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Will Boeing bail on bid for $35 billion tanker deal?

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Reuters reports that Boeing Inc. (NYSE: BA) is signaling that it may not submit a bid for the $35 billion Air Force contract for Tankers -- airborne refueling vehicles. Is Boeing serious about not submitting a bid or is it using its leverage to get the Air Force to revise the bidding process to create a more level playing field?

The tanker contract has a long history. The Air Force awarded it this February to EADS, parent of Airbus, and Northrop Grumman (NYSE: NOC). Boeing protested the award citing errors in the way the process was run. The General Accounting Office (GAO) sided with Boeing. And the Air Force announced that it would rebid the contract. But many thought that the rebidding process favored the French company.

Now Boeing is considering not submitting a bid. If Boeing ends up not bidding, it will be an embarrassment for the Air Force, which was bending over backwards to change the specifications to keep Airbus and Northrop in the process so there would be two bidders. Or it might have been to satisfy Thomas Loeffler, an EADS lobbyist who headed up John McCain's finance committee. Regardless of why it was done, if Boeing doesn't bid, the Air Force will be in a tight spot.

So maybe the Air Force will change the process and make the bids due after the November election rather than the current October deadline. That would change the politics of the bidding process dramatically. But it might result in a better solution for our Air Force as well.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He is working on a book about Boeing and has no financial interest in the securities mentioned.

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Last updated: November 14, 2009: 12:48 PM

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