Northrop Grumman said Monday that it won't submit a bid in the U.S. Air Force's refueling tanker competition, saying the proposal clearly favors Boeing's smaller tanker.
That should make it easier for Boeing to win a $35 billion contract for 179 refuelers.
A Boeing win would benefit Wichita, where workers at the company's defense facility would do the finishing work on the tanker. How many jobs the program would create is uncertain.
Although Northrop won't bid, there is speculation that its partner on the tanker project, EADS — the parent company of Airbus — is considering submitting a bid on its own.
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Northrop CEO and president Wes Bush said in a statement Monday that the Air Force's proposal doesn't adequately recognize the added capability of a larger tanker, "precluding us from any competitive opportunity."
"Investing further resources to submit a bid would not be acting responsibly," Bush said.
Northrop's tanker is based on the Airbus A330 commercial airliner. Boeing said last week that it will offer a tanker based on the 767.
EADS North America chairman Ralph Crosby called the Air Force preference for a smaller tanker "particularly disappointing given that the Air Force previously selected the A330-based KC-45 because of its added capability, lower risk and best value."
"They really wanted to bid," said Lexington Institute defense analyst Loren Thompson.
But after spending $200 million preparing its bids, Northrop concluded it wouldn't make money off the tanker competition, Thompson said.
"There were so many risks associated with the solicitation, and the prospects of making a profit were so unclear, they really couldn't do it," Thompson said.
Northrop said it won't file a protest because it would delay much-needed tankers even further.
"America's service men and women have been forced to wait too long for new tankers," Northrop said. "We feel a deep responsibility to their safety and to their ability to fulfill the missions our nation calls upon them to perform."
U.S. Deputy Secretary of Defense William Lynn called Northrop's decision disappointing, saying the competition was fairly structured so that both companies could compete effectively.
Boeing supporters said Northrop's decision means the Air Force is one step closer to a Boeing tanker.
"Finally, there is some good news for Kansas workers and our service members," U.S. Rep. Todd Tiahrt, R-Goddard, said in a statement.
U.S. Sen. Pat Roberts, R-Kan., called it a "great day for our warfighters."
"Now they are going to receive a plane that both matches their requirements and is made by the most qualified and experienced workers," he said.
Officials from Alabama, where the tanker would have been built if Northrop had won the contract, were less enthusiastic.
Sen. Jeff Sessions, R-Ala., called the development "tragic" and a "dark day for the American warfighter." Added fellow Alabama Republican Sen. Richard Shelby, "The Air Force's refusal to make substantive changes to level the playing field shows that once again politics trumps the needs of our military."
Rep. Norm Dicks, D-Wash., who is about to become chairman of the powerful House defense appropriations subcommittee, said the bidding should be scrapped and the Air Force should negotiate a contract directly with Boeing.
"I am confident they can now utilize their authority to proceed with the procurement of KC-767 tankers as quickly as possible, negotiating a contract that will allow the Air Force to begin replacing its tanker fleet rapidly," said Dicks, whose district includes Boeing's Seattle-area facilities.
Dicks also suggested that once the tanker is in production, he would push to increase production levels from 15 a year to 20 to 25 a year in order to replace the tankers as quickly as possible.
The initial contract is for 179 tankers, but the deal eventually could be worth $100 billion as the Air Force replaces about 600 tankers in what could be one of the largest Pentagon purchases ever.
Monday's decision does not necessarily mean Boeing will be the sole bidder, however. EADS is weighing whether to enter the competition.
"They could," said Teal Group aviation analyst Richard Aboulafia. "And they would probably be doing Boeing a big favor if they did."
He said it would give the bidding the "illusion of competition while actually not creating any."
EADS, however, would face the same problems as Northrop, he said — not having a political base in the right places and having an aircraft that's more expensive than what the Air Force wants.
In addition, EADS has financial restraints because of two expensive Airbus programs — the A400M and A380.
"They have constrained their ability to discount their way into the U.S. defense market," Aboulafia said.
The contract is "very much Boeing's contract to lose," he said.
Guy Hicks, a spokesman for EADS North America, said the company's preferred option was to partner with Northrop.
"Northrop Grumman has decided not to compete, and that significantly limits the options," Hicks said.
Thompson and Dicks said it was unlikely EADS would bid on its own.
"Without an American face on this, I don't see how EADS could do this on its own," Dicks said.
The Air Force issued a final request for proposal on Feb. 24. Bidders have 75 days from then to submit a proposal.
This is the Air Force's third attempt to replace its 50-year-old fleet of tankers.
Last year, the contract was awarded to Northrop, but the decision was overturned by the Government Accountability Office after Boeing protested.
An earlier attempt to give Boeing a tanker contract was thwarted amid a scandal after an Air Force procurement officer and a Boeing financial officer went to prison for conflict-of-interest violations.