U.S. lawmakers urge broader Pentagon tanker review

By Jim Wolf

WASHINGTON (Reuters) - A measure that appears to favour Boeing (BA.N) in a transatlantic battle to build new aerial tankers for the U.S. Air Force was put forward on Wednesday by a U.S. House of Representatives subcommittee that funds the Pentagon.

If the provision requiring consideration of the U.S. "industrial base" were enacted into law, it could be a blow to Northrop Grumman (NOC.N) and its European partner EADS (EAD.PA).

They are battling Chicago-based Boeing to hang on to the $35 billion (17.6 billion pounds) program to supply 179 mid-air refuelling tankers that they won in February, before Boeing successfully challenged the award on procedural grounds.

The concerns at issue in the House panel's bill involve U.S. industry's ability to meet Pentagon weapons needs with minimal reliance on foreign suppliers.

The recommendation by the House Appropriations subcommittee on defence was part of a $487.7 billion fiscal 2009 military spending bill. The legislation is subject to review by the full Appropriations Committee and would need to be reconciled with the Senate's version.

The Government Accountability Office, a congressional umpire, found "significant errors" in the Air Force's tanker selection process, defence Secretary Robert Gates announced July 9 he would seek new bids in an expedited recompetition.

Gates said the Pentagon's chief weapons buyer, rather than the Air Force, would oversee the selection this time. He said the goal was to pick a winner by the end of December, a target that now looks likely to slip into the new year and to a new administration.

Speaking at the July 9 briefing, John Young, the top weapons buyer, said federal procurement law barred consideration of the potential impact on the U.S. defence-industrial base.