Northrop pulls out of tanker bid

In a statement, Northrop Grumman CEO Wes Bush said officials ultimately decided that the final request for proposals released last month by the Air Force favored the smaller Boeing 767 over the Airbus 330 they planned to offer with their partner, EADS.

"We continue to believe that Northrop Grumman's tanker represents the best value for the military and taxpayer - a belief supported by the [selection] of the A330 tanker design over the Boeing design in the last five consecutive tanker competitions around the globe," Bush said. "Regrettably, this means that the U.S. Air Force will be operating a less capable tanker than many of our allies in this vital mission area."

Had they won the contract, valued at as much as $40 billion, the Northrop/EADS team had planned to build the planes at a new plant in Mobile, Ala.

Sen. Richard Shelby, R-Ala., criticized the Air Force today, saying they "blew it."

"This so-called competition was not structured to produce the best outcome for our men and women in uniform; it was structured to produce the best outcome for Boeing," he said in a statement. "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."