The Defense Department on Wednesday said it will delay its decision on a $35 billion aerial tanker contract until after the start the next administration to allow a "cooling off" period between rivals Northrop Grumman Corp. and Boeing Corp.
Defense Secretary Robert Gates said that he decided to cancel the renewed round of bidding on the contract to replace the Air Force's aging aerial refueling fleet because it was now clear a decision could not be made by the end of the year.
"We can no longer complete a competition that would be viewed as fair and objective in his highly charged environment," Gates said in a statement. "The resulting cooling off period will allow the next administration to review objectively the military requirements and craft a new acquisition strategy for the KC-X.
The Pentagon had been expected to release its formal set of guidelines as early as Monday for the last round of bidding for the right to build 179 new planes in the first phase of what would be a larger and lucrative contract. Many of the Air Force's current airborne tankers are about 50 years old. The tankers refuel other aircraft, such as fighter planes, in the air.
Los Angeles-based Northrop Grumman, which has partnered with Airbus parent European Aeronautic Defense and Space Co., was awarded the contract earlier this year, but a subsequent review found major flaws with the way it was awarded. The Pentagon reopened bidding in August.
Chicago-based Boeing said the new competition was unfairly tilted against its smaller plane, a version of the commercial 767 jet. It threatened to back out of the bidding if the Pentagon did not give it more time to come up with a new proposal. The Pentagon's decision to delay the contract further gives Boeing more time to redesign its bid.
Sen. Richard Shelby, R-Ala., who has backed the Northrop team because its assembly plant would be in his state, called the Pentagon's decision "unacceptable."
"This misguided decision clearly places business interests above the interests of the war fighter," he said in a statement.
Boeing supporter Rep. Norman Dicks, D-Wash., blamed the extensive changes made by the Pentagon in its revised request for bids, saying it forced Boeing to ask for additional time, or else be forced to bail out of the contest.
"They didn't have enough time to do it right," Dicks told the Associated Press.
Shares of the contenders dipped a little on the news. Northrop's stock was down $1 to $69.92 and Boeing's fell $1.73 to $62.32 in early trading.
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