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TIMELINE: U.S. Air Force tanker saga rumbles on

(Reuters) - U.S. government auditors ruled on Wednesday that the Air Force made “significant errors” in running the competition for $35 billion worth of new aerial refueling tanker aircraft, the latest twist in a nearly eight-year long procurement saga with strong political overtones.

The Government Accountability Office recommended that the Air Force reopen the competition, a boost for losing bidder Boeing Co, which had protested the award and lobbied for it to be overturned.

It is a blow for Northrop Grumman Corp and its European partner EADS, which were awarded the contract in February.

The following is a chronology of events in the Air Force’s effort to replace its aging fleet of KC-135 refueling tankers, which is no nearer to completion than it was in 2001:

- September 25, 2001 - Darleen Druyun, then the Air Force’s No. 2 acquisition official, meets with Boeing officials to lay out a strategy to lease 100 Boeing 767s.

- January 2002 - Congress OKs lease plan.

- February 2002 - Air Force requests information from Boeing and Airbus parent EADS about tanker capabilities.

- May 2002 - Sen. John McCain, now the presumptive Republican presidential nominee, slams the proposed tanker lease deal as a taxpayer “rip-off.”

- October 17, 2002 - Druyun meets then Boeing Chief Financial Officer Michael Sears to discuss a job offer. Sears tells her: “This meeting really didn’t take place.”

- November 2002 - Druyun recuses herself from further negotiations with Boeing, retires mid-month, then accepts a $250,000-a-year job with Boeing.

- January 3, 2003 - Boeing announces Druyun hire. Watchdog group Project on Government Oversight describes it as “one of the most egregious examples in recent memory of the revolving door between the federal government and defense contractors.”

- May 23, 2003 - Then-Pentagon chief arms buyer Edward Aldridge approves $23.5 billion Air Force plan to lease, then buy, Boeing 767 tankers, four days before he retires.

- November 24, 2003 - Boeing fires Druyun and Sears for unethical conduct in Druyun’s hiring. Boeing Chief Executive Phil Condit resigns a week later.

- March 29, 2004 - Pentagon inspector general says the Air Force used an inappropriate procurement strategy in the tanker deal and recommends a halt until the Pentagon resolves several issues.

- April 21, 2004 - Druyun pleads guilty to a conflict of interest violation for discussing job with Boeing while still overseeing billions of dollars of its business with the Air Force. She is later sentenced to nine months in prison.

- October 28, 2004 - Congress passes defense spending bill for fiscal 2005 that terminates Air Force’s authority to lease tanker aircraft.

- November 16, 2004 - Sears pleads guilty to violating federal conflict of interest laws. He is later sentenced to four months in federal prison.

- September 2005 - Northrop Grumman says it will team with EADS to compete for the Air Force tanker contract.

- April 2006 - Pentagon chief weapons buyer at the time, Kenneth Krieg, says Air Force can resume procurement of aerial refueling tankers.

- December 2006 - Air Force agrees to exempt a World Trade Organization dispute between the European Union and the United States from the tanker competition, a dispute that could have knocked Northrop/EADS out of the contest. Krieg underscores the need for a fair and open competition, saying the program has “a lot of ghosts.”

- January 2007 - Air Force issues final request for tanker proposals after various modifications. The five key criteria are mission capability, proposal risk, past performance, price, and an integrated fleet assessment.

- February 2007 - Northrop/EADS team says it will compete for the tanker contract, after earlier warnings that it would not bid if it thought the selection criteria unfairly favored Boeing.

- April 2007 - Boeing and Northrop submit bids in tanker competition. Air Force says more than 150 experts will examine the bids.

- August 2007 - Pentagon rules out splitting the tanker contract between both bidders because it would be too costly.

- October 2007 - Air Force’s No. 2 acquisition official, Charles Riechers, found dead at his home in apparent suicide. Riechers was working on the tanker program and was under scrutiny for a temporary job arrangement by the service while he awaited Senate confirmation.

- January 2008 - EADS and Northrop Grumman promise to build tankers at an Alabama plant if they win. Boeing would build its plane at plants in Kansas and Washington state if it wins. Boeing is widely expected to win the competition.

- February 29 - Air Force announces award of $35 billion tanker program to Northrop/EADS team, surprising analysts and the companies themselves.

- March 11 - Boeing files protest of award with Government Accountability Office (GAO), launches massive publicity campaign to highlight errors in Air Force decision. Northrop, unable to start work on the project, also bombards media with arguments in favor of the award.

- June 18 - GAO upholds Boeing’s protest, recommends Air Force reopen competition. Says Air Force “made a number of significant errors that could have affected the outcome of what was a close competition”.

(Information from U.S. Air Force, the Pentagon inspector general’s office and industry)

Reporting by Andrea Shalal-Esa in Washington and Bill Rigby in New York; Editing by Toni Reinhold