BUSINESS

Boeing Threatens To Quit $40B Marathon Military Bid Process For Tanker

09/22/2008 05:12 am ET | Updated May 25, 2011

Boeing Co. said it is inclined to bail out of its effort to win a $40 billion contract to build aerial refueling tankers for the U.S. Air Force unless the Pentagon agrees to give it a total of six months to submit a new bid.

The threat of walking away -- and leaving the government with no competition at all for a high-profile defense contract -- is perhaps the biggest weapon Boeing has at its disposal in this latest chapter of a long-running tanker saga. Jim Albaugh, head of Boeing's defense unit, said in an interview Thursday that Boeing has taken a hard look at the latest proposal and has concluded that they call for a plane that can haul more fuel than the plane Boeing originally bid.

"I think the option we would have if we were not given the six months, there is a really high likelihood that we would no-bid the program," Mr. Albaugh said.

According to people familiar with the situation, the government is leaning toward adding 15 days for Boeing and rival Northrop Grumman Corp. to respond to the latest request for proposals, giving the competitors a total of 60 days to submit a new bid. Because Boeing would have to figure out how to convert a larger airplane into a flying gas station, the Chicago aerospace company said it needs an additional four months to prepare a competitive proposal.

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