Errors likely cost Boeing U.S. contract
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 Wednesday.
The Government Accountability Office released its 67-page report – with portions redacted – on Wednesday, a week after a three-page summary noting 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 congressional auditors found a number of “prejudicial errors.” Those included 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.
“It is a fundamental principle of competitive procurements that competitors be treated fairly,” the full report says, “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 conjecture came on the last page. Auditors wrote that the Air Force failed to evaluate the Boeing and Northrop-EADS proposals in accordance with the contract criteria and 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.
Defense Secretary Robert Gates met Wednesday with Air Force and other Defense Department officials to discuss the tanker contract and determine how the GAO’s recommendations could affect a decision to award a new deal, Pentagon press secretary Geoff Morrell told The Associated Press.
While the department has 60 days to respond to the GAO report, Gates wants “to make sure that there are no further delays” and will be involved in any subsequent decisions on the contract, Morrell said.
On Capitol Hill, Boeing supporters said that if the Air Force doesn’t rebid the contract, Congress will 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-Belfair, 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.”
Sen. Patty Murray, D-Wash., said the GAO report leaves no doubt that the tanker decision was “fatally flawed” from the outset.
“This was due either to incompetence or impropriety,” she said. “In either case, this contract must be quickly rebid to ensure our war fighters don’t pay the price for these mistakes.”
The Boeing tanker would be built on a 767 airframe in Everett and converted to tankers in Wichita, Kan.
Lawmakers from Kansas wrote in a letter to Gates that the Air Force ought to award the contract to Boeing outright.
By some estimates, a new tanker competition could take two years. That could be troubling to the Air Force, since its fleet of tankers dates to the Eisenhower era.
Boeing said in a statement that the full GAO report validated its decision to file a rare protest over a contract.
Northrop officials continued to say that the GAO didn’t say 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.
However, even outside analysts said there was little doubt the contract would have to be rebid.
“Air Force officials thought they had conducted a squeaky clean, fair competition,” said Loren Thompson, a military analyst with the Lexington Institute in Arlington, Va. “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, but the Air Force eventually will have to replace most of its 600 tankers at an estimated cost of $100 billion.
About 9,000 jobs were at stake in Washington state.
The GAO found problems with the Air Force’s handling of the contract in eight specific areas, ranging from life-cycle and construction costs to depot-level maintenance and operational utility.
The report said the Air Force’s evaluation of the two tankers was generally the same, but the Air Force went to great lengths to develop criteria that favored the Northrop-EADS offering.
The Air Force was looking for a plane to replace its medium-sized KC-135 tanker and had said it would not award extra evaluation points to a tanker proposal that exceeded the criteria for such things as fuel, passenger and cargo carrying capacity. But the GAO said that’s exactly what the Air Force did in picking the larger A-330 tanker, noting that Boeing might have offered its larger 777 airplane if it had known size mattered.
Les Blumenthal: 202-383-0008
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Read the report
You can find the 67-page tanker report on our FOB Tacoma blog.
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