The Pentagon said on Tuesday it might award a multibillion-dollar aerial tanker contract sooner than planned after Northrop Grumman Corp and Europe's EADS pulled out of the competition, leaving Boeing Co as the sole bidder.

The current plan calls for companies to submit their bids by mid-May, with a contract award expected in September; but Pentagon spokesman Bryan Whitman said defense officials are looking at accelerating the current timeline for the program.

We may be in a position where we will be able to take a look at reducing some of those milestones, he said, referring to the 75-day deadline for bids, and plans for the U.S. Air Force to award a contract 120 days later.

Whitman said the Pentagon was confident it could negotiate a reasonable price for the tankers even if Boeing were the only bidder. EADS on Tuesday ruled out a solo bid for the work.

There is baseline cost data that is associated with these air frames, Whitman said. There are also measures the department can take to make sure we are controlling the costs. He declined to specify what measures were in mind.

Unlike the new radar-evading fighter being developed by Lockheed Martin Corp , aerial tanker planes already exist today, Whitman said.

He said officials also have ample cost data from the last competition, which Northrop and EADS initially won in February 2008 but later lost after government auditors upheld a Boeing protest.

Boeing last week said it would offer an updated 767-based tanker this time around, including a new digital flight deck from its 787 Dreamliner and a new fly-by-wire refueling boom.


Jim Albaugh, head of commercial airplanes for Boeing, told a JPMorgan investor conference on Tuesday that the next move is up to the Pentagon.

I've been working this program for nine years. It's the longest-running soap opera since 'Days of our Lives.' I'm not sure that we've seen the last episode, said Albaugh, who ran Boeing's defense business until late 2009.

We'll see what happens. It's really in the hands of the customer right now, how they want to proceed.

The European Commission on Tuesday said it regretted Northrop's decision and would be extremely concerned if it became clear that the terms of the competition were written to inhibit competition from Northrop and its European partner.

It also noted that the United States traditionally sold more defense goods to Europe than vice versa. In 2008, the United States exported $5 billion, and imported only $2.2 billion of defense material from the European Union.

This week's developments signaled a possible end to the long-standing saga, which began as a congressional drive to help Boeing just after the September 11, 2001, hijacking attacks and has spawned major reforms of how the Pentagon buys arms.

An investigation by Senator John McCain revealed too-cozy ties between lawmakers, Boeing and the Air Force, as well as ethics violations that later sent a former top Air Force official and Boeing's former finance chief to federal prison.

Congress killed the first Air Force plan, a $23.5 billion deal to lease and then buy Boeing 767s, saving taxpayers some $5 billion in unnecessary lease costs.

But now the Air Force is essentially back to square one -- a sole-source deal with Boeing, one industry source noted.


The saga has been the focus of numerous congressional hearings and dozens of reports by Pentagon agencies and outside watchdog groups, and has even prompted some participants to print Tanker Hell t-shirts. But now it looks like it may finally be ending, analysts and congressional aides said on Tuesday.

Northrop said it was disappointed that the rules favored Boeing's smaller tanker, but said it would not protest to avoid further delays in getting new planes that are used to refuel fighter jets and other planes in mid-flight.

Some Northrop supporters in Congress have urged the White House to review the issue, and others are exploring possible congressional hearings, but McCain has largely stayed on the sidelines this time around.

McCain told reporters on Tuesday that he was continuing to closely monitor the process, and could ask for hearings, if needed. But he said so far the Air Force's handling of this competition appears to be legitimate, adding: We haven't found any flaws so far.

We continue to ask questions, we continue to monitor, we continue to be very closely involved in the whole process, McCain said, but we can't force anybody to bid; it's just not our role.

(Reporting by Susan Cornwell, Jim Wolf, Bill Rigby and Andrea Shalal-Esa; Editing by Tim Dobbyn and Gerald E. McCormick)