Northrop Drops Out Of Tanker Competition The Air Force is down to a single bidder for one of the largest contracts in Pentagon history. Northrop Grumman pulled out of the competition to build new aerial refueling tankers on Monday — saying the selection criteria were stacked against it. With Northrop's departure, Boeing is the sole bidder on the contract worth about $35 billion.
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Northrop Drops Out Of Tanker Competition

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Northrop Drops Out Of Tanker Competition

Northrop Drops Out Of Tanker Competition

Northrop Drops Out Of Tanker Competition

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The Air Force is down to a single bidder for one of the largest contracts in Pentagon history. Northrop Grumman pulled out of the competition to build new aerial refueling tankers on Monday — saying the selection criteria were stacked against it. With Northrop's departure, Boeing is the sole bidder on the contract worth about $35 billion.

RENEE MONTAGNE, host:

The Air Force appears to have come to the end of a very long saga. It involves one of the largest contracts in Pentagon history - worth $35 billion - and two big plane manufacturers vying for that contract. One of them, Northrop Grumman, has just pulled out of the competition to build new aerial refueling tankers, saying that the selection criteria were stacked against it - which leaves Boeing the sole bidder standing. NPR's Wendy Kaufman has more.

WENDY KAUFMAN: The Air Force has been trying to get an acceptable contract for its new tankers for nearly a decade. Aerospace analyst Richard Aboulafia says it hasn't been easy.

Mr. RICHARD ABOULAFIA (Vice President, Teal Group): This is the most tortuous, politicized and deeply irritating defense contract I've seen in 25 years of studying the market.

KAUFMAN: The Air Force has more than 500 tankers, and they're old. They need to be replaced. Back in 2001, the Air Force had a plan to lease and potentially buy new tankers from Boeing. But an ethical scandal involving the company killed the deal.

The Air Force put out a new call for bids. Boeing's only rival was a team from Northrop Grumman and Airbus's parent company. That team won the contract. Boeing cried foul and asked for an investigation. The Government Accountability Office sided with Boeing, and the Air Force again asked for bids.

Mr. LOREN THOMPSON (Defense Industry Analyst): This round of competition, the Air Force removed all the rewards for offering a bigger plane that could carry more fuel.

KAUFMAN: Defense industry analyst Loren Thompson explains that the new contract requirements favored Boeing's smaller airplane over the larger one that would've been built by the Northrop-Airbus team. As a result, Thompson says, the math no longer worked for Northrop to bid on the contract.

Mr. THOMPSON: When they analyzed the proposed terms for the competition, they couldn't see a way of reducing the risk, or getting the profitability to a level that was acceptable.

KAUFMAN: And with Northrop out of the picture, Boeing becomes the sole bidder. The state of Alabama stood to gain thousands of new jobs at a new Northrop facility if the company had won the contract. Alabama congressman Jo Bonner is disappointed that Northrop pulled out. And the Republican bemoans the resulting lack of competition.

Representative JO BONNER (Republican, Alabama): President Obama said sole-source contracts are not good for America. And so I think the burden really is going to shift to the president himself.

KAUFMAN: Bonner wonders if Boeing and Northrop were really playing on a level field. And he's not convinced that if Boeing gets the contract, it will be in the country's best financial or strategic interests.

Rep. BONNER: When there's no competition, then you dont have a check and balance. You don't have the guarantee, both to the taxpayers and the war fighters, that we're going to get the best.

KAUFMAN: Right now, the Air Force doesnt seem to have many avenues except a single-bidder contract. But last month, Deputy Secretary of Defense William Lynn said there might be alternatives.

Yesterday, a spokesman for Boeing said the company intends to submit a transparent and competitive proposal. Meanwhile, on the factory floor where Boeing's tanker would be built, reaction was muted. Union member Ken Longanecker.

Mr. KEN LONGANECKER (Boeing Union Member): It wasn't so much everybody was excited about it. I think there was a level of disappointment because we wanted, you know, the competition.

KAUFMAN: Longanecker and his colleagues wanted to prove, in a fair and open contest, that Boeing's tanker could win.

Wendy Kaufman, NPR News, Seattle.

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