Gates hopes Northrop stays in race

REUTERS - Defense Secretary Robert Gates said on Wednesday he hoped Northrop Grumman Corp would remain in the Pentagon's high-stakes competition for a $50 billion aerial tanker contract after Northrop said it would bow out, complaining that contest terms favor rival Boeing Co.

"We believe that both of the principal competitors are highly qualified and we would like to see competition continue in this process," Gates told the U.S. Senate Armed Services Committee.

Gates, who appeared at a committee hearing to discuss a plan to ramp up U.S. troops in Afghanistan, made the comment when asked by Republican Senator Jeff Sessions if the Pentagon was willing to modify terms of the contest.

Sessions is among the Alabama lawmakers who have criticized the Pentagon's proposed bidding rules for the Air Force aerial refueling fleet. The state stands to gain jobs if Northrop and its European partner, EADS, win the contract because much of the final assembly work would be done in Alabama.

"The comment period is coming to a close," Gates said, referring to a public comment period on the Pentagon's proposed bidding terms and requirements for the aerial tanker project. "We will look at the comments that have been made and make a judgment at that point."

The Pentagon is expected to finalize terms for the competition as early as January.

On Tuesday, Northrop complained that the proposed contest terms were written in a way that gave an advantage to Boeing and said that it would not submit a bid unless the final terms were significantly changed. Specifically, Northrop said it was concerned the proposed bidding terms showed a preference for an aircraft smaller than the A330-based tanker it offered previously with Airbus parent EADS.

Northrop and EADS won a projected $35 billion contract to build 179 tankers for the Air Force in February 2008, but the Pentagon canceled the deal a year ago after government auditors upheld a Boeing protest.