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por Penguin » Qua Jul 09, 2008 5:08 pm
Boeing to Get New Shot at Tanker Award, Gates Says (Update2)
By Gopal Ratnam and Tony Capaccio
July 9 (Bloomberg) -- Boeing Co. will get another shot at the $35 billion military-tanker contest it lost to Northrop Grumman Corp. after the U.S. Air Force decided to reopen parts of the competition, Secretary of Defense Robert Gates said.
``I've concluded the contract cannot be awarded at present'' because of flaws found by the Government Accountability Office, Gates said at a press conference at the Pentagon today.
The GAO, the investigative arm of Congress, three weeks ago said the Air Force made ``significant errors'' in awarding the contract to Northrop over Boeing, the sole supplier of Air Force tankers for more than a half-century. Northrop and Airbus SAS parent European Aeronautic, Defence & Space Co. won the 179-plane program using an entry modeled after the Airbus A330 commercial jetliner. Boeing's bid was based on its 767 commercial plane.
``Boeing gets a do-over and it knocks a bird out of the hands of Northrop,'' said Howard Rubel, a New York-based analyst with Jefferies & Co., who doesn't own shares of either company.
The new contest will reexamine eight of Boeing's concerns that were upheld by the GAO, out of more than 100 it had raised, by seeking ``revised proposals from the industry,'' Gates said. The review will be led by Pentagon officials under the supervision of Undersecretary for Acquisition John Young and be complete by year-end, Gates said. ``This does not represent a return to the first step,'' the secretary said.
`Faith in Air Force'
``They are taking it away from the Air Force, which I think is proper, because I don't think anybody up here has any faith in the Air Force at this point after they mishandled this thing,'' said Representative Norm Dicks, a Washington state Democrat whose district includes Boeing workers.
Senator Richard Shelby, a Republican whose state of Alabama would benefit from a Northrop win, said in an e-mail that the Pentagon's plan ``is an appropriate solution to remedy'' the flaws the GAO found in the initial Feb. 29 award. Northrop has said it would build a plant in Alabama to assemble the Air Force tanker.
Northrop Grumman is ``reviewing the decision to ensure the re-competition will provide both companies a fair opportunity,'' company spokesman Randy Belote said in a statement. ``The United States Air Force has already picked the best tanker, and we are confident that it will do so again.''
Boeing spokesman Dan Beck didn't immediately have a comment.
Boeing rose 13 cents to $66.05 at 3:36 p.m. in New York Stock Exchange composite trading. Northrop fell 39 cents to $65.78. EADS, which is based in Paris and Munich, earlier today rose 3 cents to 12.09 euros in Paris trading.
Bids in October
The Pentagon will issue a request for proposals in August asking Boeing and Northrop to submit their bids by October, Young said in an interview today after the press conference. That would allow the Defense Department about 45 days to make a decision by December, he said.
The Pentagon wants to change ``fewer things rather than more things'' when it issues a request for new proposals, Young said in the news conference.
John Murtha, chairman of the House Appropriations Committee's defense panel, said in a statement that he's ``hopeful'' a decision can be made by December.
``Once the competition is complete, the subcommittee's goal will be to build 24-36 Air Force refueling tankers per year,'' said Murtha, a Democrat from Pennsylvania.
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