Bidding starts anew for Air Force tanker contract

Wednesday, August 6, 2008 | 2:59 p.m. CDT

WASHINGTON - The Pentagon opened a second round of bidding Wednesday for a $35 billion Air Force tanker contract following an error-plagued first attempt that featured bitter competition between Northrop Grumman Corp. and Boeing Co.

A revised request for proposals has been issued for a new aerial refueling tanker meant to replace the Air Force's fleet that dates back to the 1950s. Both companies are expected to bid again, and a new decision should be made by the end of the year.

The Pentagon planned a briefing Wednesday afternoon to discuss the new selection process.

The team of Northrop and Airbus parent European Aeronautic Defence and Space Co. won the original contract, but Boeing protested, saying the Air Force did not conduct the process fairly. A Government Accountability Office review found "significant errors" in the Air Force's decision, and Defense Secretary Robert Gates later said he would reopen bidding.

The new round will be limited to the eight issues where government auditors found problems with the initial process.

A key focus likely will be some of the guidelines the draft request for proposals sets out for the plane's design. For example, Northrop's version was larger than Boeing's, and the GAO concluded the Air Force unfairly gave Northrop extra credit for that even though there were no size requirements for the aircraft.

The struggle between the companies, two of the nation's biggest military suppliers, has been particularly acrimonious. The two have sniped at each other through public relations campaigns that included full-page newspaper ads, Internet spots and sharp words from company executives.

Boeing and its supporters on Capitol Hill have charged that the Northrop partnership with a European company will siphon jobs away from the U.S. as the nation's economy is swooning. But Northrop officials say they plan to do much of the work at a new plant in Alabama that would provide up to 1,500 jobs.

A winning Boeing bid could affect thousands of workers in Missouri, Kansas and Washington state.

Northrop spokesman Randy Belote said Wednesday morning he had not seen the new request for proposal. A Boeing spokesman did not immediately return a phone message seeking comment.

Shares of Los Angeles-based Northrop rose 38 cents to $67.70 in morning trading, while Chicago-based Boeing's stock slipped 76 cents to $64.04.


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