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Iran's test comes during the same week that the United States made progress on installing a missile defense system in Europe, and one of the goals would be to defend against Iran's missiles. NPR Pentagon correspondent Tom Bowman has been following this story. And Tom, do national security officials in the United States agree on how to approach Iran now?

TOM BOWMAN: Well, you know, President Bush says that they should work this out diplomatically at this point. All options are on the table, but they're pushing this diplomatically. And clearly the Pentagon does not want to have this turn into a shooting war.

Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, said just last week, listen, we have a full plate in the region with Iraq and Afghanistan. And also he said the last thing he wants to see is further destabilize the region.

INSKEEP: So lots of tension, lots of rhetoric, but administration officials say they want to pursue diplomatic courses at this time. We're talking with Tom Bowman. He's our Pentagon correspondent. He's also covering another story this morning.

We're expecting new developments today on a hotly contested Air Force contract. This is a contract to build a new fleet of air refueling tankers. It's worth at least $40 billion. And Tom, what's going to happen now? This contract has already been awarded once.

BOWMAN: Well, we expect perhaps as early as today - there's a great deal of speculation about what's going to happen, whether they'll re-bid the contract, and there's a sense that we could get an announcement today on a re-bid or at the very least revise the proposals from those involved in the contract.

It was awarded to Northrop Grumman and Eaves, a European defense giant, and Boeing Company protested the decision, and then the Government Accountability Office basically said there were a lot of errors made in the bid process and recommended it all go out to bid.

So there's speculation that Secretary of Defense Robert Gates could go out today and announce a re-bid.

INSKEEP: Well, let's take a listen to some of what Gates has been saying about the tanker contract recently.

Mr. ROBERT GATES (U.S. Secretary of Defense): We've clearly had problems with the tanker contract and this time around is not the first time, obviously.

BOWMAN: Do you still have faith in the Air Force team or is it too early to even...

Mr. GATES: Well, I have confidence in the team until I see something to the contrary.

INSKEEP: Although, wait a minute, Tom Bowman, he said this is not the first time, which is true. The Air Force tried to just give the contract to Boeing - that was protested - and then they tried to give this competitive bid - they gave it to Northrop and its European partner. That was protested. Does Gates still have confidence in Air Force leadership at this point?

BOWMAN: Well, I was the one who asked him that question a couple of weeks back, and that's what we don't know yet. Can he stick with this same procurement team headed by Assistant Air Force Secretary Sue Payton, and that's something else other people are talking about. Will she still have her job or will this contract process perhaps be turned over to someone else in the Pentagon to look at and review? And that's something we could hear again as early as today.

INSKEEP: You know, tanker planes aren't too sexy but you need them. Is the Air Force going to be in trouble if they don't figure this out pretty soon?

BOWMAN: Well, the current ones they have are several decades old, and with anything that's that old, any mechanical - it's very difficult. There's down time, there's maintenance issues. So they say they need them as quickly as possible.

INSKEEP: Okay, Tom. Thanks very much.

BOWMAN: You're welcome, Steve.

INSKEEP: That's NPR Pentagon correspondent Tom Bowman.

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