Northrop Grumman Corp. informed the U.S. Defense Department Tuesday that it may not bid on a $40 billion Air Force refueling tanker contract, which would leave arch rival Boeing Co. as the sole bidder.
Chief Operating Officer Wes Bush wrote in a letter to the Pentagon's top weapons buyer that unless major changes were made in how the Air Force would select a winner, Northrop “cannot proceed to submit a bid.”
The Air Force wants to buy 179 jetliners that are converted to refuel military planes mid-flight. The Los Angeles defense contractor partnered with European Airbus maker EADS and won the first bid during the Bush administration, but the contract was cancelled after a successful appeal by Boeing.
Northrop believes that the Obama administration’s new bidding process is stacked against it. Its bid has been based on the Airbus A330, but Boeing is now expected to submit a version of its smaller and less expensive 767 jet.
Bush said that an A330-based tanker would provide the best capability for the U.S. military and taxpayers. "Furthermore, we are aware of how important it is to the credibility of the ultimate KC-X tanker award that it can be arrived at competitively," according to the letter released by the company.
Bush also said that Northrop is leery about the potential financial burden that would be required of the winner. The DOD's request for proposal includes significantly more mandatory requirements and a preference for a fixed-price development contract for a project that likely would last more than 18 years.
Northrop shares closed up 46 cents, or less than 1 percent, to $35.26 on the New York Stock Exchange.
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