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Has Mobile Lost Tanker Project?

By Billy House/Media General News Service

GAO report is non-binding, but opinion clearly favors Boeing Has Mobile Lost Tanker Project?

Published: Wed, June 18, 2008 - 1:32 pm

WASHINGTON – Congressional auditors are recommending that a controversial Air Force decision awarding a $35 billion military aircraft program to the subsidiary of a European manufacturer instead of the Boeing Co. should be reconsidered.

“Our office sustained Boeing’s protest," says the GAO’s ruling, released today.

Northrop Grumman Corp. and its parent, the European Aeronautic Defense and Space Co.. beat out The Boeing Co. to win the order from the Air Force three months ago.

But now, the GAO’s findings add more uncertainty to the contract to build 179 aerial refueling tankers. The contract was seen as growing possibly to $100 billion if the Air Force places additional orders.

"We recommend that the Air Force reopen discussions with the offerors, obtain revised proposals, re-evaluate the revised proposals, and make a new source selection decision ...," says the GAO's there-page finding.

“I just got handed this,” said Rep. C.W. Bill Young of Indian Shores, the ranking Republican on the House Appropriations Defense subcommittee.

“This is going to further delay the acquisition of the tankers which we have needed for years,” said Young.

Specifically, the GAO found:

-- The Air Force, in awarding the contract, did not assess the merits of the competing proposals according to the criteria it listed as being need to be met;

-- The Air Force conducted "misleading and unequal" discussions with Boeing by informing Boeing that it had fully satisfied a key requirement, but later determined the company had only partially done so.

-- The record did not demonstrate "the reasonableness" of the Air Force's decision that Northrop Grumman's proposed refueling tanker could refuel all current Air Force fixed-wing tanker-compatible aircraft.

-- The Air Force's evaluation of military construction costs in calculating the propiosals was unreasonable.

-- The Air Force improperly increased Boeing's estimated non-recurring engineering costs.

The Air Force is not bound by the GAO review, but the decision is likely to give critics of the Air Force’s decision more ammunition to unravel the deal.

The GAO review was sparked by a “Buy American” backlash in Congress and elsewhere over the Air Force’s awarding of the contract, handing a foreign company such a substantial role in the huge military project.

Boeing argued the contract was awarded improperly and has asked the GAO to look into whether the bidding process was fair. Boeing has mounted a major campaign to sway support, saying the project will cost American jobs and put national security at risk.

It is uncertain how the decision would impact Florida companies expecting some of the Northrop subcontracting work.

Northrup had said parts of the plane will be made overseas. But 60 percent of the tanker will be American-made, through Northrop’s U.S. suppliers in Florida, Alabama, and 47 others states.

In all, it says 230 U.S. companies as many as 48,000 U.S. jobs will be involved in the work.

For instance, the new tankers, which may replace some of the 16 aging KC-135 tankers now flown out of MacDill Air Force Base in Tampa, could mean $500 million a year for Florida companies. That includes four subcontractors in the Tampa Bay area. In all, it could create up to 2,000 new jobs in Florida.

Congressional critics have threatened to kill the deal if any evidence is found that Boeing was treated unfairly. House and Senate committees that set the budgets for the Defense Department and Air Force say they can turn off the funding spigot for the contract.

Reporter Billy House can be reached at bhouse@mediageneral.com or at 1 (202) 662-7673.