Wall Street Journal
March 12, 2008
Pg. B2
By August Cole
Boeing Co. filed a formal protest in hopes of overturning its loss of a $40 billion aerial-tanker contract, a sign that a bureaucratic appeal may be a more winnable battle for the aerospace giant than waging a legislative fight in Congress over the tankers.
Boeing last month lost the competition for 179 refueling tankers to Northrop Grumman Corp. and European Aeronautic Defence & Space Co., the parent of jet-maker Airbus.
Boeing's protest, filed with the Government Accountability Office, kicks off a review of the decision that could take as many as 100 days. Possible outcomes might include a recommendation that the Air Force rebid the contract.
Chicago-based Boeing is basing its protest on a variety of issues. Boeing said yesterday it objected to how the Air Force gave the Northrop team credit for capabilities like cargo and passenger capacity, which the Air Force said exceed the Boeing jet's. Boeing also cited what it says are flaws in how the Air Force evaluated the risks associated with each bid; cost assessments; and how the planes would be used on military missions at bases around the world.
"It was clear that this was an extremely close competition where the improper evaluation of just one or two factors could have resulted in a different decision," said Mark McGraw, the head of Boeing's tanker effort, during a conference call yesterday.
Mr. McGraw said that "we'd love to get the decision overturned." The GAO said in a statement yesterday that it expects to have a decision by June 19.
"To go back and consider changing the rules after the contract is not the way it's done in America," said Northrop Grumman spokesman Randy Belote.
The Air Force and Northrop, the lead company in the competing team, have said the military picked the better plane.
The appeal may be more attractive to Boeing than the legislative alternative. Boeing's supporters in Congress could seek to withhold funding for the tanker program or insert amendments to thwart the program's advancement, citing trade or national security issues.
But that appears to be a difficult approach because the Air Force says it has a clear case for needing to replace its fleet of tankers. Also, lawmakers are divided between the states where each team's work is performed. Meanwhile, key players -- like Michigan Sen. Carl Levin, chairman of the Senate Armed Services Committee -- haven't yet weighed in.
Even as Boeing filed the protest, its supporters continued to criticize the Air Force over the contract. At a House Appropriations Defense Subcommittee hearing yesterday, Rep. Norm Dicks -- a Democrat from Washington, home of significant Boeing operations -- told Air Force Secretary Michael Wynne that he wants the contract redone because he believes Boeing was misled by the service into tendering the smaller 767 tanker, which carries less cargo, fuel and passengers than the Airbus A330 tanker.
The filing of Boeing's protest can be expected to affect what Air Force officials say in public about the award. The Air Force said in a statement late yesterday that "it will carefully evaluate the protest, defend our source selection decision and allow the GAO to make its final decision." The service won't comment on the protest's details. Already at yesterday's hearing, Mr. Wynne declined to delve into details about certain aspects of the contract, citing the protest.
With thousands of jobs on the line and larger issues about U.S. defense policy in question, lawmakers aren't holding back from trying to get Boeing back in the game. "We've got to straighten this out if we're going to maintain a defense industrial base," said Kansas Rep. Todd Tiahrt, who said during the same hearing that the Air Force had "stacked the deck" against a U.S. manufacturer in favor of European companies like EADS. Kansas also is home to significant Boeing operations.
