Boeing and Northrop Grumman will square off again to win the Air Force’s $35 billion aerial refueling tanker contract.

Defense Secretary Robert Gates on Wednesday announced the Pentagon is reopening parts of the competition.

The Pentagon chief’s announcement comes after the Government Accountability Office (GAO) upheld Boeing’s protest of the Air Force’s decision to award the contract to Northrop Grumman and EADS North America, the parent company of Boeing rival Airbus.

“I have concluded that the contract cannot be awarded at present,” Gates said at a Pentagon news conference on Wednesday. Northrop Grumman won the heated competition on Feb. 29, but is currently under a stop-work order.

The new competition will examine eight Boeing concerns sustained in the GAO ruling. Boeing filed more than 100 complaints with the watchdog.

The decision means Boeing could win the contract. After it lost the initial decision, it opened a risky lobbying and public relations battle against the Air Force’s decision in the hope of overturning it. Boeing currently holds the monopoly on the Air Force’s tanker market.

Gates said that he hoped the Pentagon’s way forward on the tanker program would restore confidence among lawmakers who have been increasingly critical of the Air Force’s ability to select a new tanker — the service’s No. 1 priority. The renewed competition would be the third attempt in seven years to try and replace the Air Force’s Eisenhower-era tankers. The first attempt — a lease deal with Boeing — ended up as a corruption scandal that landed a former Air Force acquisition official and a Boeing executive in prison.

Both Northrop and Boeing welcomed the announcement, but Boeing said it was concerned a new decision would be based on substantially different criteria than the Air Force asked for when it first solicited bids.

“As the Government Accountability Office reported in upholding our protest, we submitted the only proposal that fully met the mandatory criteria of the original [request for proposals],” Boeing said in a statement.

Northrop said it would review the decision “to ensure the re-competition will provide both companies a fair opportunity to present the strengths of their proposals.”

The Pentagon had 60 days to decide how to heed the GAO’s recommendations, but intense pressure from Capitol Hill likely sped up the decision by several weeks. The House Armed Services Committee is scheduled to hear testimony on the GAO report and the Air Force’s way forward Thursday.

Boeing’s congressional supporters from Washington state, Kansas and Missouri used the GAO’s ruling to push the Pentagon to reopen the competition. In its report, GAO said the Air Force made “significant errors” in its selection process. Without those mistakes, Boeing would have had a “substantial chance” of winning the contract.

Boeing supporter and Senate defense appropriator Patty Murray (D-Wash.) vowed to scrutinize the Pentagon’s way forward on the tanker. “There are a number of specific details that I will be looking at as this new contract process moves forward,” she said. “These include any requirements set forth by the Pentagon that make the new request for proposal biased in any way.”

Gates said John Young, the Pentagon’s top weapons buyer and a former Senate Appropriations Defense staff member, would be in charge of the tanker selection. Air Force officials were in charge when the contract was awarded to Northrop Grumman.

The Air Force will still be in charge of the program once a contractor is selected, Gates said.

Young said that the Pentagon will issue a draft request for proposals that will address all of the GAO’s findings. The Pentagon is not starting the competition from scratch but is asking the bidders to modify their proposals to address the GAO concerns. Young stressed that he wanted to see as few areas as possible changed in the request for proposals.

The Pentagon will issue the draft request at the end of the month or the beginning of August. Young expects to select the winner by the end of the year.

It’s unclear how the Pentagon will handle the fact it already has a signed contract with Northrop, and Young provided no answers on Wednesday.

The Air Force already made a payment of several million dollars to Northrop Grumman, and it could have to pay more if it cancels the contract.

According to industry sources, a contract termination would have to be based on either convenience or cause, which usually suggests fault on the contractor. Since there would be no cause for terminating the contract with Northrop, the Pentagon would likely have to pay for terminating the contract at its convenience, these sources said. Amounts can go up to hundreds of millions of dollars depending on the status of the program.

Several lawmakers hailed Gates’s decision. House Speaker Nancy Pelosi (D-Calif.) called it “an appropriate response” to the GAO’s conclusion that the original process was flawed.

“It is essential that the American people have confidence that the military contracting process, which is critical to our national security, is fair and open,” Pelosi said in a statement. She promised continued “vigorous and thorough” congressional oversight.

Rep. John Murtha (D-Pa.), the chairman of the Appropriations Defense subcommittee, also agreed with Gates’s decision. “I would expect the secretary to take into full consideration the recommendations of the Government Accountability Office,” Murtha said.

GOP presidential candidate Sen. John McCain (Ariz.), who has come under criticism from Democrats in the dispute, said he agreed with Gates’s decision.

“The steps he announced reflect careful consideration of the GAO’s decision and the need for continuing oversight of the process by which the Department decides to purchase its largest and most expensive weapons,” McCain said in a statement.