U.S. GAO Upholds Boeing's Protest over Tanker Contract

July 16, 2008
The decision could wrest the $35 billion contract from Northrop Grumman and its European partner EADS.

The Government Accountability Office (GAO), the watchdog arm of Congress, on July 16 upheld Boeing's protest over an aerial refueling tanker contract awarded to Northrop Grumman, and recommended the U.S. Air Force review the deal. The decision could wrest the $35 billion contract from Northrop Grumman and its European partner EADS.

"Our review of the record led us to conclude that the Air Force had made a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman," the GAO said.The recommendations of the powerful congressional investigative arm, although non-binding, are usually heeded.

"We welcome and support today's ruling by the GAO fully supporting the grounds of our protest," Mark McGraw, vice president of Boeing Tanker Programs, said. "We appreciate the professionalism and diligence the GAO showed in its review of the KC-X acquisition process. We look forward to working with the Air Force on next steps in this critical procurement for our warfighters."

Boeing lost the contract to make 179 air force tankers in February to Northrop Grumman and its partner, the European Aeronautic Defence and Space Company (EADS), parent of Boeing's arch rival Airbus. The politically charged battle over the tanker contract -- one of the largest defense contracts in recent years -- pits the KC-45, a militarized version of Airbus's 330, and the KC-767, a new version of the Boeing 767. The U.S. Air Force's choice of a European aircraft maker has raised protectionist hackles in the U.S. Congress, with lawmakers citing job losses at a time when the economy is struggling with sluggish growth.

The GAO said the Air Force did not respect the evaluation criteria, conducted "misleading" discussions with Boeing about its compliance with requirements and gave too much slack to Northrop Grumman on some points .It also said the Air Force made "unreasonable" cost calculations that, when corrected, fixed Boeing as the lower bidder over the life of the contract.

News filtered out last week that the Air Force had made errors in awarding the contract, but Northrop said the minor "computation" mistakes should have "no impact" on the GAO's review. On July 15 the Defense Department stressed that any further delay would pose problems for the renewal of its aging tanker fleet. Pentagon spokesman Geoff Morrell said: "This is the number one acquisition priority of the air force, it is 10 years overdue, the average age of this fleet is 47 years old."

The announcement caps a process dating back to 2003 that once saw Boeing awarded the contract, only to have it canceled in a procurement fraud scandal.

Copyright Agence France-Presse, 2008

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