UPDATE: We have new details below on the likely shape of the rebid that Defense Secretary Robert Gates should be announcing. The Pentagon will announce its way forward on the KC-X tanker contract at 1 p.m during a press conference with Defense Secretary Robert Gates.
John Young, undersecretary of Defense for acquisition, technology and logistics, wanted to go with a fly off and our best source on this says that's what will happen. A modified request for proposal will be issued. Boeing and Northrop Grumman will have to build four test models over the next 18 months. We hear Defense Secretary Robert Gates has been actively involved in the decision, issuing several emails dealing directly with what should be done.
Whoever best meets the requirements and demonstrated capability would win the contract. Although Gates has made it pretty clear that he is uncomfortable relying on Young's office about the tanker deal -- after all, Young signed off on and then defended the Air Force choice -- my source says that Young's fly-off approach will be the way ahead.
With today's announcement Gates may be trying to get ahead of any congressional steamroller on this one, since the House Armed Services air and land forces subcommittee has its tanker hearing scheduled for Thursday afternoon.
Aside from the usual Boeing lawmakers who can be expected to speak after the rebid decision is announced, we hear that Sen. Carl Levin (D-Mich.), chairman of the Senate Armed Services Committee, and several of the Alabama contingent -- to include Sen. Richard Shelby (R-Ala.) -- are ready to weigh in as well. Several lawmakers -- Rep. Norm Dicks (D-Wash.), senior member of the House Appropriations defense subcommittee, and Sen. Maria Cantwell (D-Wash.) -- close to Boeing have clearly signaled they expect the Pentagon to rebid the contract. Also, in a July 7 letter to Levin and Sen. John McCain (R-Ariz.), Cantwell called for a full Armed Services Committee hearing to consider "several classified issues of concern that must be fully investigated" relating to the tanker deal. Cantwell added that the hearing should be held to "hold Secretary Gates accountable" for his decision.
One argument Boeing supporters have offered for a rebid is that Boeing is likely to sue the Pentagon unless the bidding is reopened and Boeing would use information in the GAO report as evidence. That would be perhaps the worst outcome, delaying any decision for years as things ground through the legal system and positions hardened.
The Solomonic decision would be to offer both companies half the production of the initial operational capability segment. Whether either company would accept that -- and DoD lawyers would approve -- is unclear but it was an option being discussed last week.