GAO: Boeing had 'substantial' shot at tanker deal but for Air Force errors

Boeing Co. had a "substantial chance" of winning a lucrative contract for aerial refueling tankers had the Air Force not made several errors during its evaluation of the losing firm's offering, congressional investigators concluded in a report released Wednesday.

GAO released the 67-page redacted report a week after siding with Boeing in its protest of the Air Force's decision to award the $35 billion contract for 179 tankers to a team led by Northrop Grumman and EADS, the European parent company of Boeing rival Airbus.

GAO has recommended that the Air Force reopen competition on the program, arguing that the Air Force's mistakes might have swayed the contract in the favor of the Northrop-EADS team.

"But for these errors, we believe that Boeing would have had a substantial chance of being selected for [the] award," according to the report, which was scrubbed of proprietary information before its release.

Also Wednesday, Defense Secretary Robert Gates met with John Young, the Pentagon's top procurement official, and Air Force officials to discuss the GAO's ruling and the Air Force's preliminary review of the findings.

Pentagon spokesman Geoff Morrell acknowledged that the Air Force has 60 days to respond to GAO, but he said Gates wants to move quickly on charting the path forward for replacing the Air Force's 1950s-era tankers.

"It's a procurement issue that's been going on seven years now -- seven years probably too long," Morrell said. "Our men and women in uniform, who depend on this now-ancient fleet of tankers, need a new tanker as soon as possible."

Among the errors cited in the GAO report, Air Force officials did not follow the criteria they had established for the program's competition, nor did they "conduct discussions in a fair and equal matter." In addition, the Air Force "misled" Boeing about whether its aircraft met one of the key objectives for the program, the report states.

The redacted version of the report strikes several details on the costs and capabilities of the two competed aircraft, the Boeing 767 and the Airbus A330.

But it makes clear that the Air Force initially miscalculated military construction costs for the two planes in Northrop's favor. During the GAO review, the Air Force conceded that military construction costs on the Boeing 767 were actually $92 million less than the A330, according to the report.

GAO's ruling last week gave Boeing and its supporters on Capitol Hill their best hope to undo a contract they have criticized since its award Feb. 29. The release of the GAO's detailed decision immediately provided Boeing backers with more fuel.

"If, after reading this report, the Air Force thinks they can move forward with this contract without heeding the GAO's recommendations and rebidding this contract, the problems at the Air Force go well beyond the tanker program," Democratic Rep. Rick Larsen, whose Washington district would have built the tanker, said in a statement.

A spokesman for Boeing likewise said in an e-mailed statement that the release of the report "further validates" Boeing's decision to protest the award. "It is clear the award was the result of a flawed process," the spokesman added.

Northrop Grumman officials stressed that GAO's report does not indicate any problems with their aircraft. "The document makes clear that the GAO's issues with the contract do not reflect on the tankers' capabilities," Paul Meyer, Northrop Grumman's tanker program manager, said in a statement.

Northrop is launching an advertising campaign today with full-page ads in several publications asserting that it has "the only tanker aircraft and aerial refueling boom in this competition that has been built, tested, and flown."