Boeing admits considering no-bid on tanker contract

An emphasis on a larger plane that carries more fuel would send Boeing back to the drawing board. Current bid deadlines don't provide enough time, Boeing says.

The Boeing Co. (Chicago, Ill.) has officially admitted that it is considering withdrawing its bid to win a $40 billion contract to build aerial refueling tankers for the U.S. Air Force unless the Pentagon agrees to allow more time for Boeing to submit a new bid.

The contract was awarded earlier in 2008 to a consortium led by Northrop Grumman and EADS. However, following a Boeing protest, the U.S. Government Accountability Office (GAO) found several flaws in the award and ordered the U.S. Department of Defense (DoD) to clarify some parameters of the contract and restart the bidding process.

Jim Albaugh, head of Boeing's defense unit, said that the requirements of the tanker have changed enough -- with an emphasis on a larger plane and more fuel capacity -- that significant design changes and time will be required for the 767 variant Boeing has developed. Were Boeing to walk away, it would leave the DoD with no competition for the high-profile defense contract, and this threat alone may be enough to force the government to extend the proposal deadline.

"I think the option we would have if we were not given the six months, there is a really high likelihood that we would no-bid the program," Mr. Albaugh said.

The Wall Street Journal reported on Aug. 22 that the government is leaning toward adding 15 days for Boeing and rival Northrop Grumman Corp. to respond to the latest request for proposals, giving the competitors a total of 60 days to submit a new bid.

"This is an airplane that's going to be in the inventory 40 years," said Mr. Albaugh. "What we're asking for is an additional four months to have a meaningful competition."

The Pentagon is expected to release its final bid specifications sometime this week, which would start the clock running.