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Boeing’s Challenge of Northrop Tanker Contract Still Up in Air

The saga of arguably the most coveted defense contract ever issued could be over soon, but as the end draws near, only uncertainty seems to be definite.

Los Angeles-based Northrop Grumman Corp. is hoping to keep the $35 billion deal to supply aerial refueling tankers to the Air Force despite a considerable challenge by Boeing Co., the Chicago-based defense contractor initially expected to win the contract.

Shortly after Northrop and its European partner won the deal in February, Boeing filed a formal complaint with the Government Accountability Office, which could overturn the contract and require a new competition. The government is expected to announce its decision by June 19, but some analysts are skeptical of a government notorious for delays.

“I wouldn’t hold my breath waiting,” said Paul Nisbet, a defense analyst with JSA Research Inc. “The contract was supposed to be awarded in October it took until Feb. 29, so this deadline will probably not hold either.”

As Northrop and its partner, the European Aeronautic Defence and Space Co., wait to hear the government’s decision, some high-profile figures are coming out in support of them.

Last week, Bob Stevens, chief executive of Bethesda, Md.-based Lockheed Martin Corp., applauded the Air Force’s decision at a conference in Brussels, saying it “reinforces the openness of U.S. markets and is the most recent example of the growing willingness of the United States to look to global sources of supply for vital equipment.”

Meanwhile, John Young, the acquisition chief for the Defense Department, told a group of reporters last week that he saw no mistakes with the Air Force’s decision and said he hopes it will not be overturned over some minor squabbles.

The support is welcome news at Northrop, which has been the target of criticism for its partnership with a European company in pursuing this important military program.

“We’re cautiously optimistic the Government Accountability Office will move forward and dismiss Boeing’s protest,” said Randy Belote, the head of Northrop’s tanker program.

But Nisbet believes Northrop should not be so confident. Boeing has said it was misled during the competition and was unaware that the Air Force wanted a large plane, which they noted was a key component in their selection of the Northrop/EADS plane.

“Boeing has a legitimate gripe here if what they are saying about being misled is true,” Nisbet said.

Boeing is contending that the selection parameters were changed midstream in a way that inherently favored the Northrop/EADS team.

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