Team Infidel
Forum Spin Doctor
Washington Post
June 19, 2008
Pg. 1
GAO Report Cites Mistakes in $40 Billion Contract Boeing Lost
By Dana Hedgpeth and Robert O'Harrow Jr., Washington Post Staff Writers
Federal auditors said yesterday the Air Force bungled its decision to award a multibillion-dollar contract for new refueling tankers to a team that includes the European company Airbus, touching off calls for a congressional probe and putting yet another twist in the years-long, scandal-plagued effort to replace the aging tanker fleet.
The Feb. 29 award of the $40 billion contract had spurred a fierce and unusual public relations battle between the loser Boeing, which claimed it was treated unfairly, and winner Northrop Grumman and its partner, European Aeronautic Defence and Space, parent of Airbus.
It also triggered fears that thousands of well-paying jobs in the United States would evaporate. Critics said the Air Force was being shortsighted by awarding key defense contracts to a European company, possibly hobbling the industrial might of Boeing, the nation's top airplane maker.
Yesterday's finding by the Government Accountability Office is the latest in a series of public relations debacles for the Air Force. It comes just two weeks after Air Force Secretary Michael W. Wynne and Chief of Staff Gen. T. Michael Moseley were asked to resign because of "a chain of failures" in their leadership.
Critics of the award, some of whom represent states where Boeing employs thousands of people, questioned whether those resignations were linked to problems with the tanker contract. Sen. Maria Cantwell (D-Wash.) is among several lawmakers who said they would ask Congress to review the Air Force's decision.
"Congress needs to investigate," Cantwell said. "How is it that the process was so flawed? These mistakes are so glaring."
Sen. Pat Roberts (R-Kan.), whose state is also home to major Boeing operations, called the GAO decision "a major win for Kansas and America's industrial base." Roberts said he and Rep. Todd Tiahrt (R-Kan.) would introduce legislation mandating that the Air Force hold another competition.
The Air Force has 60 days to respond to the GAO findings. The service can agree or ask the GAO to reconsider. It said in a statement it would review the decision to determine its next step.
"The Air Force will do everything we can to rapidly move forward so America receives this urgently needed capability," said Sue C. Payton, assistant secretary of the Air Force for acquisition. "The Air Force will select the best value tanker for our nation's defense, while being good stewards of the taxpayer dollar."
The months-long GAO review found that the Air Force failed repeatedly to follow procedures designed to ensure a fair and open competition and good value for taxpayers. The GAO urged the Air Force to renew discussions with both teams and obtain revised proposals, and to effectively stage a new competition.
"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," said Michael R. Golden, the GAO's managing associate general counsel.
Boeing filed its protest with the agency March 11 after it lost the deal to build 179 refueling aircraft, which are essentially gas stations in the sky. The Chicago-based company is the largest U.S. aircraft manufacturer, with 44,000 jobs in the United States and operations in 40 states. It began building the Air Force's fleet of KC-135 tankers nearly 50 years ago.
In 2003, the Air Force attempted to award a contract to replace the fleet, but that effort was also mishandled. After awarding a $20 billion contract to Boeing to lease tankers, the Air Force's procurement chief at the time, Darleen A. Druyun, admitted that she favored Boeing while negotiating for a job with the company. Druyun and Boeing's former chief financial officer went to prison, and Boeing agreed with the Justice Department to pay $615 million -- the biggest penalty ever paid by a defense contractor -- to settle allegations of misconduct on the tanker deal and others.
Arizona Sen. John McCain, the presumptive Republican nominee for president, had spearheaded the investigations that turned up fraud in the contract for leasing tankers and pressed the Air Force to widen the competition for a new one. Yesterday, Democrats said the GAO report showed that McCain's pressure on the Air Force was improper, and his Democratic presidential rival, Sen. Barack Obama, called for a new competition. A McCain spokesman said in a statement that the senator's hope all along was for a fair and open process.
The tanker contract, after its initial phase, could be worth up to $100 billion over the next two decades. The deal gives the winner a major inside track on future military aircraft sales and an advantage in commercial airline business.
Boeing said in its protest that the Air Force had not fairly evaluated the technical capabilities, costs and other areas of its proposed aircraft, which is based on the 767 jetliner. Without the tanker contract, Boeing has said it would shut down the 767 production lines. EADS and Northrop said they planned to build a major plant in Mobile, Ala., and had scheduled a groundbreaking for next week.
The GAO's 69-page decision has to be reviewed by both teams and redacted for proprietary information, so it could take several days before the details are known, officials said.
In a summary of its decision, the GAO outlined seven reasons why it sustained Boeing's protest, saying the Air Force conducted "misleading and unequal discussions with Boeing" during the process. The Air Force's evaluation of operating the aircrafts was "unreasonable," it said, noting that the service adjusted Northrop's engineering costs so that they were lower than Boeing's.
The report said that the Air Force never justified its conclusion that the proposed Northrop tanker could handle refueling all types of military planes and said that the service mistakenly found that Boeing's plane was more expensive to operate and maintain when it was, in fact, cheaper.
Mike McGraw, vice president of Boeing's tanker program, said "we welcome and support today's ruling by the GAO fully sustaining the grounds of our protest."
Northrop spokesman Randy Belote said, "We continue to believe that Northrop Grumman offered the most modern and capable tanker for our men and women in uniform."
The GAO rarely sustains protests, defense analysts said, so it raises serious questions about the Air Force and its leadership.
"I cannot believe that in the most highly scrutinized procurement in the history of the United States Air Force, the GAO found so many errors," said Sen. Richard C. Shelby (R-Ala.).
Even one of Northrop's strongest supporters called for an investigation of the selection process.
"Air Force officials didn't miss it by a little; they apparently missed it by a mile," said Tom Schatz, president of Citizens Against Government Waste, a nonprofit group that worked closely with Northrop on a public relations campaign defending the award. "If this is the best the Air Force can do on its most critical contract award, the system remains dysfunctional."
Staff writer Michael D. Shear and staff researcher Julie Tate contributed to this report.
June 19, 2008
Pg. 1
GAO Report Cites Mistakes in $40 Billion Contract Boeing Lost
By Dana Hedgpeth and Robert O'Harrow Jr., Washington Post Staff Writers
Federal auditors said yesterday the Air Force bungled its decision to award a multibillion-dollar contract for new refueling tankers to a team that includes the European company Airbus, touching off calls for a congressional probe and putting yet another twist in the years-long, scandal-plagued effort to replace the aging tanker fleet.
The Feb. 29 award of the $40 billion contract had spurred a fierce and unusual public relations battle between the loser Boeing, which claimed it was treated unfairly, and winner Northrop Grumman and its partner, European Aeronautic Defence and Space, parent of Airbus.
It also triggered fears that thousands of well-paying jobs in the United States would evaporate. Critics said the Air Force was being shortsighted by awarding key defense contracts to a European company, possibly hobbling the industrial might of Boeing, the nation's top airplane maker.
Yesterday's finding by the Government Accountability Office is the latest in a series of public relations debacles for the Air Force. It comes just two weeks after Air Force Secretary Michael W. Wynne and Chief of Staff Gen. T. Michael Moseley were asked to resign because of "a chain of failures" in their leadership.
Critics of the award, some of whom represent states where Boeing employs thousands of people, questioned whether those resignations were linked to problems with the tanker contract. Sen. Maria Cantwell (D-Wash.) is among several lawmakers who said they would ask Congress to review the Air Force's decision.
"Congress needs to investigate," Cantwell said. "How is it that the process was so flawed? These mistakes are so glaring."
Sen. Pat Roberts (R-Kan.), whose state is also home to major Boeing operations, called the GAO decision "a major win for Kansas and America's industrial base." Roberts said he and Rep. Todd Tiahrt (R-Kan.) would introduce legislation mandating that the Air Force hold another competition.
The Air Force has 60 days to respond to the GAO findings. The service can agree or ask the GAO to reconsider. It said in a statement it would review the decision to determine its next step.
"The Air Force will do everything we can to rapidly move forward so America receives this urgently needed capability," said Sue C. Payton, assistant secretary of the Air Force for acquisition. "The Air Force will select the best value tanker for our nation's defense, while being good stewards of the taxpayer dollar."
The months-long GAO review found that the Air Force failed repeatedly to follow procedures designed to ensure a fair and open competition and good value for taxpayers. The GAO urged the Air Force to renew discussions with both teams and obtain revised proposals, and to effectively stage a new competition.
"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," said Michael R. Golden, the GAO's managing associate general counsel.
Boeing filed its protest with the agency March 11 after it lost the deal to build 179 refueling aircraft, which are essentially gas stations in the sky. The Chicago-based company is the largest U.S. aircraft manufacturer, with 44,000 jobs in the United States and operations in 40 states. It began building the Air Force's fleet of KC-135 tankers nearly 50 years ago.
In 2003, the Air Force attempted to award a contract to replace the fleet, but that effort was also mishandled. After awarding a $20 billion contract to Boeing to lease tankers, the Air Force's procurement chief at the time, Darleen A. Druyun, admitted that she favored Boeing while negotiating for a job with the company. Druyun and Boeing's former chief financial officer went to prison, and Boeing agreed with the Justice Department to pay $615 million -- the biggest penalty ever paid by a defense contractor -- to settle allegations of misconduct on the tanker deal and others.
Arizona Sen. John McCain, the presumptive Republican nominee for president, had spearheaded the investigations that turned up fraud in the contract for leasing tankers and pressed the Air Force to widen the competition for a new one. Yesterday, Democrats said the GAO report showed that McCain's pressure on the Air Force was improper, and his Democratic presidential rival, Sen. Barack Obama, called for a new competition. A McCain spokesman said in a statement that the senator's hope all along was for a fair and open process.
The tanker contract, after its initial phase, could be worth up to $100 billion over the next two decades. The deal gives the winner a major inside track on future military aircraft sales and an advantage in commercial airline business.
Boeing said in its protest that the Air Force had not fairly evaluated the technical capabilities, costs and other areas of its proposed aircraft, which is based on the 767 jetliner. Without the tanker contract, Boeing has said it would shut down the 767 production lines. EADS and Northrop said they planned to build a major plant in Mobile, Ala., and had scheduled a groundbreaking for next week.
The GAO's 69-page decision has to be reviewed by both teams and redacted for proprietary information, so it could take several days before the details are known, officials said.
In a summary of its decision, the GAO outlined seven reasons why it sustained Boeing's protest, saying the Air Force conducted "misleading and unequal discussions with Boeing" during the process. The Air Force's evaluation of operating the aircrafts was "unreasonable," it said, noting that the service adjusted Northrop's engineering costs so that they were lower than Boeing's.
The report said that the Air Force never justified its conclusion that the proposed Northrop tanker could handle refueling all types of military planes and said that the service mistakenly found that Boeing's plane was more expensive to operate and maintain when it was, in fact, cheaper.
Mike McGraw, vice president of Boeing's tanker program, said "we welcome and support today's ruling by the GAO fully sustaining the grounds of our protest."
Northrop spokesman Randy Belote said, "We continue to believe that Northrop Grumman offered the most modern and capable tanker for our men and women in uniform."
The GAO rarely sustains protests, defense analysts said, so it raises serious questions about the Air Force and its leadership.
"I cannot believe that in the most highly scrutinized procurement in the history of the United States Air Force, the GAO found so many errors," said Sen. Richard C. Shelby (R-Ala.).
Even one of Northrop's strongest supporters called for an investigation of the selection process.
"Air Force officials didn't miss it by a little; they apparently missed it by a mile," said Tom Schatz, president of Citizens Against Government Waste, a nonprofit group that worked closely with Northrop on a public relations campaign defending the award. "If this is the best the Air Force can do on its most critical contract award, the system remains dysfunctional."
Staff writer Michael D. Shear and staff researcher Julie Tate contributed to this report.
