Analysts: GAO conclusions a big setback for Air Force

Jun 20, 2008 (Dayton Daily News - McClatchy-Tribune Information Services via COMTEX) -- NOC | Quote | Chart | News | PowerRating -- The Air Force has much work to do to recover from an unusually blunt report by congressional auditors who criticized the service's handling of the Boeing vs. Northrop Grumman competition for a $35 billion contract to supply refueling aircraft, defense industry analysts said.

"It was nothing less than scathing. It's going to be a tough thing for them to recover from," Richard Aboulafia, an analyst with Teal Group Corp., of Fairfax, Va., said Thursday, June 19.

The U.S. Government Accountability Office, in its 69-page report made public Wednesday, concluded that the Air Force failed to follow its own standards in evaluating the contract bids from Boeing Co. and the rival bid from Northrop Grumman Corp. and its European partner, the parent of French aircraft manufacturer Airbus.

The GAO recommended that the Air Force reopen the competition, which likely will delay an award of the contract until the next presidential administration. The tankers, needed to replace an aging fleet, are used to allow Air Force aircraft to stay aloft and get where they are needed as quickly as possible.

The program will be managed from the Aeronautical Systems Center at Wright-Patterson Air Force Base, after the contractor is selected. The GAO, investigative arm of Congress, upheld Boeing's protest of the Air Force's decision in February to award the contract for 179 aerial refueling tankers to the Northrop-European Aeronautic, Defense and Space Co. partnership.

Boeing claimed that the Air Force treated it unfairly. The GAO said it found, in one instance, that the Air Force had conducted "misleading and unequal discussions with Boeing."

"I think it has real serious implications for the Air Force Materiel Command and the acquisition community," said Loren Thompson, a defense analyst with the Lexington Institute in Arlington, Va. "It suggests that the standards for procurements have not been fixed since the procurement scandal earlier in the decade."

The Air Force had decided years ago to lease the tanker aircraft from Boeing, but that plan collapsed as a senior Air Force acquisition official and a high-level Boeing executive were convicted of illegal activities in connection with the deal. They were sent to prison in 2005 and 2006, respectively.

By law, the Air Force has 60 days to respond to the GAO's findings.

Gary Strasburg, an Air Force spokesman at the Pentagon, said Thursday that the service will not comment while it is assessing the GAO's report.

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