Pentagon plans quick re-bid of tanker contract

Boeing and Northrop Grumman will submit new offers for a disputed $35 billion Air Force tanker contract, and the Pentagon will pick a winner by the end of the year.

Defense Secretary Robert Gates said Wednesday that his office — not the Air Force — will oversee the competition between Boeing and the team of Northrop and Airbus parent European Aeronautic Defence and Space Co.

The plan, which hands control to the Pentagon acquisition chief John Young and sets up a dedicated source-selection committee, shows that senior civilians at the Defense Department have lost confidence in the Air Force's ability to manage the contract.

"I think it's better," said Rep. Norm Dicks, D-Wash. "No one has any faith in the Air Force."

The Government Accountability Office last month detailed "significant errors" the Air Force made in the original award to the Northrop team. The GAO said Chicago-based Boeing might have won the contract had the service not made mistakes in evaluating the bids.

The Pentagon will conduct a limited rebid that looks only at eight issues where government auditors found problems in the initial process, Gates said.

Sen. Richard Shelby, a Republican from Alabama, where the Northrop Grumman team would assemble its plane, called it "the best of all options" that would address the "minor procedural flaws" the GAO cited.

Lawmakers from Washington state and Kansas, where Boeing employs thousands of workers, have put considerable pressure on the Air Force to reopen the bidding process and cancel the contract with the Northrop team.

The deal has emerged as the latest black eye for the service, which is trying to rebuild a tattered reputation after a procurement scandal in 2003 sent a top Air Force acquisition official to prison for conflict of interest and led to the collapse of an earlier tanker contract with Boeing.

The Air Force in February selected the Northrop team to replace 179 Eisenhower-era aerial refueling planes. Boeing filed its protest in March.

The deal — one of the largest in Pentagon history — is the first of three contracts worth up to $100 billion to replace nearly 600 refueling tankers over the next 30 years.

Shares of Boeing added 61 cents to $66.53 in afternoon trading, while Los Angeles-based Northrop Grumman fell 10 cents to $66.07.