Boeing demands tanker answers as lawmakers vow fight

WASHINGTON (Reuters) - Boeing Co (BA.N) demanded on Tuesday immediate answers on why it lost a $35 billion contract for refueling tankers to Northrop Grumman Corp (NOC.N) and its European partner EADS (EAD.PA), as Boeing backers in Congress threatened to hold up funding for the deal.

Pentagon acquisition chief John Young defended the contract award, saying it followed procedures carefully and there was no obvious reason for the loser to protest the decision.

But he told reporters he had urged the Air Force to brief Boeing "as soon as possible," possibly on Thursday, and there was no reason for an extended delay.

Young said federal law did not allow for consideration of how many jobs were created by a weapons program and required the military to get the "best value" deal it could.

"I don't think anybody wants to run the department as a jobs program," Young said, noting that most lawmakers generally wanted him to reduce the cost of weapons programs.

He also warned that any move by Congress to ban foreign-made weapons would be a "terrible reaction" and could trigger similar retaliation abroad.

A House of Representatives appropriations subcommittee has ordered senior U.S. Air Force officials to explain at a Wednesday hearing why they gave the contract -- and several thousand related jobs -- to Northrop and Airbus parent EADS.

In the Senate, Republican Sam Brownback of Kansas vowed to fight funding for the deal to replace the Air Force's aging KC-135 tankers, which were built by Boeing in the 1960s.

Brownback is a member of the Senate Appropriations Committee, which controls funding for the Pentagon and other federal agencies.

"I think it's the wrong thing to do. I'm going to fight against this in appropriations," Brownback said on the Senate floor, where his Kansas Republican colleague, Pat Roberts, as well as Washington state's two Democratic senators, also railed against the Northrop deal.

If Boeing had won, it planned to build its 767 tanker in Washington state and modify it for military use in Kansas.

Chicago-based Boeing called on the Air Force to explain immediately why it lost the lucrative contract, claiming its bid was more cost-effective and less risky than Northrop's.

BOEING WANTS EARLIER BRIEFING

Boeing said the Air Force's plan to wait until around March 12 to brief Boeing was "unusual" and "inconsistent with well-established procurement practices."

"We do not understand how Boeing could be determined the higher risk offering. It's important for us to understand how the Air Force reached their conclusion," said Mark McGraw, vice president of Boeing's 767 tanker programs, noting details of the Air Force's evaluation were already leaking out.

Losing bidders have 10 days after receiving a formal debriefing to file a protest against the contract award. Boeing has said it will review its options after the briefing.

Defense analyst Loren Thompson said on Monday that Northrop beat Boeing on every major evaluation criteria, including mission capability, price and performance risk.

Lawmakers who backed the Boeing proposal say they are outraged that the contract went to a team that includes EADS, instead of Boeing. Some wrote to Defense Secretary Robert Gates on Monday, demanding the Air Force brief Boeing by week's end.

Senate Majority Leader Harry Reid backed hearings to examine how the Air Force awarded the lucrative contract, but said he would remain neutral on the mounting controversy.

"I think at the very least there should be congressional hearings of committees of jurisdiction to look into this to see if everything was done appropriately," the Nevada Democrat told reporters. "I'm going to continue being neutral."

The Air Force declined to comment on the requests for an earlier briefing, but defended its acquisition process.

HEARING WEDNESDAY

Top Air Force arms buyer Sue Payton and Lt. Gen. Donald Hoffman, the top military official in charge of acquisitions, are due to testify on Wednesday before the House Appropriations defense subcommittee.

Lawmakers from Alabama, where Northrop will build the tanker, say the deal will create jobs across the United States. They argue the Air Force rated the Northrop tanker superior to the Boeing plane in every technical category.

"I will be closely watching any efforts in the Senate to block or delay the Air Force's number one acquisition priority," Sen. Richard Shelby, an Alabama Republican.

"We are not doing the warfighter any service by holding up the Air Force's efforts to replace the aging tanker fleet with political fights," Shelby added.

Joined by labor unions, some lawmakers are raising concerns about the loss of U.S. jobs and future funding requirements to house and maintain the Northrop A330-based tankers, which are bigger and use more fuel than the current fleet of KC-135s.

Boeing has large manufacturing facilities in California, but the state is also home to Los Angeles-based Northrop.

Northrop says it will assemble its A330 aircraft and modify it for military operations in Mobile, Alabama, creating at least 2,500 new jobs and supporting 25,000 around the country.

EADS has also promised to assemble all its A330 commercial freighters at the new facility it plans to build in Mobile.

Northrop shares closed down 2.8 percent to $80.25 on the New York Stock Exchange on Tuesday, while Boeing shares fell 1.3 percent to end at $79.62.

(Additional reporting by Bill Rigby; Editing by Tim Dobbyn)