Northrop threatens to quit contest for tanker contract

Northrop Grumman Corp. on Tuesday threatened to pull out of the heated competition to build a fleet of aerial refueling tankers for the Air Force, arguing that the Pentagon's approach unfairly favors the plane produced by rival Boeing Co.

In a letter to Pentagon acquisition chief Ashton Carter, Northrop Grumman President Wes Bush said the Defense Department must significantly revise the parameters of the competition to make it worthwhile for the firm to vie for a contract that is worth at least $35 billion.

Northrop has asked the Pentagon to issue a second draft Request For Proposals that addresses their concerns, including what they believe is a preference for the smaller Boeing 767 airframe over the Airbus A330 proposed by a team led by Northrop Grumman and the European consortium EADS, maker of Airbus planes.

Northrop also is concerned that plans for the program would "place contractual and financial burdens on the company that we simply cannot accept," Bush wrote.

But the program's contracting office notified Northrop officials that it does not plan to issue a second draft RFP before releasing the final document.

The final RFP is expected next month in anticipation of a contract award in the summer.

"As a result, I must regrettably inform you that, absent a responsive set of changes in the final RFP, Northrop Grumman has determined that it cannot submit a bid to the Department for the KC-X [tanker] program," Bush said in the letter, copies of which were also sent to Deputy Defense Secretary William Lynn and Air Force Secretary Michael Donley.

Northrop Grumman threatened several years ago to pull out of the last competition for the tankers and the Air Force ultimately addressed their concerns. Northrop won that competition last year, but the Government Accountability Office ultimately upheld a protest filed by Boeing and the Pentagon canceled the contract.

The firm hopes the Pentagon will once again address their concerns and make changes to the competition to replace the Air Force's fleet of Eisenhower-era KC-135 tankers, all built by Boeing.

"It's our expectation that DOD will modify its approach and pursue a full competition that leads to the selection of the most capable tanker at the best value in a financially viable environment," a Northrop Grumman spokesman said.

A spokesman for EADS said the firm "fully supports the decision not to submit a KC-X tanker bid unless there is a responsive set of changes in the final RFP."

But the Pentagon doesn't seem eager to budge. A Defense official said the department has "played this right down the middle and will continue to do so" as it reviews responses to the draft RFP and prepares the final document.

"The department wants competition but cannot compel the two airplane makers to compete," the official said. "Both offerers have suggested changes to the RFP that would favor their offering. But the department cannot and will not change the war fighter requirements for the tanker to give advantage to either competitor."

Northrop Grumman is already notifying its suppliers and lawmakers whose states and districts have a stake in the program that it may not compete for the tanker. Northrop planned to assemble the plane in Mobile, Ala., but jobs would have been dispersed around the country.

"The question moving forward is: `Does the Department of Defense want a true competition or not?' " Sen. Jeff Sessions, R-Ala., said. "If so, it must re-examine its solicitation and remove areas of bias that tilt the playing field."

But Sen. Patty Murray, D-Wash., whose state stands to gain jobs if Boeing's offering wins, said that Northrop's decision was no surprise.

"This is a new competition, but the players are the same and Airbus is up to its same old tricks," she said.