(Reuters) - The U.S. Defense Department canceled plans to rerun the competition for $35 billion worth of aerial refueling tanker aircraft on Wednesday, citing impossible time pressures, handing off the high-profile decision to the next administration and extending the seven-year procurement saga.
The delay is a boost for Boeing Co (BA.N). which had asked for more time to formulate its proposal, but is a blow to the team of Northrop Grumman Corp (NOC.N) and Europe’s EADS EAD.PA, which favored a prompt recompetition.
The Northrop team won the contract in February, but the Pentagon opted to rerun the competition after government auditors found errors in the way the Air Force handled the contest. An earlier plan for Boeing to lease tankers to the Air Force was scrapped four years earlier after a procurement scandal.
The following is a chronology of events in the U.S. government’s effort to replace the Air Force’s fleet of KC-135 refueling tankers, which is no nearer to completion now 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 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.
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 a 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 the 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.
January 2007 - Air Force issues a 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 - The Northrop/EADS team says it will compete for the tanker contract, after earlier warning that it would not bid if it thought the selection criteria unfairly favored Boeing.
April 2007 - Boeing and Northrop submit bids in the tanker competition. Air Force says more than 150 experts will examine the bids.
October 2007 - The Air Force’s No. 2 acquisition official, Charles Riechers, is found dead at his home in apparent suicide.
January 2008 - EADS and Northrop Grumman promise to build tankers at an Alabama plant should they win. Boeing would build its plane at plants in Kansas and Washington state if it won. Boeing is widely expected to win the competition.
February 29 - The Air Force announces the award of the $35 billion tanker program to Northrop/EADS team, surprising analysts and the companies themselves.
March 11 - Boeing files a protest of the award with the Government Accountability Office (GAO) and launches a massive publicity campaign to highlight errors in the Air Force decision. Northrop, unable to start work on the project, bombards the media with arguments in favor of the award.
June 18 - GAO upholds Boeing’s protest and recommends that the Air Force reopen competition. It says the Air Force “made a number of significant errors that could have affected the outcome of what was a close competition”.
July 9 - The Pentagon says it plans an “expedited recompetition” of the tanker contract, run by itself, not the Air Force.
Sept 10 - The Pentagon cancels the planned competition, saying it wouldn’t be able to complete it before President George W. Bush leaves office on January 20.
(Information from U.S. Air Force, the Pentagon inspector general’s office, companies)
Reporting by Andrea Shalal-Esa in Washington and Bill Rigby in New York, editing by Gerald E. McCormick