US Air Force to name winner of tanker deal Friday

WASHINGTON (Reuters) - The U.S. Air Force will announce Friday at 5 p.m. EST the winner of a high-stakes transatlantic battle for a contract to start building 179 new jet-refueling aircraft, the Pentagon said.

Northrop Grumman Corp and its European partner, Airbus parent EADS , are competing against Boeing Co for the deal, valued at $30 billion to $40 billion over the next 10 to 15 years.

At stake is what some analysts have called the deal of the century -- what could be the world's biggest purchase of wide-bodied aircraft for decades.

The program marks the first stage of a multi-decade plan to phase out more than 500 aging tanker aircraft used to extend the range of fighter jets and other warplanes. With follow-on orders, the cost of the new U.S. fleet could top $100 billion, aerospace experts have said.

Boeing's KC-767 has been widely predicted to win the initial contract, but the Northrop-EADS candidate, based on the Airbus A330 commercial airliner, is highly competitive.

"Either one of these planes could satisfy all of the ... operational and performance requirements," said Loren Thompson of the Lexington Institute, noted for close ties to the Pentagon and to industry.

The winner will be announced by Air Force Secretary Michael Wynne and Vice Chief of Staff Gen. Duncan McNabb, a release said. Wynne calls the tanker the Air Force's top acquisition priority.

The Pentagon paperwork required for the Air Force to carry out its plan was signed Thursday night by John Young, the Defense Department's top weapons buyer, said Cheryl Irwin, a department spokeswoman.

In 2004, the U.S. Congress killed an earlier $23.5 billion Air Force plan to lease and then buy 100 modified Boeing 767 tankers amid a procurement scandal that sent two former Boeing officials to prison on conflict-of-interest charges and prompted the resignation of two senior Air Force officials.

The Air Force says it has toiled mightily to avoid any charges of unfairness in the current competition.

"The Air Force has taken as much time as necessary to ensure the best value for taxpayers and the warfighter," Pentagon jargon for the U.S. military, said Lt. Col Tatiana Stead.

But EADS has already raised "substantial concerns" about the tanker acquisition process and changes in how the KC-30 offer was being evaluated, according to two sources briefed about the matter.

The losing side is widely expected to file a formal protest. On Thursday, Reuters reported that several weeks ago, the Air Force changed criteria used to assess rival bids. The recent change in evaluation criteria could well form the basis of a formal protest that could delay the acquisition for months or longer, according to defense analysts.

The changes caught the bidders by surprise, given that they had submitted thousands of pages of detailed answers to Air Force questions over the past year.

The Air Force chose the winner of the battle last week, but has been waiting for Young, the undersecretary of defense for acquisition, to sign off on its purchase plan.

The Air Force's top general, Chief of Staff Michael Moseley, said Thursday he hoped the losing side would refrain from challenging the contract award.

"I would ask them to think about the country and about the people that are flying those airplanes," he said, referring to Eisenhower-era KC-135 tankers due to be replaced.

(Reporting by Jim Wolf, editing by Gerald E. McCormick)