Boeing looks set to win the USAF’s $40bn aerial refuelling tanker contract after Northrop Grumman pulled out of the race.

Northrop said that after a comprehensive analysis of the final RFP it determined it would not submit a bid to the Department of Defense for the KC-X programme.

This conclusion was based on the structure of the RFP’s selection, which clearly favours Boeing’s smaller refuelling tanker and does not provide adequate value recognition for the larger tanker, the company said.

Northrop Grumman president and CEO Wes Bush said the company believed it offered the best value, and the USAF would now be operating a less-capable tanker.

Deputy Secretary of Defense William Lynn said the Pentagon was disappointed that Northrop had pulled out of the competition, noting that it competed well on price and other factors.

According to Pentagon officials, there is a contingency plan in place to work with a single bidder.

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In the previous competition, Northrop Grumman was selected by the air force as offering the most capable tanker for the warfighter, at the best value for the taxpayer.

Had this contract been successful a reconfigured A330 would become the new tanker, as opposed to Boeing’s 767, meaning French manufacturer EADS would have won the US military contract.

The Northrop Grumman and EADS team, however, is very disappointed that the revised source selection methodology now dramatically favours Boeing’s smaller refuelling tanker.