GovernmentExecutive.com

The Government Accountability Office Wednesday sustained a protest filed by Boeing Co. over the Air Force's decision to award a lucrative contract for 179 aerial refueling tankers to a team led by Northrop Grumman and EADS, the European firm behind Airbus.

The GAO's decision follows its exhaustive, 100-day review of the Air Force's selection process for the $35 billion program.

In a summary of its decision, GAO urged the Air Force to reopen competition for the planes, which the service has said are urgently needed to replace 1950s-era KC-135 tankers.

"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," GAO said.

It recommended that the Air Force reimburse Boeing for the cost of the protest. GAO's decision is non-binding, but it puts intense pressure on the Air Force to comply with its recommendations.

GAO cited seven specific reasons for siding with Boeing, including its conclusion that the Air Force did not adequately assess the merits of the proposals in line with the criteria they established for the program. The Air Force also gave added weight to Northrop Grumman's proposal because it exceeded a key program requirement, despite establishing in its solicitation for the contract that "no consideration will be provided for exceeding" requirements, GAO said. The GAO summary does not specify which of the requirements was at issue, but Boeing Co. has long argued that the Air Force ultimately selected a larger plane, a modified Airbus A330, than it had asked for.

Additionally, GAO concluded that the Air Force "conducted misleading and unequal discussions with Boeing" by informing the aerospace giant that it had fully satisfied a requirement on so-called operational utility. The Air Force later determined that Boeing had only partially met the objective and did not advise the firm of the change in its assessment of the proposal. GAO also concluded that the Air Force's evaluation of military construction costs on the two planes was "unreasonable" and that the Boeing offering, adapted from its 767 aircraft, would cost less over its lifetime than the A330.

In addition, the Air Force "improperly increased" Boeing's estimated engineering costs on the program, according to GAO. The GAO's decision Wednesday delivers a stunning blow to an Air Force already suffering from a string of public embarrassments that led to the firings earlier this month of the service's top civilian and military leaders. It also amounts to a significant setback for the Air Force's acquisition office, still recovering from a highly publicized scandal nearly five years ago that led to the cancellation of an overpriced Boeing contract to lease tankers to the service. And it also is likely to delay Air Force plans to replace its aging tanker fleet with newer, more capable aircraft -- a top acquisition priority for the service.

COMMENTS

• The best firm probably got the award the first time. Most likely, however when whomever ends up with it in the end will most likely give a small chunk to the other. Mike Posted June 23, 2008 7:01 AM
• As a person who works in this field, I have to say that one of the fundamental principles is that you evaluate a proposal the way you say you are going to evaluate in the solicitation. It's not fair or legal to change the rules without notifying the participants of the rule change. Therefore, I would say shame on the air force. You made a mistake. What's more then that, you knew better. The GAO made the absolute right decision. Now let's hope that the Air Force does the right thing. To be honest, I am really tired of the "the enemy won't wait argument". While it is true in some regards, had this been handled appropriately in the beginning this would not be an issue. You fail to really question how a delay of awarding this contract will truly affect, as we currently have assets in the field performing the function. As for costing the govt more money to recompete, again had they done it right to begin with....this would not be an issue. This is not a valid argument in the sense....that it alone can be the reason you to recompete. What other argument can support not recompeting? It's a case of two wrongs using that theory. As for hidden costs, if the Air Force does their homework and does a lifecycle cost study....then it will catch these or at least most of them. Being in contracts, I realize and have experienced first hand the pressure to award to certain contractors. It's a miserable situation for the person receiving the pressure which is supposed to not exist. I have no doubt that this probably occured here. BOTTOM LINE is Air Force....do the right thing. You should have played it more by the book in light of your recent scandals. A Contracts Person Posted June 20, 2008 11:04 AM
• The GAO press release isn't as conclusive as the way it is being reported. Note they say "could have affected" and have a list of possible AF actions. Guess the straight record of what was said isn't as interesting. “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. We therefore sustained Boeing’s protest,” said Michael R. Golden, the GAO’s managing associate general counsel for procurement law. “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.” Ralph Posted June 19, 2008 5:45 PM