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GAO supports Boeing protest of tanker decision

The top U.S. government watchdog agency sided with Boeing on Wednesday in a dispute of the $35 billion Air Force tanker contract that went to Northrop Grumman and European partner EADS in February.

The Government Accountability Office recommended that the Air Force conduct a new competition for the 179-plane deal after finding that the service did not treat Boeing fairly during the contest and that a variety of costs for both aircraft were not properly considered.

“Our review of the record led us to conclude that the Air Force made a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman,” Michael Golden, GAO’s lead counsel for procurement matters, said in a statement.

The 69-page decision was not released to the public because it contains proprietary and sensitive information from both competitors, according to the agency. But a summary cited seven reasons for sustaining the Boeing protest, including:

* “Misleading and unequal discussions” with Boeing in one case.

* The service’s inaccurate estimate of how much Boeing’s 767-based tankers would cost to operate.

* The Air Force may have been incorrect in its assessment of the Northrop-EADS plane’s ability to refuel the entire Air Force fleet.

The Air Force has 60 days to decide what it will do next. While GAO decisions are not legally binding, they are seldom ignored.

For now, Air Force officials said they were still reviewing the GAO documents and will have further comment later in the day.

Boeing responded to the decision with measured enthusiasm.

“We welcome and support today’s ruling by the GAO fully supporting the grounds of our protest,” said Mark McGraw, vice president of tanker programs, in a company statement. “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 the next steps in this critical procurement for our war fighters.”

Northrop stood by its aircraft in a statement of its own.

“We respect the GAO’s work in analyzing the Air Force’s tanker acquisition process,” said Randy Belote, Northrop’s communications vice president. “We continue to believe that Northrop Grumman offered the most modern and capable tanker for our men and women in uniform. We will review the GAO findings before commenting further.”

The Air Force announced Feb. 29 that it had picked the Northrop-EADS offering of a modified Airbus A330 to replace its aging fleet of KC-135 tankers, most of which are more than 40 years old. Boeing, in a rare move for the aerospace giant, filed a lengthy protest with the GAO on March 11.

While the GAO had 100 days to make a call on the Boeing protest, the Northrop-EADS team remained optimistic, rolling a second would-be tanker off the line in Toulouse, France, on May 15 and scheduling a June 28 groundbreaking in Mobile, Ala., for a U.S. manufacturing facility.

Though GAO recommends reopening the competition, Golden said not all of Boeing’s protest points were upheld.

“We also denied a number of Boeing’s challenges to the award to Northrop Grumman because we found that the record did not provide us with a basis to conclude that the agency had violated the legal requirements with respect to those challenges,” he said in a statement.

Discuss: GAO upholds Boeing Air Force tanker protest