Boeing may walk away with Air Force tanker contract if Northrop doesn't bid

WASHINGTON — Defense contractor Northrop Grumman is not expected to bid on an estimated $100 billion contract for Air Force refueling planes, potentially paving the way for Boeing to walk away with the deal, a source familiar with the matter said.

Loren Thompson, a defense analyst at the Lexington Institute, said officials at Northrop signaled to him Thursday that the company does not intend to compete on the final request for proposals, which could come as early as next week.

"They believe the current wording of the solicitation is so unfavorable to them that bidding would be pointless," Thompson said, citing the Air Force's apparent interest in a less ambitious and less expensive proposal than Northrop favors. "They have zero expectations that they could prevail in the type of competition that is shaping up."

A Northrop spokesman said the company has not yet decided whether to compete, although there has been speculation among analysts for weeks that they would not.

While Boeing's chances of winning the contract certainly improve if Northrop does not make a bid, the Chicago-based company is not guaranteed to win the deal. Members of Congress have criticized the Air Force's handling of the multibillion-dollar refueling contract, and could attempt to delay the deal.

"The no-bid decision will be predicated on what is or is not included in the final" request for proposal, Northrop spokesman Brandon Belote said.

A Boeing spokesman declined to comment.

Pentagon officials met with the Air Force Wednesday, agreeing to a final proposal for the multibillion dollar project, Thompson said. The Office of the Secretary of Defense is expected to approve the acquisition strategy soon, one of the final steps before the bid is publicly released.

The Air Force has dubbed the estimated $100 billion deal one of its highest priority contracts that will replace a portion of the military's older fleet of KC-135, a medium-sized refueling plane made by Boeing and critical to military operations in Iraq and elsewhere. The Air Force is expected to seek 179 next-generation tankers.

Both Chicago-based Boeing and Los Angeles-based Northrop had once been expected to compete in the contract, though industry insiders say the government has long favored Boeing's 767 aircraft for this project.

Thompson said Northrop will refuse to compete in the Air Force deal if the requirements of the contract are noncompetitive to its planned offering of the Airbus A330.

Northrop has been seeking a contract that would include an ambitious cargo carrying ability that would justify the higher price of their aircraft, as compared to Boeing's 767 offering.

For its part, the Air Force has said that it is interested in a competitive contest for the contract.