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Tanker Wars: Advantage Northrop Grumman?

The Pentagon has released its "draft" of requirements to Boeing and Northrop Grumman in what it wants in a new air refueling tanker, and, at first blush, advantage Northrop.

Defense officials now say they will give extra credit if a tanker can offload more fuel than its "threshold" requirement, and the Northrop/Airbus tanker can do just that. Procurement director Shay Assad says this was what the Air Force actually planned do all along--give extra credit--but the GAO pointed out the Air Force never made that clear. Now it's perfectly clear.

This is what Boeing was afraid of, that rather than re-opening the bidding with a real shot at winning the tanker, the Defense Department would just be more clear about why it wanted the Northrop/Airbus tanker.

But there's also good news for Boeing. The Pentagon says that it's listened to "warfighters" who say that the lifecycle of these planes is 40 years, not 25. So the new draft proposal will measure the cost of the planes over 40 years, which could favor Boeing's less expensive, smaller tanker.

Assad says the Pentagon has provided both companies with "very clear and unambiguous insight" in order to avoid another protest. We'll have to see about that.

Here's the proposed timeline going forward. Assad says the Pentagon will be speaking with both Boeing and Northrop Grumman over the next few days, and he hopes to have their responses to the draft "next week sometime." Then a final request will be issued by mid-August, and both companies will have 45 days to put in their bids. That will be followed by a couple of months of back and forth between the Pentagon and the two firms, with their final, best offers expected the first part of December. Assad believes they can still come out with a final decision "around New Year's Eve...hopefully."

Will that be the end of it? Will the loser protest yet again? Stay tuned...

Here's Northrop's statement. Boeing should be issuing one as well later:

"Northrop Grumman applauds the Defense Department for recognizing the urgency of replacing the Eisenhower-era refueling tankers via a thorough yet speedy revised acquisition process. We are reviewing the draft RFP with an eye toward ensuring that it addresses the issues raised by the GAO in a way that facilitates a fair and non-political evaluation of the competing bids. It is vital that this effort leads to the selection of the aerial refueling tanker that provides the most capability to our men and women in uniform at the best value to the American taxpayer.

"We intend to provide the Department of Defense our comments on the draft in short order."

Video: The Pentagon says extra credit will be given for more fuel offload capability.

UPDATE: Boeing's statement in response to today's RFP: "Boeing has received the amended Request for Proposals (RFP) for the KC-X tanker competition. Given the very narrow window for commenting on this draft, our team is focused on identifying and understanding any changes that may have been made to the original requirements and evaluation criteria. We also need to see how the document addresses the strong concerns the Government Accountability Office identified in sustaining our protest.

Despite the fact that the first competition appropriately addressed the aircraft's intended mission, until we receive the final RFP it is too early to offer any details about Boeing's path forward.

Boeing remains committed to providing the most capable tanker to the warfighter and the best value for the American taxpayer."

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  • Based in Los Angeles, Jane Wells is a CNBC business news reporter and also writes the Funny Business blog for CNBC.com.

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