GAO upholds Boeing Bid Protest for EADS/NG KC- X Air Force Contract FA8625-07-R-6470 -"Buy America" campaign pays an early Dividend, war not over yet

EADS CEO Louis Gallois was a model of calm this morning when he spoke to Lord Patel prior to the publication of the U.S. Government Accountability Office's "Bid Protest decision" on the protest by Boeing (69 page protest June 18, 2008) of the contract FA8625-07-R-6470, issued by the Department of the Air Force, for up to 179 KC-X aerial refueling tankers (see pic) . The initial contract announced on February 29, 2008, for EADS and their partners Northrop Grumman Corp. was to supply an initial 80 of their innovative and low cost tankers to the Air Force.

It is worth noting that on Page 2 the GAO say,"Our decision should not be read to reflect a view as to the merits of the firms’ respective aircraft." which doesn't lighten the burden on the Pentagon of the GAO's damning indictment and conclusion ; "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."

Louis' early morning calm will have evaporated as the GAO have backed Boeing’s protest on the contract award process for the EADS / Northrop Grumman contract , saying the Air Force made errors during the process and recommended that the Air Force should reopen the bidding and obtain revised proposals for the squilion billion dollar contract.

The Air Force (as does the RAF) need to replace their fleet of ageing aerial tankers - some dating back to the Eisenhower administration.

It is more than a battle over planes. It is a trans-Atlantic battle. Gallic and Teutonic pride, lost jobs , lost contracts as delays pile on delays. This involves not only the major players directly, but many hundreds of global subcontractors and suppliers depending on the outcome.

The February decision wounded the pride of Boeing ,who see the Air Force an essential teat for Government cash - and some claim, is a hidden subsidy for their civilian plane programs. To some it was proof (if needed) of the growing influence of foreign influence pedlars at the Pentagon - rather than , as some would claim ,signs of US technological leadership being eroded and overtaken , and plump overfed and complacent aerospace contractors used to getting contracts having to sharpen up their act.

Boeing have always held the inside track and their decision to protest about the Air Force choice whilst reflexive , carries some worrying baggage. Whatever the decision it delays provision of a much needed fleet and force requirement - in a global world they will have upset some major players with their multi million "Buy America" campaign - not least the Northrop Grumman workers in Mobile, Alabama , and NG managment who counter claim how they support American jobs on the contract. see pic (clickto enlarge or goto the website for more info) .

Boeing claimed the Air Force decision-making process was flawed (which is rich , considering their recent history of bribery and influence mongering - resulting in jail for a former senior Air Force procurement official and a former senior Boeing executive) and that their rebuilt and revamped Boeing 767 ( a smaller plane than the Airbus 330) — would cost less over the life of the plane than the EADS-Airbus tanker. They also questioned the maths of the Air Force when it concluded that the costs of the two planes were about equal - a point the GAO have upheld.

The GAOsay in the 6th of their 7 stated objections (page 3) -"6. The Air Force’s evaluation of military construction costs in calculating the offerors’ most probable life cycle costs for their proposed aircraft was unreasonable, where the agency during the protest conceded that it made a number of errors in evaluation that, when corrected, result in Boeing displacing Northrop Grumman as the offeror with the lowest most probable life cycle cost;..." sounds fairly damning. "Errors in evaluation" ...these guys are spending Billions of tax payers dollars.

If the decision is reversed (and the Air Force are given only 60 days by the GAO to resolve the issue) the GAO say the contract FA8625-07-R-6470 should be cancelled , and the Air Force pay Boeing's bid protest costs.

Boeing shares rose nearly US$3 on the news, about 5% ,but then settled back , up 50 cents. EADS shares reacted promptly and fell 50 E cents of about 3.5%. The Northrop Grumman website has an official response from Randy Belote, Vice President of Corporate & International Communications , "We respect the GAO’s work in analyzing the Air Force's tanker acquisition process. We continue to believe that Northrop Grumman offered the most modern and capable tanker for our men and women in uniform. We will review the GAO findings before commenting further." (see NG KC25 website)

This show won't be over until the fat lady has sung her song.

The Washington summer will be loud with well paid counsels hornswoggling, wheeling, dealing, ducking and diving, and sweaty browed Pentagon procurers busy at their lap tops - the result ? Yet more delay, a lower initial cost and an untidy and grubby compromise that will allow Boeing a share of the spoils.

Everyone has to win, their must be no losers. Watch out for Boeing having to ditch some over priced unwanted projects like the Hummingbird... and some lobbyists hospitalised with hernias hauling their wallets to the bank.

PS: An Associated Press report in the International Herald Tribune says "The Government Accountability Office said Wednesday that it found "a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman." - those words do not appear in the official bid protest report on the GAO website and haven't been attributed to any source by AP. ... the lobbyists lies , counter lies, claims, and counterclaims have just begun.

Tuesday, June 17, 2008 The GAO Reminds Us Why The Republicans Can't Be Trusted to Defend America