August 22, 2008 / 1:41 PM / 12 years ago

Boeing may withdraw from U.S. tanker bid

WASHINGTON (Reuters) - Boeing Co (BA.N) confirmed on Friday it may withdraw from a $35 billion competition for new aerial refueling aircraft unless the Pentagon agrees to give it six months to submit a new bid.

A Boeing KC-767 Tanker is seen in an artist's rendering handout from Boeing. REUTERS/Handout

“If they don’t give us sufficient time to prepare a meaningful and competitive proposal ... there’s a strong likelihood that we would no-bid,” Boeing spokesman Dan Beck said, confirming comments by Boeing defense unit chief Jim Albaugh in an interview with the Wall Street Journal.

“Basically we would not submit a proposal,” said Beck.

Boeing had concluded that the Pentagon’s amended request for proposals in the competition that pits Boeing against Northrop Grumman Corp (NOC.N) and its European subcontractor EADS EAD.PA required an aircraft that can haul more fuel than the 767-200 variant that Boeing first proposed.

To prepare a serious bid, the company would need to study the final request for proposals, confer with suppliers to evaluate costs and work through its own costs and pricing, a process that would be impossible by the 45 to 60-day deadline that the Pentagon was expected to give for final proposals.

In the initial competition, Beck said, the companies had nine months before their final bids were due.

Beck said a protest of the request was another possibility, but at this point withdrawing from the competition appeared to be the “highest likelihood in all of this” unless the Pentagon agreed to give the companies six months to respond.

He said no further meetings were scheduled with Air Force or Pentagon officials ahead of the expected release of the final request for proposals next week.

“We’re not asking them to change the requirements of the airplane at all. We’re just asking for enough time to put together a meaningful and competitive proposal,” said Beck.

Sources who are closely watching the process told Reuters this week that Boeing had already invested too much time and money in the competition to overlook what it considers an unreasonable deadline to prepare a new bid based on a tanker larger than the 767 aircraft they proposed initially.

Defense consultant Jim McAleese described Boeing’s demand for six months to work on its proposal “a wish,” and said that the two sides could still compromise on a shorter period.

For instance, he said the Pentagon could postpone the release of the final request for proposals for two months, followed by a 60-day response period, giving Boeing four months to work up a new proposal.

The sources said the Air Force’s separate competition for new search and rescue helicopters was also being redone, but on a much longer schedule than the one proposed for the tanker. The Air Force expects to make a new contract award this fall, two years after it first awarded that contract to Boeing.

The helicopter competition involved a much less complex change to the request for proposals, but the timetable for the tanker competition was much tighter, they said.

Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn

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