Page last updated at 20:59 GMT, Wednesday, 9 July 2008 21:59 UK

US reopens $35bn air tanker deal

Northrop Grumman and EADS' design was originally awarded the contract

The US government has reopened a $35bn (17bn) contract to supply the US Air Force with refuelling tankers, which had been given to European firm EADS.

It said mistakes had been made when the original bids were evaluated.

US plane maker Boeing will get the opportunity to rebid after losing out to the Airbus parent company.

The Air Force's decision to award the valuable contract to EADS and its partner Northrop Grumman has been controversial in the United States.

Northrop's aerial refuelling tankers would be assembled in the US using components largely made in Europe.


When the decision went against Boeing, the company and a number of US senators campaigned to get the tender process reopened.

We are reviewing the decision to ensure the re-competition will provide both companies a fair opportunity to present the strengths of their proposals
Randy Belote, Northrop Grumman

The US Government Accountability Office (GAO) reassessed the Air Force's decision and last month said "significant errors" had been made, including the evaluation of which of the two proposals was cheaper.

The initial evaluation had suggested that the Northrop Grumman bid would probably work out cheaper over the life of the deal. But when reexamined, Boeing looked to be the cheapest, the GAO said.

Boeing welcomed the decision to reopen the competition, but expressed concern that the selection criteria might be different.

"It's encouraging that the Defense Department intends to take steps to ensure a fair and open competition that, among other things, fully accounts for life-cycle costs, such as fuel, to provide the most capable tanker at the best value for the American taxpayer," Boeing said in a statement.

'Best tanker'

The deal - one of the biggest in the Air Force's history - is the first of three contracts to supply up to 600 new refuelling tankers. The 30-year deal could be worth up to $100bn.

Northrop Grumman, who was awarded the contract along with EADS in February, said the "best tanker" had already been picked.

"We are reviewing the decision to ensure the re-competition will provide both companies a fair opportunity to present the strengths of their proposals," the company said in a statement.

The Pentagon is expected to decide by the end of the year who will be awarded the contract. It has taken over responsibility for the process from the Air Force.

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