GAO upholds Boeing protest of tanker award
Watchdog agency recommends Air Force reopen discussions with contractors, obtain revised proposals and make a new decision.
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.