U.S. Trade Representative has started this 
enforcement action, blown the whistle on these illegal subsidies. 
Frankly, it has been years later than it should have been. But we have 
finally done it. It's one of these great sort of black comedies to 
think in the year period when we finally blew the whistle after all of 
these years of abuse of these illegal subsidies that disadvantage 
American workers, that that same year the Air Force ends up giving a 
contract for $40 billion.
  These subsidies are not just an issue of dollars, they are jobs in 
Iowa as well. I want to thank Mr. Loebsack. I would like to yield to 
Mr. Tiahrt.

[[Page 4698]]


  Mr. TIAHRT. I thank the gentleman from Washington and the gentleman 
from Iowa. He is representing one of the 42 States that is impacted by 
this decision. Getting back to the statement that the gentleman from 
Washington, Mr. Inslee, said about cleaning up the act, there is a 
report that really highlights why it is so important that it is such a 
travesty that foreign corrupt practices is one of the regulations that 
is waived.
  We can't track what EADS is doing when it comes to their interface 
with foreign suppliers and foreign countries. But there is a report 
that was put out by the Center for Security Policy in April 2007. The 
name of the report is: ``EADS is Welcome to Compete for U.S. Defense 
Contracts--But First It Must Clean Up Its Act.'' Then it goes through 
and highlights some of the corrupt practices that EADS has been known 
for across the globe, and their problematic issues.

                              {time}  1815

  Issue number one, espionage, bribery and other dirty practices; issue 
number two, Russian ownership and influence of EADS; issue number 
three, trying to supply America's adversaries with weapons.
  The report goes on, but in the section called ``Bottom Line,'' it 
says the six things that EADS must do before they should be allowed to 
bid on government contracts.
  Madam Speaker, those six issues are: Number one, resolve espionage 
problems; number two, correct the bribery problem; number three, remove 
the Kremlin from the company; number four, prevent other ambiguous or 
known bad actors from owning EADS stakes; number five, resolve the 
proliferation problem; and, number six, resolve anti-American workforce 
problems.
  This is what the Center For Security Policy suggests to the 
Department of Defense and to Congress, it is a public document, that we 
should do before we should allow this European manufacturer to supply 
products for our defense. And we won't ever know what they are doing 
right, because the foreign corrupt practices regulations are waived by 
our own Department of Defense. That is another reason why this is such 
an outrageous practice.
  Mr. INSLEE. We should point out that this law, this international law 
against subsidization, has not been waived by Congress. This is sort of 
a backdoor way to waive an international agreement.
  We have an agreement that now we are attempting to enforce that would 
prohibit this illegal launching. ``Launching'' basically is a situation 
where a European government assists the private manufacturer, in this 
case Airbus, by giving them essentially loan guarantees or essentially 
free money. You give them a loan that they don't have to pay back if 
the airplane doesn't do well. That is an enormous subsidy, to give free 
capital, in essence, or low cost capital, when you are manufacturing an 
airplane. Of course, when you develop an airplane, there are billions 
of dollars in development costs. Well, if a company like Airbus can go 
to their governments in Europe and say give us a loan we don't have to 
repay if the airplane doesn't perform as expected, we don't make money 
on it, that is an enormous subsidy.
  Europeans with Airbus have been doing this for years. We have 
international laws against that, and those laws are in effect national 
laws in America. But somehow it is just like we ignored these. It is 
like they didn't exist.
  Congress certainly never waived those laws, the courts have never 
waived those laws, the President has never waived those laws, the 
American people have never waived those laws. But somehow the Air Force 
did not take into consideration these enormous subsidies, and that is 
why this thing, this contract, has an odor about it, where we don't 
take into consideration that violation of international and American 
law.
  But I want to talk, if I can, about the capability of these aircraft 
too, because obviously we want the best possible airplane for the job. 
There is possibly no more critical infrastructure, certainly to our Air 
Force, than the ability to refuel our planes. This is the absolute 
spine of the whole skeleton of the Air Force, to have this refueling 
capability.
  There has been sort of a propaganda war that has been waged by the 
Airbus folks to sort of suggest that the Boeing airplane wasn't up to 
the job, and I just want to point out some of the facts about this 
aircraft that I think it is important to realize.
  First off, if you want to look at the only company in this bidding 
that has essentially ever built an air tanker and has been building 
them for 50 years for America, it is Boeing. This is the hometown team 
that has been doing it for decades successfully, and I think we should 
maybe start the discussion from that point.
  Second, the airplane that Boeing bid has some very distinct 
advantages that somehow were not considered, one of which is that the 
Boeing airplane can service about twice as many airfields as the 
competitor. The reason is it can land in shorter, not quite as equipped 
airfields. It can land fully loaded in 811 airfields around the world, 
compared to the competitor at 408. This is a distinct advantage, 
considering we don't know why where the next conflict is going to be. 
We don't know what sort of developing world airfield we are going to 
use. The airplane that Boeing proposes can be serviced and can 
essentially use twice the number of airfields.
  Second, and this is critically important, the Boeing 767 is 24 
percent more fuel efficient. In these days of a crunch with fuel and 
global warming we have to be concerned with and the enormous increase 
in costs that the Air Force is experiencing, this ought to be taken 
into consideration. That adds up to $30 billion, a distinct advantage.
  Third, and this is one that I think is worth mentioning, this sort of 
propaganda effort that was started by the Airbus folks to suggest that 
the Boeing Company didn't score well just simply doesn't comport with 
the facts.
  There were several factors, the first of which is called mission 
capability. When they compete these, there is a very sophisticated way 
of evaluating these. On mission capability, the Boeing airplane scored 
blue, which means exceptional, and low risk in the area of mission 
capability. That is the highest possible rating and I think can be 
considered the most critical factor in the whole competition. The Air 
Force concluded that the Boeing airplane met or exceeded all key 
performance parameters, which are also called thresholds and 
objectives. The Air Force concluded that the Boeing product actually 
had significantly more strengths, also called discriminators, than the 
competitor.
  So you had Boeing receiving the highest rating possible for mission 
capability, it met or exceeded all of what is called KPP thresholds and 
objectives, and it was graded as having significantly more strengths 
than the competition, and somehow came up on the short end of the 
stick.
  This deserves not only GAO review, but it deserves Congress reviewing 
this. As folks know, this is being evaluated now under the protest 
consideration, and we know it will be looked at carefully. But, 
frankly, if this does not get the thorough review we want, Congress is 
going to be looking at this, because these numbers just don't add up to 
say this was the right decision.
  On factor two, proposal risk, just kind of from a commonsense 
standpoint perhaps we can look at the fact that we have one bidder, 
Boeing, that has been doing this for decades. They have an airplane, 
the 767, in the air, providing tanker services, ready to go, against a 
product that is going to be manufactured in this multi-nation system. 
To me, that would create significant confidence in the folks that have 
been doing it and have a plane that is in the air. In fact, the Air 
Force rated Boeing's risk as low, as it should be.
  Surprisingly, the competitor was also rated as low, despite to me 
obvious risk where you have a multi-country, multi-facility, multi-
build approach, contrasted with Boeing's integrated approach to design, 
build and certify with the existing facilities. So, at worst it seems 
to me that there is certainly no advantage of the competitors in that 
regard.

[[Page 4699]]

  I would like to yield to Mr. Tiahrt. I have several more factors, but 
I want to yield to Mr. Tiahrt because I know he has a great idea.
  Mr. TIAHRT. I thank the gentleman from Washington.
  When talking about risk, the Air Force has done studies as to what is 
the best manufacturing technology that we have when we are building a 
complex, single point of failure system like the tanker. They say the 
best way to do it is to have an integrated production line, where you 
build your commercial off-the-shelf item and integrate in that very 
same production line those things that you need to make this a unique 
product for the Department of Defense. That was what was employed by 
the Boeing company in their proposal to the Air Force for the KC-767 
tanker.
  What we find out after looking at and listening to the Airbus or the 
EADS proposal is that they had this disjointed thing, as the gentleman 
from Washington pointed out very well, multi-country, multi-
manufacturing sites, starting four new facilities that have to be FAA 
certified and they have to find qualified workers for. This develops a 
tremendous amount of risk in the proposal that the EADS company was 
putting forward, as compared to what the Air Force actually asked for 
in their own studies.
  Somehow in this convoluted process of trying to decide which product 
to buy, they overlooked the fact that the Air Force said this is what 
we wanted, an integrated production line. We didn't want a multi-
facility operation in multi-countries. We wanted it all to happen in 
one place, where we could keep track of the product and the quality. 
And yet when it came time to risk, they gave an equal amount of risk to 
both companies. It just doesn't make any sense.
  The other point that the gentleman from Washington made that I would 
like to add to is what is the net cost to taxpayers? There are some 
things that the Air Force follows in their Federal acquisition 
regulations as part of their cost evaluation process, but there are 
some things they don't consider. For example, they didn't consider 
outsourcing our national security. They are just based on their rules 
and regulations. They look at cost and their key performance 
characteristics, et cetera.
  But if you look at other things that need to be taken into 
consideration in Congress, like how do we secure the national defense 
industry, the defense base, well, we have to take these things into 
consideration.
  If you look at the $35 billion contract and say what is the real net 
cost to the taxpayers, the $35 billion contract we know is what was 
awarded. But if you looked at the fuel savings that was pointed out by 
the gentleman from Washington, the KC-767 is 24 percent more fuel 
efficient, and that saves taxpayers $30 over the life of this program. 
So you take your $35 billion contract and you have to subtract that 
from the Boeing bid. So what is the net cost to taxpayers? It is $5 
billion.
  Then you take the comparison of American jobs versus French jobs. One 
thing unique about French jobs is they don't pay any American income 
taxes, but American workers do. So you take the 19,000 lost aerospace 
jobs in America and say what would they have paid the Federal 
Government over the life of this program in the form of income taxes? 
Well, 19,000 workers, which is the difference between the two 
proposals, times about $11,000 a year, which is the average that an 
aerospace worker pays in federal income taxes, and you take that over 
the life of this program, it comes out to $8 billion.
  So you have got $35 billion. You take away $30 billion worth of 
savings on the fuel and you get down to a $5 billion net cost to the 
taxpayer. Then you add back what you would get from the lost American 
jobs paying taxes if they were employed with the American contract than 
they would have gotten to pay these taxes. That is $8 billion. So the 
net cost is actually a $3 billion advantage.
  In other words, if we would have issued this to a American company 
with American workers paying American Federal income taxes, and you 
take into consideration the fuel savings, it would have actually 
brought in $3 billion more in revenue in the net cost to the taxpayer 
than what it had under the circumstances that they had given it to the 
foreign supplier. Then you look at the lost revenue from corporate tax 
by having 90 percent of this airplane built in France instead of built 
in America, and you get another $1 billion.
  So what is the true cost to the taxpayers? It is positive $4 billion 
for the American company employing American workers to make an American 
tanker, versus $74 billion if you add all these costs up to the foreign 
supplier using foreign manufacturing workers.
  So what would you do if you were a taxpayer? For me, a $74 billion 
cost or a $4 billion savings, I would take the $4 billion savings, and 
that says we buy an American tanker made by an American company with 
American workers. So this decision doesn't make sense just on the net 
cost to taxpayers, let alone all these other things that we are talking 
about.
  Mr. INSLEE. Coming back, it is not just cost, it is capability. 
Bigger is not always better, and I am very concerned here that the Air 
Force has been lulled into the sense that bigger is always going to be 
better.
  Frankly, when I found out that the Boeing tanker can serve in twice 
as many airfields, it can refuel the V-22, which is our tilt rotor 
aircraft, this aircraft they have can't refuel one of our aircraft, we 
are going with a company that has no boom experience, they have never 
built an airplane commercially with a boom.
  We have decided to reject a company, Boeing, that delivered a 767 to 
Japan, one February 19, 2008, a second one March 5, 2008, they are 
flying, they are in the air, they are a known quantity. And we are 
taking this risk, an uncertain risk, just for this apparent decision 
that all of a sudden bigger became better, which is very interesting, 
because Boeing could have competed a larger airplane, an airframe of 
the Boeing 777, and didn't, essentially because they understood that 
this was a satisfactory size component to deliver.
  It made sense when Boeing made that decision and when Air Force led 
them to that decision, because when you look at the loading, the range 
of loading and what it has done historically, the Boeing 767 is a 
perfect fit. If you look at the offloading potential, the Boeing 767 is 
significantly greater than the average offloading in any of either the 
Vietnam, the Iraqi Freedom or the Southwest Asia conflicts.
  So we are concerned that this decision of this deciding bigger was 
better was, A, not fair to a bidder, Boeing, which was not told that 
that apparently was now the Air Force's brand new criteria; B, exposes 
American taxpayers to greater risk with an uncertain contractor, with 
an uncertain plan in multiple locations; C, causes significant loss of 
jobs; and, D, violates international law, or at least awards folks who 
are receiving illegal subsidies violating international law.
  This is not a good thing for the American warfighter, the American 
taxpayer or the American worker, and that is why we are here tonight 
suggesting that this contract has to be redone one way or another, and 
we are going to be talking about ways to do that.

                              {time}  1830

  Mr. TIAHRT. Another thing Congress must consider in this whole 
scenario is, looking back over history and saying, when we do have a 
difference of opinion between our European allies and our own country 
and we employ our young men and women to carry out the will of this 
country, will our foreign suppliers be there to supply us in our time 
of need?
  During the Gulf War, we had allies that disagreed with what we were 
doing and they failed to supply the parts that we needed to keep our 
young men and women safe while they carried out the will of this Nation 
so they could come home safely to their families. During Operation 
Iraqi Freedom, again, our European allies failed to support us when, in 
our time of need and through great diplomatic strains and a lot of 
harsh words, finally we

[[Page 4700]]

were able to find suppliers that were going to give us the parts that 
we needed so that our young men and women could carry out the will of 
this country and come home safely to their families.
  Once again, in this system, it is a single point of failure system. 
It is a system that, if it is down, everything does not function. We 
cannot transport aircraft from the East Coast to the West Coast for our 
military without tankers. We cannot supply our troops or carry our 
troops anywhere outside the continental United States without aerial 
refueling tankers. If we are going to respond to a natural disaster 
like the tsunami in southeast Asia, we have to have air refueling 
tankers. So, we cannot have such a critical item that is so vulnerable 
to our foreign suppliers when they may disagree with us politically and 
withhold the parts we need to have this very critical, single point of 
failure weapons system.
  So if you look at our ability to protect our families, like my chart 
has here, it is an immeasurable cost. What is the dollar value when we 
have to protect our families and our military doesn't have the supplies 
they need to carry out that task? What about the loss of defense 
workers? That is another immeasurable cost. Once we lose part of our 
national defense industry base, it is gone apparently forever.
  For example, if this contract goes through, never again in America 
will we rebuild an air refueling tanker. I can give you the technical 
reasons why, but basically aircraft are built on an improvement curve. 
And the thought of an improvement curve is a theory, which is reality, 
is that the second unit costs less time to build than the first unit; 
the fourth unit costs less time than the second unit; and the eighth 
unit costs less time than the fourth unit, and on down. Every time it 
doubles, there is less time to build that next aircraft. After you 
build 179 aircraft, like in this air refueling tanker contract, you are 
bidding for the follow-on procurement at unit 180. In other words, you 
are 180 units down the improvement curve. It is a lot cheaper than if 
you are building the first unit. An American manufacturer bidding on 
the follow-on contract would have to bid a number one unit. They cannot 
keep up, once again, with our foreign suppliers because they are 
bidding a number one unit and our foreign would be bidding the 180th 
unit. So we never again will build air refueling tankers here in 
America if this contract goes forward.
  And what does that do? It is a loss to defense workers; it 
compromises our ability to protect our families; and, it is a loss of 
defense manufacturing capability. Those are things that are 
immeasurable in cost, but it is something that Congress must consider 
when we vote on whether this contract should go forward or not.
  Mr. INSLEE. And I hope we don't have to vote. I hope this protest is 
successful. But we will be looking at the right ways for Congress to 
exercise the will of the American people through the appropriation or 
authorization process. And the reason we intend to do that is that we 
think there were several mistakes made in this contract that 
essentially resulted in the Air Force selecting a larger, more 
expensive, and more operationally limited tanker, despite the fact that 
the domestic Boeing tanker met the requirements of the Air Force.
  So, we intend to go forward. We hope that our colleagues will join us 
in this effort. It is the right thing to do. It may take some time to 
do, we regret that, but America deserves this and deserves better than 
what happened here.
  Mr. TIAHRT. If you look at all the data involved, from the employment 
of illegal subsidies that you pointed out so clearly and how our United 
States trade representative is taking the European companies to task 
for these illegal subsidies, when you take into consideration the lost 
tax revenue, when you consider the costly one-sided regulations that 
are granted by our own Department of Defense and the loss of our 
industrial base and the loss of our national security, this is a bad 
decision, and it appears that the Air Force had to bend over backwards 
to give this work to the French company EADS. And it is heartbreaking 
in one sense, outrageous in another. But, for me, it came in the form 
of outrage.
  I know that one of the Senators from Washington State has set up a 
Web site where you can fill out a survey. I know, on my own Web site at 
www.house.gov/tiarht, you can get on my Web site and fill out a survey 
about your feelings on us outsourcing our national security to the 
French. It is I think a bad decision. It is one that needs to be 
reviewed by Congress. I am hopeful that the Government Accountability 
Office will look at these inequities, these disparities, this unlevel 
playing field, and correct this before we have to take action on the 
floor of the House.
  But I think it is clear from the people that we have spoken with here 
in the 42 States that have lost workers because of this contract going 
awry, that there will be something happening on this contract this 
year, either through the Government Accountability Office or through 
actions of the Congress, because it is too outrageous to allow our 
national security to be outsourced to the French.
  Mr. INSLEE. I want to thank Mr. Tiahrt and Mr. Loebsack.
  Madam Speaker, we yield back the balance of our time.

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