Everett, Wash.
Published: Tuesday, August 12, 2008

Boeing signals it will stay in $35B tanker fight

By STEPHEN MANNING
AP Business Writer

 WASHINGTON -- Boeing signaled Tuesday it will remain in the competition for a disputed $35 billion Air Force tanker contract, saying talks with the Pentagon were the start of a "continuing dialogue" over the latest round of bidding on the aerial refueling plane.

Officials from both Boeing Co. and rival Northrop Grumman Corp. met with Defense Department officials at Wright-Patterson Air Force Base in Dayton, Ohio, to discuss the latest draft request for proposals for the second round of bidding on the tanker program. Some Boeing supporters say the new round is unfairly tilted to Northrop's larger plane, and there has been speculation that Boeing might not bid again.

Boeing said the meeting was used to attain clarity about the changes in the criteria the Pentagon will use to pick a new winner.

"We hope that it was just the beginning of a continuing dialogue as we move toward a final RFP that prescribes the right aircraft and gives appropriate weight to all of the capabilities that will be required for the evolving mission over the next several decades," Boeing said.

Company spokesman Dan Beck added that Boeing "remains committed" to providing a new tanker to the Air Force, but that it needs to be selected "through a fair, open and balanced competition."

The new request comes after Boeing protested the original award to the team of Northrop and Airbus parent European Aeronautic Defence and Space Co. earlier this year, saying it was unfairly penalized for pitching a smaller plane. A Government Accountability Office review found the Air Force made several errors in the selection process, and the Pentagon decided to reopen the bidding.

But Boeing supporters say the latest request merely puts into the writing many of the alleged original biases against the company. That includes language that appears to give Northrop greater credit for proposing a larger plane that could carry more fuel.

Boeing has not said how it will react to the new guidelines, but some analysts have suggested the Chicago-based company could lodge a new protest or not issue a new bid.

Paul Meyer, manager of Northrop's refueling tanker program, said the Los Angeles-based company's meeting with Pentagon officials focused on the eight problems identified by the GAO. He would not comment on what the company's new bid will look like, but both Boeing and Northrop are expected to submit planes similar to their proposals in the first round.

"They were productive, positive, and we look forward to a very near term release of the final RFP," Meyer said.

The Air Force wants to build 179 new tankers to replace its aging fleet of planes, some of which are nearly 50 years old. A decision is expected by the end of the year on a new contract. Following the GAO's report, control over the award was removed from the Air Force and given to Pentagon acquisition chief John Young.

Top Air Force officials referred questions to Young's office Tuesday. But newly appointed Air Force Chief of Staff Norton Schwartz said the service is eager to begin work on the new planes and hoped to avoid an "indefinite delay in action" on the new tanker.

Shares of Boeing fell 69 cents to $65.93 Tuesday, while Northrop Grumman added 69 cents to $70.65.
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