Northrop dumps $40 billion USAF tanker contract

Los Angeles: Defence contractor Northrop Grumman said Monday that it was pulling out of the $40 billion competition to build aerial refuelling tankers for the United States Air Force. The move not just left rival Boeing as the likely winner but also found Pentagon officials trying to put on a brave face over the fact that they were now left with a single bidder and the spotlight was back on the terms of reference they had drawn up for the contract, which Northrop said was heavily weighted in favour of Boeing.

Northrop Grumman-EADS KC-45. Image Northrop

Though Northrop made it clear it would not contest the terms of the fresh contract, Pentagon officials were already taking pains to point out that there was nothing wrong with these.

Deputy secretary of defense William Lynn said in a statement that the Pentagon was "disappointed" that Northrop had pulled out of the competition, noting that it "competed well on both price" and other factors. "We strongly believe that the current competition is structured fairly and that both companies could compete effectively," Lynn said.

In a statement, Los Angeles-based Northrop said comprehensive analysis conducted by it determined that the bidding favoured Boeing. In a similar statement, an official of EADS North America said, "The source selection methodology clearly favours a smaller aircraft."

Pentagon officials said they had a contingency plan to work with a single bidder. Michael Donley, secretary of the Air Force, said there were "military and legal channels that would protect the taxpayer interest."

Another fallout from Northrop's decision would be the increased focus that would now be brought on the nature of procurement reforms as proposed by the Obama administration.