US watchdog upholds Boeing protest over tanker contract

MILPLEX

Points cited in GAO report on tanker contract
Here are key points cited by the General Accountability Office, the congressional watchdog, in its review citing errors in a huge aerial refueling tanker contract awarded to Northrop Grumman : Boeing had lodged a protest after losing the 35-billion-dollar contract; The Air Force "conducted misleading and unequal discussions with Boeing," by informing Boeing that it had fully satisfied a key objective, but "later determined that Boeing had only partially met this objective, without advising Boeing of this change"; The evaluation of military construction costs in calculating the most probable long-term costs was "unreasonable," with "a number of errors in evaluation" that, when corrected, result in Boeing's bid becoming less costly than Northrop Grumman's; The Air Force "improperly increased Boeing's estimated non-recurring engineering costs" after Boeing failed to to satisfactorily explain its basis for these expenses.

by Staff Writers
Washington (AFP) June 18, 2008
A congressional audit Wednesday backed Boeing's protest over a huge aerial refueling tanker contract awarded to Northrop Grumman, and recommended the Air Force review the deal.

The decision could wrest the 35-billion-dollar contract from Northrop and its European partner EADS in a battle fraught with protectionist overtones.

The new refueling plane is to replace the Air Force's fleet of aging tankers made by Boeing, which had been the sole supplier of air refueling planes to the US military.

The Government Accountability Office said its review "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 Air Force 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, made Boeing the lower bidder over the life of the contract.

"We recommended that the Air Force reopen discussions ... obtain revised proposals, re-evaluate the revised proposals, and make a new source selection decision, consistent with our decision," the GAO said.

The recommendations of the powerful congressional investigative arm, although non-binding, are usually heeded.

The Air Force said it would respond to the report later in the day.

The announcement marks a new twist a process that in 2003 saw Boeing awarded the contract, only to have it canceled in a procurement fraud scandal.

On February 29, Boeing lost the Air Force contract for 179 tankers to Northrop Grumman and its partner, the European Aeronautic Defence and Space Company (EADS), parent of Boeing's archrival Airbus.

Boeing filed a protest March 11, effectively freezing the contract and starting a 100-day period for the GAO to review the contract.

The contract is for the initial phase of a fleet replacement project worth some 100 billion dollars over the next 30 years.

"We welcome and support today's ruling by the GAO fully sustaining the grounds of our protest," Mark McGraw, vice president of Boeing Tanker Programs, said in a statement.

"We look forward to working with the Air Force on next steps in this critical procurement for our warfighters."

Northrop Grumman vice president Randy Belote said the company would review the GAO findings before commenting further, insisting it had "offered the most modern and capable tanker."

EADS chief executive Louis Gallois said that "though we're disappointed, it's important to recognize that the ... announcement is an evaluation of the selection process, not the merits of the aircraft."

The politically charged battle over the tanker -- 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 choice of a European aircraft maker raised protectionist hackles in Congress, with lawmakers citing security concerns and job losses to Europe at a time when the economy is struggling with sluggish growth.

Representative Norm Dicks, a Democrat from Washington state, home to Boeing factories, welcomed the news.

"I believe the Air Force should set aside the agreement it improperly reached with EADS/Northrop Grumman and we should proceed expeditiously to build the best aircraft -- the Boeing KC-767 -- here at home," he said.

Senator Sam Brownback, a Kansas Republican, agreed.

"This contract should be overturned and awarded to Boeing. The GAO is not allowed to consider a number of other issues important in this procurement, including foreign subsidies, corruption, and domestic production and employment."

Bob Riley, the Republican governor of Alabama, where Airbus is planning to build the tanker, said: "What's most important is that the best aircraft be chosen for those who serve in our military and that political decisions never be allowed in the military's selection process."

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MILPLEX

Democrats lash McCain over Boeing tanker row

Washington (AFP) June 18, 2008
The Democratic Party Wednesday turned new controversy over an Air Force tanker deal into a searing election attack on Republican White House hopeful John McCain.

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