Northrop Grumman drops out of tanker fight

Northrop Grumman Corp. has decided not to compete against the Boeing Co. for a contract estimated at $35 billion to build the Air Force's next generation of refueling tankers.

Congressional and industry officials confirmed the decision Monday.

“This is very good news,” said Rep. Norm Dicks, D-Wash. “We can now go forward with the program.”

The decision puts the Pentagon on a path toward something President Barack Obama wanted to avoid: a single-bidder contract with big money at stake.

The Obama administration has said sole-source contracts aren't a good deal for taxpayers. But industry insiders say there's no other company able to meet the Air Force's guidelines for the tanker program.

Northrop was expected to make an announcement later Monday. It had been hinting for months that it would remove itself from the bidding.

Rep. Jo Bonner, a Republican who represents the Alabama district where Northrop would have built the tankers, said he is “deeply disappointed” by the decision.

“Frankly, I am outraged at the Defense Department's bungling of this contract for what is now the third time,” Bonner said. “I wrote President Obama last month and warned him the Pentagon was headed down a path that would kill the chance of competition in the tanker program.”

“Apparently the Pentagon didn't get the word and has handed the President a $35 billion sole-source hot-potato, under circumstances that are highly suspect,” he added. “ The president must now intervene to protect the interests of the taxpayer and the men and women of our military.”

Sen. Richard Shelby,. R-Ala., also said the bid specifications were mishandled.

“The Air Force had a chance to deliver the most capable tanker possible to our warfighters and blew it,” he said in a prepared statement. “This so-called competition was not structured to produce the best outcome for our men and women in uniform; it was structured to produce the best outcome for Boeing. The Air Force's refusal to make substantive changes to level the playing field shows that once again politics trumps the needs of our military.

It appears that Boeing will be the sole bidder for the lucrative contract, but that doesn't mean it won't be a difficult effort.

Analysts say that the Air Force wants a fixed price for the tankers, with increase over time based on inflation. Deciding what to charge over a long period won't be easy.

The contract will bring new life to the 767 assembled in Everett. Boeing had reduced production of the jet to just a few each year because of few orders. Winning the contract to replace 179 of the aging KC-135 tankers would provide work for many years to thousands of employees.

The Associated Press contributed to this story.