U.S. Will Negotiate Hard with Boeing: Gates

The United States will negotiate carefully with Boeing to build the next generation of tanker aircraft, U.S. Defense Secretary Robert Gates said on Thursday.

Gates said a rival’s withdrawal from the multibillion dollar competition should not create further delays.

Northrop Grumman [NOC  64.55  —  UNCH  (0)] withdrew from the competition for a U.S. aerial refuelling aircraft contract worth up to $50 billion earlier this week, charging the United States Air Force’s rules of favouring rival Boeing [BA  70.01  —  UNCH  (0)].

“We will certainly be sharpening our pencil when it comes to negotiating with Boeing,” Gates said on Thursday at a military base at an undisclosed location in southwest Asia.

“I don’t see any reason for this outcome to bring further delays,” said Gates, in his first public comments on the issue.

Northrop’s decision puts the tanker contract within Boeing’s reach nearly nine years after the Air Force first mapped out a sole-source deal with Boeing that was later killed by Congress after a huge procurement scandal.

Northrop’s European partner, Airbus parent EADS [EADSF  20.55  —  UNCH  (0)] could still mount a bid on its own, sources told Reuters last week, although a bid without a U.S. partner would likely become a bigger political target.

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