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By
The Associated Press
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Published: Thu, June 26, 2008 - 11:49 am
WASHINGTON (AP) - Defense Secretary Robert Gates pledged to oversee a disputed $40 billion tanker contract after congressional investigators on Wednesday detailed numerous mistakes the Air Force made in awarding the deal to Northrop Grumman and its European partner over Boeing Co.In a redacted 67-page report, the Government Accountability Office found the Air Force failed to evaluate both refueling tanker proposals based on the same merits, and repeatedly offered unfair preference to the team of Northrop and Airbus parent European Aeronautic Defence and Space Co. The extended report comes a week after the GAO upheld Boeing's contract protest and recommended the Air Force hold a new competition.
The GAO said while the Air Force's decision was based on the "best value" for the government, its rationale "was undermined by a number of prejudicial errors that call into question" whether Northrop's bid was "technically acceptable."
The government watchdog found that the Air Force offered the Northrop/EADS team extra credit for exceeding a fuel offload requirement when both teams "should have received equal credit."
The GAO also agreed with Boeing that the Air Force did not establish in advance any size requirements for the aircraft. While a larger tanker like Northrop's could provide greater refueling capabilities, there also could be possible disadvantages with respect to costs and space constraints.
The news did little to bolster Boeing on Wall Street, where the Chicago-based company's shares sank to a two-year low after some negative analyst reports before rebounding slightly.
Gates was meeting Wednesday with Air Force and other Defense Department officials to discuss the tanker contract and determine how the GAO's recommendations could affect a decision to award a new deal, said Pentagon press secretary Geoff Morrell.
While the department has 60 days to respond to the GAO report, Gates wants "to make sure that there are no further delays" and will be involved in any subsequent decision on the contract, Morrell said.
In February, the service selected the Northrop/EADS team to replace 179 Eisenhower-era aerial refueling planes. Boeing filed its protest with the GAO in March.
The contract has sparked a fierce backlash among lawmakers from Washington, Kansas and other states that stand to gain jobs if Boeing succeeds in landing the award. The new details from the GAO did little to ease tensions on Capitol Hill.
Sen. Patty Murray called for the Air Force to quickly rebid the contract: "There is no doubt that the tanker decision was fatally flawed from the outset ... either due to incompetence or impropriety."
But Sen. Jeff Sessions of Alabama, where Northrop would assemble its tankers, said "the GAO's concerns are strictly related to the Air Force's selection process, not its final judgment."
A Boeing spokesman said the GAO report supports the company's decision to challenge an award that was based on a "flawed process." But a Northrop spokesman noted the GAO's issues with the contract "do not reflect the tankers' capabilities," and in several areas did not object to the Air Force's decision.
The tanker deal is the first of three Air Force contracts worth as much as $100 billion to replace its fleet of nearly 600 refueling tankers the next 30 years. As original winners of the first contract, the Northrop/EADS team would be in a strong position to win subsequent deals.
Shares of Boeing tumbled Wednesday after Goldman Sachs cut its rating on the aircraft manufacturer citing rising fuel prices and weakness in the economy, and a Jefferies & Co. analyst said Wall Street is starting to sell off shares of aerospace companies in anticipation of a possible downturn in orders.
Boeing shares fell $5.15, or 6.9 percent, to $69.64 Wednesday, after earlier hitting a new two-year low of $69.16. Shares of Los Angeles-based Northrop Grumman added $1.12 to $70.37.
(Copyright 2008 by The Associated Press. All Rights Reserved.)
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carl , could be but what about asda’s fact finding mission i think asda did a great job. that will have to hit boeing supporters where it hurts. i will post it in one of their war rooms love ticking them off.