Air Force "moving toward completion" on tanker

WASHINGTON Wed Jan 12, 2011 11:56pm EST

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WASHINGTON (Reuters) - The Air Force is "moving toward completion" on deciding whether Boeing Co (BA.N) or Europe's EADS EAD.PA will build 179 new refueling planes, Air Force Secretary Michael Donley said on Wednesday.

Donley told military and industry officials that a hearing planned by the Senate Armed Services Committee on the Air Force's handling of the tanker competition would not affect the timetable for an Air Force contract award.

He declined to give a firm date for a contract award, saying only that the new refueling tankers remain a "very, very high priority" for the Air Force and that "source selection is moving toward completion."

The contract has been projected to be worth about $50 billion.

Donley, speaking at a breakfast sponsored by the Air Force Association, said the Air Force was working with the Senate committee to determine what data the Air Force could provide, given that it has not yet awarded a contract.

The Senate Armed Services Committee said in December that it would hold a hearing in January into the Air Force's inadvertent release of data to the bidders, and whether it compromised "the propriety of the procurement process."

In November, the Air Force dismissed two officials after the rival bidders received confidential data, but it later said the data release would not provide grounds for a protest because the same data was eventually provided to both companies.

A committee spokesman had no immediate comment on the date of the hearing or whether it might be closed to the public.

Boeing's commercial airplane chief Jim Albaugh, who headed the company's last unsuccessful bid for the Air Force contract, said he expected an Air Force decision "later rather than sooner." Under Albaugh's leadership, Boeing successfully protested the Air Force's 2008 contract award to a team made up of EADS and Northrop Grumman (NOC.N) Corp.

"I've been waiting for that decision for 10 years. I'm not holding my breath," Albaugh told reporters at a separate briefing in Washington on Wednesday.

Given the long history, Albaugh said the tanker contract would be the most heavily scrutinized military procurement in a very long time.

This is the Air Force's third attempt since late 2001 to begin replacing its aging fleet of KC-135 refueling tankers, which are now about 50 years old on average.

The first attempt, a lease-buy agreement with Boeing, was scuttled by Congress amid a procurement and ethics scandal that sent a former Air Force acquisition official and Boeing's former chief financial officer to federal prison.

Defense Secretary Robert Gates canceled the second deal after government auditors upheld Boeing's protest of the projected $35 billion contract awarded to Northrop.

(Reporting by Andrea Shalal-Esa; Editing by Robert MacMillan)

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