Pentagon expects "healthy competition" for tanker

* Pentagon says will be a healthy competition for tanker
* Pentagon might try to scrap alternate F-35 engine again

WASHINGTON, Oct 28 (Reuters) - The Pentagon dismissed on Wednesday any suggestion that Northrop Grumman Corp (NOC.N) might boycott a multibillion-dollar contest to supply new aerial tanker planes to the U.S. Air Force. "This is an extremely lucrative contract and I don't think we have any doubt that there will be a healthy competition to win it," Geoff Morrell, a Pentagon spokesman, told reporters at a news conference.

"I find that extraordinarily hard to believe," Morrell added, referring to Northrop's refusal earlier on Wednesday to rule out a boycott of the competition.

If Northrop dropped out of the bidding to replace the U.S. Air Force's aging tanker fleet, it would leave rival Boeing Co (BA.N) as the sole bidder.

The Pentagon is expected to release the final bidding terms in November and aims to award the contract by June.

Northrop, which won an earlier bidding contest for the contract, said it might take legal action over its allegation the U.S. government improperly gave rival Boeing sensitive bidding price information. Northrop and its partner, Airbus parent EADS (EAD.PA), say that gives Boeing an unfair advantage this time around.

On another topic, Morrell said Defense Secretary Robert Gates would reconsider the alternate engine built by General Electric Co (GE.N) and Rolls Royce Group Plc (RR.L).

Asked if Gates would again try to kill the second engine, Morrell said: "That is the discussion that is taking place between the secretary and his budget team as they go about building the FY 11 budget request." (Reporting by Jim Wolf; editing by Andre Grenon)