Government Accountability Office requests rerun of US Air Force tanker bid

July 2, 2008

The Government Accountability Office on June 18 called for a re-run of the bidding for the U.S. Air Force $40 billion tanker contract, citing major flaws in the procurement process. This imperils the Northrop Grumman and EADS North America plan to assemble the planes in Mobile, Alabama.

When the Air Force selected Los Angeles based Northrop Grumman on February 29 to build the aircraft, Boeing challenged the award in a formal protest before the GAO, claiming the evaluation was skewed towards Northrop.

The GAO upheld Boeing's protest, though not all of their individual claims were upheld.

"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," said Michael R. Golden, the GAO's managing associate general counsel for procurement law.

The GAO issued a non-binding recommendation that the Air Force re-open the competition, allow the competitors to submit revised bids, and completely re-evaluate the new bids. This process could take a year or more to complete.

The Air Force has 60 days to respond to the GAO.

Reaction
Northrop said that they needed time to consider the ruling, but their spokesman, Randy Belote, said "we continue to believe that Northrop Grumman offered the most modern and capable tanker for our men and women in uniform."

Boeing supporters on Capital Hill urged the Air Force to scrap the contract and start a new competition as soon as possible.

"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" said U.S. Rep. Norm Dicks, D-Wash, in whose state the Boeing aircraft would be built. Alabama politicians were disappointed and surprised by the GAO's ruling. Northop and EADS were to assemble their tankers in Alabama at a new assembly plant at Mobile's Brookley Industrial Complex.

"I don't believe this ruling signals the end of Alabama's hopes for building tankers for the Air Force," said U.S. Rep. Jo Bonner, R-Mobile. "Like everyone else, I look forward to hearing from the GAO and meeting with the Air Force on how we move forward. For the sake of our airmen and women, we must find a way to do so quickly."

Main Points of the GAO evaluation:
The 69 page GAO decision was not made public, due to sensitive information about the aircraft, but a 3 page press release stated the main points of the ruling:


 * The Air Force did not correctly apply its own criteria when assessing the aircraft.
 * They miscalculated the costs associated with the Boeing tanker, and incorrectly concluded that Northrop's would be cheaper.
 * They wrongly gave Northrop's tanker extra credit for exceeding key performance objectives.
 * They did not back up their claim that the Northrop tanker could refuel all current Air Force fixed-wing aircraft.
 * They told Boeing that its aircraft met a key performance objective, before deciding this was only partially true.
 * The Air Force "unreasonably" favored Northrop after the company refused to help set up maintenance depots within two years of the first airplane delivery.