June 15 (Bloomberg) -- Boeing Co. will offer a tanker version of its 777 plane as it seeks to beat Northrop Grumman Corp. in a rematch of the U.S. aerial-refueling competition.

The company plans to pitch tankers based on both the 777 and smaller 767 to the Pentagon when the contest begins in a few weeks, Jim Albaugh, its defense chief, said today in a briefing at the Paris Air Show. The larger aircraft would offer maximum fuel capacity and the 767’s selling point is its flexibility, he said.

Boeing, the U.S. Air Force’s tanker supplier for more than half a century, lost out to a Northrop design based on the Airbus SAS A330 when the $35 billion tanker order was awarded in February 2008. The Chicago-based company derailed that decision a year ago this week with a successful protest to the U.S. Government Accountability Office.

“The 777 solves the technology and additional cargo capability questions, but it increases cost and it might be too much plane for the requirement” said Richard Aboulafia, vice president of Teal Group in Fairfax, Virginia. “On the other hand, if there is a split between Boeing and the Airbus A330 platform the two planes complement each other nicely.”

Boeing will rename its tanker program KC-7A7 until it decides which plane to go forward with following a new request for proposals later this year. Its previous unsuccessful bid was given the name KC-767.

Biggest Best

Los Angeles-based Northrop won last year by convincing the Air Force of the benefits of its bigger KC-45 plane based on the A330. Spokesman Randy Belote said he couldn’t comment on “what Boeing may or may not offer.”

The “KC-45, which is ready now, has the right combination of fuel carry and offload, range, multi-role capability and cost,” Belote said in a briefing at the Paris show.

The 192-foot-long Northrop jet would have carried 250,000 pounds of fuel, or 24 percent more than the 202,000-pounds capacity of Boeing’s 159-foot plane based on the 767. The current Boeing-built KC-135s carries 200,000 pounds of fuel.

Northrop aims to win the next contest, Paul Meyer, vice president of air mobility systems, said at the air show today, before Boeing’s announcement.

“I think we are all waiting for a draft RFP so we can clearly understand what is the evaluation criteria going to be,” Meyer said. “This is a significant competition that we will work very hard to make sure that we are able to win.”

Split Decision

Both sides may yet be winners as two appropriations chairmen in Congress hold out the possibility of a split order, an idea opposed by Defense Secretary Robert Gates.

Northrop is willing to accept a split so long as annual production for each supplier runs to at least 12 aircraft, below which it “is not economical,” Meyer said. He suggested the contract could be divided 60:40 in favor of the best bid.

Northrop Grumman was the Pentagon’s third-largest supplier by value of prime contracts last year, behind Bethesda, Maryland-based Lockheed Martin Corp. and Boeing, according to federal government Web site USAspending.gov.

Boeing’s protest was sustained when the GAO said the Air Force “made a number of significant errors” in its selection. The Air Force failed to assess bids in accordance with evaluation criteria and improperly credited Northrop for exceeding aerial-refueling parameters, the GAO said at the time.

The Pentagon intends to make the next award by March 31, 2010. Gates, in testimony June 9 to the Senate Appropriations Committee, pledged to “ensure that it is a fair, open and transparent process.”

To contact the reporters on this story: Susanna Ray in Seattle at sray7@bloomberg.net; Edmond Lococo in Paris at elococo@bloomberg.net;

Last Updated: June 15, 2009 10:03 EDT