Aug. 22 (Bloomberg) -- Boeing Co. says the aerial tanker it proposed for a $35 billion Pentagon program is no longer a good match because the Air Force is now emphasizing fuel capacity and it deserves six months more to challenge Northrop Grumman Corp.'s larger plane.

``What we proposed 18 months ago would not fit the bill for what the Air Force is looking for,'' Boeing spokesman Daniel Beck said in an interview of the company's 767-200 aircraft. ``We've been looking at other configurations'' because of the Air Force focus on fuel capacity. Boeing may quit the contest without more time to prepare a bid based on a bigger plane, he said.

The request may leave U.S. military officials facing the prospect of a longer wait to replace a fleet of aging tankers, or possibly leaving Northrop as the sole bidder on the program. Giving Chicago-based Boeing extra time would also push the decision on the contract into next year and a new U.S. presidential administration, creating additional obstacles.

``I get a feeling that they are perhaps playing delay tactics,'' Michel Merluzeau, an aviation consultant at G2 Solutions in Kirkland, Washington, said in an interview. ``They could probably get even more time if, say, the Democrats win'' the election in November and take office in January.

In the last round of the competition, which Los Angeles- based Northrop won in February, both companies got about ``seven to eight months'' to submit bids after the Pentagon announced a draft proposal, Beck said.

Second Competition

The Government Accountability Office decided on June 19 to uphold Boeing's protest. The GAO said the Air Force made ``significant errors'' in awarding the contract to Northrop and partner European Aeronautic, Defence & Space Co., the parent of Boeing rival Airbus SAS.

The Pentagon agreed to reopen bidding on eight issues raised by the GAO, and released a draft proposal on Aug. 6 that, among other things, specified there would be an advantage for a larger fuel payload. The department has said it will issue a final bid request next week and hopes to have a decision by year-end.

The Defense Department wants to move ahead ``in an expeditious fashion'' and still plans to issue the final request for bids next week, along with a deadline, Pentagon spokesman Bryan Whitman told reporters today. ``Whether either of the contractors submits a proposal is entirely up to them.''

Any delay in issuing the final rules will be ``harmful to the warfighter'' and lead to a ``direct escalation in cost to the government,'' Northrop spokesman Randy Belote said in an e-mail.

Boeing Allies

Boeing and its allies say that's not enough time to produce a bid with a bigger aircraft.

The Pentagon's desire for a larger tanker ``poses substantial costs to taxpayers,'' Senator Sam Brownback, a Kansas Republican, said in a statement. If the department's new bid request favors higher fuel capacity, ``it must provide adequate time for competitors to offer bids.''

Boeing's request is ``reasonable and it should be granted,'' George Behan, a spokesman for Representative Norm Dicks, a Washington Democrat, said in an e-mail. Dicks is a Boeing supporter and a senior member of House Appropriations Committee that approves military spending. Boeing's allies in Congress have said awarding the contract to the team of Northrop and Toulouse, France-based Airbus team may cost U.S. jobs.

Comparing Tankers

Boeing, which has supplied Air Force refueling tankers for more than a half-century, based its bid on a modified 767 commercial plane. The Northrop-EADS entry was based on the Airbus A330 commercial jetliner. The Northrop aircraft can carry 250,000 pounds of fuel, more than Boeing's 205,000.

The next biggest plane in Boeing's commercial lineup is the 777, which is bigger than the A330.

In 2004, a Boeing contract with the Air Force to lease replacement tankers was scrapped because of ethical violations that sent a Boeing executive and a Pentagon official to jail. The scandal led to a new competition that opened the door to Northrop and Airbus.

Boeing rose $2, or 3.2 percent, to $65.55 at 4:15 p.m. in New York Stock Exchange tradingm, while Northrop increased 61 cents to $70.

To contact the reporters on this story: Gopal Ratnam in Washington at gratnam1@bloomberg.net; Susanna Ray in Seattle at sray7@bloomberg.net

Last Updated: August 22, 2008 16:31 EDT