Northrop May Not Bid on Tanker Contract

Northrop Grumman says it may not bid on a U.S. Air Force refueling tanker contract, the latest development in the ongoing contract saga.

In a letter to the Pentagon dated December 1, Northrop Chief Operating Officer Wes Bush said the company would not make a bid given the current structure of the selection process.

Northrop is concerned that the Air Force's competition terms favor a smaller, cheaper aircraft than the Airbus A330 it had offered previously, such as Boeing's 767. Further, the request requires a fixed price, which Northrop notes may not be feasible for parts of a project to be completed many years down the line.

The Air Force request for 179 refueling tankers could total a $40 billion contract.

Backing out of the process means that Boeing (BA) would be the only bidder and the winner of the contract. Northrop, along with partner Airbus, won a contract for the tankers last year, but Boeing protested over how the selection was handled, and the process began anew.

The preceeding is a transcript of the MarketNewsVideo.com video published at: http://www.marketnewsvideo.com/?id=200912Northrop120209&mv=1.

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