Government Accountability Office Rules for Boeing, but Now What?

By Mike Caggeso

The Government Accountability Office backed The Boeing Co.’s (BA) petition that the U.S. Air Force altered the auction for a $35 billion aerial-tanker contract - a bid that went to rivals Northrop Grumman Corp. (NOC), and in turn, helped push Boeing’s stock down more than 11%.

Boeing filed the complaint in early March, claiming that the Air Force misled the company and modified its specifications to accommodate models made by Northrop and Airbus S.A.S.

The GAO agreed.

“The Air Force conducted misleading and unequal discussions with Boeing by informing Boeing that it had fully satisfied a key performance parameter objective relating to operational utility, but later determined that Boeing had only partially met this objective,” according to the GAO, as reported by MarketWatch.

The ruling is critical because the contract in question could be decades-long and grow to $100 billion in value. Obviously, Boeing is thrilled with the GAO’s decision.

“We welcome and support today’s ruling by the GAO fully supporting the grounds of our protest,” Mark McGraw, vice president of Boeing’s 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.”

As for what’s next, that answer lies somewhere between nothing and everything because GAO rulings are only advisory. The Air Force isn’t required to follow the recommendation to change its flight plan. But if it chooses not to, it would have to explain to Congress why, Bloomberg reported.

The Air Force has 60 days to respond to the GAO’s ruling, and even if accepted, Boeing is far from being a shoo-in for the contract.

“To be successful in any potential re-competition, Boeing must demonstrate that it is either technically superior at a reasonable cost/price-premium, or that it is significantly lowest-evaluated-cost,” Jim McAleese of McAleese & Associates, a government contracting and national-security law firm unaffiliated with the protest, told Bloomberg.

Comments

[gtlaw]

Assuming a rebid, the Air Force will want to save face. It will likely write the more detailed criteria to back up its original decision (thus favoring the Airbus). Almost assuredly, Boeing will respond with a 777-based bid, possibly in addition to the 767, and possibly offering a mix of the two types.

[LeftCoaster]

Now that McCain has been exposed as being in the hip pocket of the Airbus lobbyists, he will have less influence in prejudicing the decision making process. That should help Boeing. That said, I've stopped trying to figure out how the military reaches its decisions a long time ago.

[BS Detector]

This was a scathing rebuke of the Air Force - read the GAO press release for details. That said, they've been trying to start replacing tankers for seven years now. I don't think they will restart the process from scratch; I think this will now be handled at the most senior levels, and a streamlined recompetition will ensue, with slightly modified requirements that will tilt the table towards EADS but which Boeing will have no problem meeting.

It wouldn't surprise me if there ended up being two contracts let, which would provide needed competition to Boeing down the line, but which would be politically palatable.

[Captain Tom]

Splitting the contract still means a foreign government-company would be providing part of our warfighting equipment which is unacceptable. Also, the euro government loans/subsidy issue needs to be addressed. Recognizing all of this and contrary to McCain's earlier "help" in this procurement the tanker contract should be sole sourced to Boeing. Forget any rebid.

[McCriminal]

GAO AGREED AND STATED THAT THE AIR FORCE FAILED TO STICK TO THE EVALUATION CRITERIA.
McCain's letter to the defense secretary changed the decision... The Air Force changed the criteria four days later after McCain's letter was sent to defense secretary, Robert Gates.

McCain is a crook who hides behind this phony ethics mask and is just as guilty as Clinton of back door deals to pad his lobbyist and
buddies pockets which in a "return favor' dump PAC and Lobbyist money into his Presidential Campaign.
Just call him
McCaiNOEthics

[colretw]

The GAO summary appears to mean that the actual GAO opinion is an indictment of the how the procurement was handled. A minor revision and recompetition will not be appropriate if the actual 67 page GAO decision is anywhere near as strong as the GAO summary. The strength of this opinion is all the more remarkable when contrasted with the high level AF statements at the time of the award that NOC had won the competition decisively. The AF should issue a new solicitation and the Source Selection participants, including the Source Selection Authority, should be untainted (i.e. new). It appears that nothing short of a complete new competition will suffice to ensure the absolute neutrality of the evaluators and decision-maker. The AF and Congress (collectively, not just Senator McCain) need to determine how the issue of foreingn subsidies will be handled and it needs to be stated in the RFP. The AF should clearly state its requirements anew and then apply the evaluation criteria to each competitor's proposal equally. It is not that difficult to do. Keep it simple, perform the evaluations and conduct the source selection fairly, and make an unbiased decision.

[pokernut]

Captain Tom, please cut the jingoistic rheteric. Most of the work on Boeing's 787 is done by foreign workers in Europe and Japan.

[sheets277]

Why is everyone jumping on McCain, that is because Boeing wants you to. Boeing is still pissed off about the old tanker lease deal that McCain stopped. If that deal would have gone through we the taxpayers would have over paided for an old aircraft that Boeing needed to sell off because sales of the B767 had dropped.

Boeing thinks they can do anything, well they had their hands slapped and are trying to get even and you fools are falling for it.

Ask Boeing why they are going to charge the government $300 million for a 100 day protest. As a tax payer I would demand a line by line entry and explaination for each charge.