Northrop Backs Out of Tanker Bid
LOS ANGELES (
) --
Northrop Grumman
(NOC) - Get Report
dropped out of the race to win a $40 billion contract to build the Air Force's next generation of aerial-refueling planes, leaving
Boeing
(BA) - Get Report
as the sole competitor.
"After a comprehensive analysis of the final (request for proposal), Northrop Grumman has determined that it will not submit a bid to the Department of Defense for the KC-X program," said Northrop CEO and President Wes Bush, in a statement.
Northrop shares were falling 3 cents to $64.13 in recent trading. Northrop shares rose slightly after hours Monday.
Northrop said it felt the structure of the source selection methodology defined in the proposal clearly favored Boeing's smaller refueling tanker and didn't provide "adequate value recognition" of the added capability of a larger tanker.
While Northrop believes it had grounds to successfully protest the contract proposal, it decided not to do so as it would cause another delay.
"America's service men and women have been forced to wait too long for new tankers. ... Taking actions that would further delay the introduction of this urgent capability would also not be acting responsibly," Bush said.
U.S. Deputy Defense Secretary William Lynn told the
Wall Street Journal
the department was "disappointed" by Northrop's decision not to submit a bid for the program.
"We strongly believe that the current competition is structured fairly and that both companies could compete effectively," Lynn said.
Northrop's partner in the proposal was European defense group
EADS
, rhe parent company of Airbus. Sources told
Reuters
EADS could still mount a bid on its own.
Northrop and EADS won the last competition in February 2008 with a bigger A330-based plane. But the deal was canceled after government auditors upheld a Boeing protest,
Reuters
notes.
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