Northrop Grumman Awaits Final Tanker Propsal

Alabama Mobile Company doesn't foresee any significant differences between the rough draft and the final proposal which is expected to be issued sometime this week.

by CBS MarketWatch

Published: Mon, August 18, 2008 - 4:29 pm CST Last Updated: Mon, August 18, 2008 - 4:34 pm CST

NEW YORK (MarketWatch) -- Boeing Co. and Northrop Grumman Corp. said Monday they had met with Defense Department and Air Force officials over the weekend to discuss the military's latest rough-draft proposal for a next-generation aerial-refueling tanker aircraft.

Neither company would provide details of the separate discussions, held Saturday, though both said the talks went well. So far, no further meetings have been scheduled.

Northrop said it doesn't foresee any significant differences between the rough draft and the final proposal, which is expected to be issued sometime this week.

The $40 billion contract was awarded to Northrop in February for its Airbus A330 bid, but was later protested by Boeing, which claimed the Air Force didn't properly score its 767 offer. The Government Accountability Office agreed, and military subsequently reopened the bidding process.

The Air Force has said it wanted to release the final proposal by mid-August and award the contract before the end of the year.

Boeing's original offer may now be upped to a larger model, probably a 767-ER or a 777, industry analysts said. However, the 777 would come with a larger price tag, due to its popularity among commercial aircraft operators, they said.

On Monday, Boeing would only say that the company was still in the running and that all options were on the table.

The stakes are high. The Air Force has said it isn't interested in splitting the contract between the rivals because it will be cheaper in the long run to have the tanker built by just one manufacturer.

Though the current contract is for just 170 planes, the military will eventually want to replace more than 500 Stratotankers, used for hauling cargo and refueling other aircraft in flight.

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