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In a blow to the Boeing Co., the Defense Department has decided to revive competition for modernizing its aerial refueling tanker fleet, a move that could frustrate Boeing's bid to provide KC-767 tankers to the Air Force.

Deputy Defense Secretary Paul Wolfowitz wrote Senate Armed Services Committee Chairman John Warner Friday, expressing the department's intent to re-open competition for the tankers. "After we have selected an appropriate alternative, we intend to require competition," Wolfowitz told Warner. "No matter which alternative we choose, leasing is not an option without new congressional authority."

Wolfowitz's letter, which was read to CongressDaily, did not explicitly mention disputed language in the recently enacted fiscal 2005 defense authorization bill that Warner's committee asserts calls for open competition for a multi-year tanker acquisition plan. Nonetheless, Wolfowitz's policy statement was consistent with the Senate interpretation of the new law that Warner and others contend would enable Boeing's European rival, Airbus, to bid on an Air Force tanker contract.

House lawmakers who support the Air Force's current effort to acquire 100 Boeing tanker aircraft reject the Senate's take on the language crafted last month in the final hours of the conference.

In an Oct. 28 letter to Defense Secretary Rumsfeld, House Armed Services Committee Chairman Duncan Hunter, R-Calif., and House Defense Appropriations Subcommittee Chairman Jerry Lewis, R-Calif., clarified their interpretation of the new law. Both chairmen assured the department it could move forward expeditiously with the current "program of record" -- the multibillion dollar effort to acquire Boeing tankers, which has been stalled for the past year pending the outcome of investigations into alleged unethical conduct during contract negotiations.

The department has been awaiting the outcome of an analysis of alternatives as well as a study of aerial refueling mission needs aimed at determining the best approach to replace the Air Force's aging fleet of KC-135 Stratotankers. Both the analysis and the aerial refueling portion of the mobility capabilities study were accelerated earlier this year for completion in November.

Wolfowitz said in his letter to Warner that the studies consider a wide range of alternatives and that the department will look at "all viable solutions" to the tanker replacement program, including "retention and re-engineering" of the KC-135E tankers.

The Wolfowitz letter is a boon to Warner and Sen. John McCain, R-Ariz., an Armed Services Committee member who has fought for the past three years against the Air Force's effort to acquire Boeing KC-767s. Late last week in a speech on the Senate floor McCain released internal Pentagon e-mails that he said show "a systemic Air Force failure in procurement oversight, willful blindness or rank corruption," in pursuit of the Boeing deal.