UPDATE 2-Alabama lawmakers say Pentagon tanker rules unfair
* Alabama lawmakers demand meeting with Sec'y Gates
* Senator says tanker bidding "tilted toward Boeing"
* Alabama would benefit if Northrop wins contract (Adds details from letter, quotes from news conference, byline)
WASHINGTON, Oct 27 (Reuters) - Alabama lawmakers blasted the Pentagon's bidding rules for a multibillion dollar contract to replace the Air Force's aerial refueling fleet, saying the procedure unfairly favors Boeing (BA.N).
"I believe it's already tilted toward Boeing. I believe it's a sham," Senator Richard Shelby, a Republican, told reporters at a news conference on Tuesday.
Alabama stands to gain jobs if rival Northrop Grumman (NOC.N) and its partner, Airbus parent EADS (EAD.PA), win the contract because much of the final assembly work would be done in that state.
Shelby and other lawmakers sent Defense Secretary Robert Gates a letter saying the new competition rules were fundamentally flawed and did not meet his objective of a "best value competition that is fair, open and transparent."
The lawmakers also criticized an increase in the number of contract requirements to 373 from 37.
Such a detailed list "makes a mockery of the capability that our warfighters truly value by equating water flow in the toilet with fuel flow in the refueling boom," they said.
They demanded a meeting with Gates to discuss their concerns before the Pentagon releases a final version of the bidding rules at the end of November.
Boeing and Northrop have been poring over a draft request for proposals issued by the Air Force on Sept. 25.
Northrop and EADS have already raised questions about pricing data the Air Force gave to Boeing, saying it gave Boeing an unfair advantage in the new competition.
The Pentagon denies that, but told Northrop in a recent letter that it asked Boeing to release its comparable data to Northrop, but Boeing declined.
Northrop has scheduled a news conference Wednesday to share its views about the rules for the tanker competition.
Boeing Chief Executive James McNerney last week took aim at the Air Force for exempting a trade dispute between Brussels and Washington over alleged aircraft subsidies, a factor he said could harm Boeing's chances in the bidding.
The competition is for an initial 179 tankers, the first of three batches to be bought over coming decades at a projected cost of at least $100 billion. The Pentagon hopes to award a contract by June, with the first planes delivered in 2015.
The competition is the Pentagon's third attempt in eight years to start replacing its KC-135 tankers, which average more than 50 years old.
Senator Jeff Sessions of Alabama, also a Republican, said the new rules for the tanker competition put the focus solely on the price of the new tankers, not the increased capability that the Air Force said last time it needed.
He said Northrop had said it would not compete if the process was not fair, which meant the Pentagon faced a non-competitive process unless it made major changes.
Northrop and EADS won the last competition in February 2008, a contract valued at up to $35 billion, but the Pentagon canceled the deal after government auditors upheld a Boeing protest.
Alabama lawmakers said the decision by the Government Accountability Office raised concerns about only a handful of issues in its decision, and the Pentagon should have addressed those and kept the overall structure the same.
Instead, they completely revamped the procedures -- much to the surprise of the lawmakers and the companies. (Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn)
