EADS could lose multi-billion dollar tanker award

The investigative arm of the US Congress has declared that the Air Force had made "significant errors" in awarding the deal to Northrop Grumman and EADS, the manufacturers of Airbus. The deal is worth nearly 100 billion dollars in the long term.


The US Congress watchdog agency Wednesday upheld Boeing's protest over a huge aerial refueling tanker contract awarded to Northrop Grumman, and recommended the US Air Force review the deal.

The decision could wrest the 35-billion-dollar contract from Northrop Grumman and its European partner EADS in a battle fraught with protectionist overtones.

"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," the Government Accountability Office, the watchdog arm of Congress, said in a statement.

The recommendations of the powerful congressional investigative arm, although non-binding, are usually heeded.

"We welcome and support today's ruling by the GAO fully supporting the grounds of our protest," Mark McGraw, vice president of Boeing Tanker Programs, said in a statement.

"We appreciate the professionalism and diligence the GAO showed in its review of the KC-X acquisition process. We look forward to working with the Air Force on next steps in this critical procurement for our warfighters."

The Air Force said it would respond to the report later in the day.

Boeing lost the contract to make 179 air force tankers in February to Northrop Grumman and its partner, the European Aeronautic Defence and Space Company (EADS), parent of Boeing's arch rival Airbus.

The politically charged battle over the tanker contract -- one of the largest defense contracts in recent years -- pits the KC-45, a militarized version of Airbus's 330, and the KC-767, a new version of the Boeing 767.

The US Air Force's choice of a European aircraft maker has raised protectionist hackles in the US Congress, with lawmakers citing job losses at a time when the economy is struggling with sluggish growth.

The GAO said the Air Force did not respect the evaluation criteria, conducted "misleading" discussions with Boeing about its compliance with requirements and gave too much slack to Northrop Grumman on some points.

It also said the Air Force made "unreasonable" cost calculations that, when corrected, fixed Boeing as the lower bidder over the life of the contract.

"We recommended that the Air Force reopen discussions with the offerors, obtain revised proposals, re-evaluate the revised proposals, and make a new source selection decision, consistent with our decision," the GAO said.

"We further recommended that, if the Air Force believed that the solicitation, as reasonably interpreted, does not adequately state its needs, the agency should amend the solicitation prior to conducting further discussions with the offerors."

News filtered out last week that the Air Force had made errors in awarding the contract, but Northrop said the minor "computation" mistakes should have "no impact" on the GAO's review.

On Tuesday the Defense Department stressed that any further delay would pose problems for the renewal of its aging tanker fleet.

Pentagon spokesman Geoff Morrell said: "This is the number one acquisition priority of the air force, it is 10 years overdue, the average age of this fleet is 47 years old."

The announcement caps a process dating back to 2003 that once saw Boeing awarded the contract, only to have it canceled in a procurement fraud scandal.

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