Politics & Government

Boeing could have won tanker contract, GAO says

WASHINGTON — The Boeing Co. had a "substantial chance" of winning a $35 billion contract for aerial-refueling tankers if the Air Force hadn't made a number of errors in awarding it to a team that includes a rival European aerospace company, government auditors concluded.

The Government Accountability Office on Wednesday released its 67-page report — with portions redacted — a week after a three-page summary noted significant problems with the Air Force's decision to award the tanker contract to Northrop Grumman and the European Aeronautic Defense and Space Co., the parent company of Boeing rival Airbus. The GAO recommended that the contract be rebid.

The auditors found a number of "prejudicial errors," including mistakes in calculating the so-called life cycle costs of the two planes and uncertainty over whether the winning plane could refuel all of the Air Force's aircraft. The auditors also found that the Air Force held "misleading and unreasonable" discussions with Boeing.

The full report notes, "It is a fundamental principle of competitive procurements that competitors be treated fairly, and fairness in competitions for federal procurements is largely defined by an evaluation that is reasonable and consistent with the terms of the solicitation."

"The Air Force did not fulfill this fundamental obligation here."

The report's most eye-catching conclusion came on its last page, where auditors wrote that the Air Force had failed to evaluate the Boeing and Northrop-EADS proposals in accordance with the contract criteria and had failed to conduct discussions with the bidders in a fair and equitable manner.

"But for these errors, we believe that Boeing would have had a substantial chance of being selected for award," the report said.

In a statement Wednesday, Air Force officials said they were still reviewing the GAO report.

"The Air Force will continue daily discussions with senior Department of Defense leadership to determine the most effective course of action," the statement said.

Defense Secretary Robert Gates reportedly met with Air Force officials Wednesday to discuss the contract.

On Capitol Hill, Boeing supporters said that if the Air Force didn't rebid the contract, Congress would force it to.

"I'm worried they will hunker down, make a few changes and give it to Northrop-EADS," said Rep. Norm Dicks, D-Wash., who over the past week has talked with the chairman of the Joint Chiefs of Staff and the Pentagon's top acquisitions official. "If they want to do that, they are in for one hell of a fight."

The Boeing tanker would be built on a 767 airframe in Everett, Wash., and converted to tankers in Wichita, Kan.

Lawmakers from Kansas said in a letter to Gates that the Air Force ought to award the contract to Boeing outright.

"We believe the Department (of Defense) has the authority to award the contract to Boeing based on their competitive proposal," wrote Kansas Republican Sens. Pat Roberts and Sam Brownback, along with Republican Rep. Todd Tiahrt.

The Air Force has 60 days to respond to the nonbinding GAO recommendations. By some estimates, a new tanker competition could take two years at a time when the Air Force's fleet of tankers date mostly to the Cold War era.

Boeing said in a statement that the full GAO report validated its decision to file a rare protest over a contract. Boeing officials also noted that the government auditors had concluded that the company had a good chance of winning the contract except for the Air Force mistakes.

Northrop officials continued to say that the GAO hadn't said anything about the merits of the tankers themselves.

"The document makes clear that the GAO's issues with the contract do not reflect on the tanker's capabilities," said Paul Meyer, Northrop's tanker program manager.

Sen. Jeff Sessions, R-Ala., said there was nothing in the full GAO report to suggest that the Northrop-EADS tanker wasn't the best plane offered. The Northrop-EADS tanker would have been assembled at a new plant in Mobile, Ala.

"The GAO is staffed by respected, independent government auditors, accountants and lawyers, but they are not pilots, airmen or engineers," Sessions said. "Neither GAO nor Congress is qualified to select which airplanes our pilots fly. Moving forward, I intend to do everything I can to ensure this competition is free of undue political influence."

However, even outside analysts said there was little doubt that the contract would have to be rebid.

Loren Thompson, a military analyst with the Lexington Institute in Arlington, Va., said he didn't see any way that the contract wouldn't be rebid.

"Air Force officials thought they had conducted a squeaky clean, fair competition," he said. "For the GAO to find this many problems has left them speechless."

The Air Force awarded the contract to Northrop-EADS in late February, and Boeing filed its protest two weeks later. The initial contract was for 179 planes. The Air Force eventually will have to replace most of its 600 tankers at an estimated cost of $100 billion.


A PDF of the Government Accountability Office's report

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