- The Washington Times - Thursday, September 11, 2008

The Defense Department has again delayed plans to award a $35 billion contract for Air Force refueling planes, handing a victory to defense contractor Boeing Co. and leaving the politically charged decision for the next president.

Defense Secretary Robert M. Gates told lawmakers Wednesday that he ended the current round of bidding on the tankers because the Pentagon’s plan to pick a winner by the end of the year no longer seemed possible given the complexity of the project and the rancor between Boeing and rival Northrop Grumman Corp. He said a delay would provide a “cooling off” period.

“We can no longer complete a competition that would be viewed as fair and objective in this highly charged environment,” Mr. Gates said in prepared testimony before the House Armed Services Committee.

The decision represents a major win for Boeing in its lengthy and bitter struggle with Northrop for the lucrative contract for 179 planes that could eventually include the right to build many more. Boeing recently threatened to back out, saying the Pentagon’s timeline and terms unfairly favored the larger plane proposed by Northrop. That would have left Northrop as the only bidder.

Boeing welcomed the Pentagon’s decision, saying it will allow “the appropriate time for this important and complex procurement to be conducted in a thorough and open competition.”

The Pentagon has tried and failed for seven years to award a contract to replace its aging fleet of tankers that refuel military planes in flight. Some of the tanker planes are nearly 50 years old, and senior defense officials have said they need to be replaced soon.

In 2004, Boeing lost the contract amid an ethics scandal that resulted in prison terms for a former senior company official and a former high-ranking Air Force official. A team of Northrop and Airbus parent European Aeronautic Defense and Space Co. was awarded the contract earlier this year, but bidding was reopened after a Government Accountability Office report found serious flaws with the Air Force’s decision. The Pentagon had hoped to make a new contract decision by Dec. 31.

But Boeing and its congressional supporters exerted heavy pressure on the Defense Department to defer its decision, with company officials saying they needed at least six months to come up with a new bid.

The struggle between the two major defense contractors has been especially bitter, with each waging sharp-edged public relations and lobbying campaigns in Washington.

Capitol Hill support also is divided, with lawmakers from Boeing’s industrial base in Washington state and Kansas battling their counterparts from Alabama who back Northrop’s plans to build a manufacturing plant in Mobile, Ala., that would employ 1,500 people.

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