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Originally published June 18, 2008 at 12:00 AM | Page modified June 19, 2008 at 12:00 AM

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Boeing wins tanker protest, but drama is far from over

The saga of the Air Force refueling tanker contract is not over by a long shot, though Boeing won a huge victory Wednesday when the Government...

Seattle Times aerospace reporter

The saga of the Air Force refueling tanker contract is not over by a long shot, though Boeing won a huge victory Wednesday when the Government Accountability Office (GAO) comprehensively backed the company's protest of the initial contract award.

Boeing's Everett-built 767, which in February lost the contract award to an Airbus A330 jet that the European planemaker proposed to assemble in Mobile, Ala., is now right back in contention.

The GAO said it found "a number of significant errors that could have affected the outcome of what was a close competition." It recommended that the Air Force re-run the selection process.

Boeing's allies in Congress passionately endorsed the news.

"We are vindicated and we're back in the game," said Sen. Patty Murray, who mounted a campaign of constant speeches on the Senate floor aimed at reversing the February contract award.

Murray had just talked by cell phone to some workers on the 767 production line in Everett."I could hear the excitement in their voices,' she said. "It was great."

The decision is a blow to the joint venture formed by Northrop Grumman and Airbus parent company EADS (European Aeronautic Defence & Space) that won the initial award.

From Boeing's perspective, the ruling could hardly have come out better.

"If Boeing's proposal is ultimately selected for award, the Air Force should terminate the contract awarded to Northrop Grumman," the GAO ruling states. "We also recommended that the Air Force reimburse Boeing the costs of filing and pursuing the protest, including reasonable attorneys' fees."

A GAO summary of its ruling outlined seven major mistakes in the Air Force procurement process that detracted from "full and open competition and fairness."

The GAO said the Air Force

• didn't assess the relative merits of the two contending airplanes in accordance with its stated criteria.

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• gave Northrop extra credit for exceeding certain performance parameters, when this was expressly not allowed.

• failed to show that the A330 could refuel all of the Air Force aircraft it needs to service.

• misled Boeing about its failure to meet certain performance parameters, while giving fuller information to Northrop.

• dismissed a Northrop failure to agree to an aircraft maintenance plan as only "an adminstrative oversight" when it was a material requirement.

• made unreasonable estimates of the cost of constructing runways, ramps and hangars needed for the larger Airbus jet, which led to the conclusion that Northrop offered lower total program costs — when in fact Boeing's overall cost was lower.

• inappropriately rejected Boeing's estimate of its non-recurring cost to develop the program, using an "unreasonable" model to increase that cost estimate.

The ruling is a huge boost to Boeing, which would effectively have been out of the air-to-air tanker business if the previous decision had stood.

"We welcome and support today's ruling by the GAO fully supporting the grounds of our protest," Boeing said in a statement. "We look forward to working with the Air Force on next steps in this critical procurement for our warfighters."

Northrop issued only a brief response.

"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," Northop said. "We will review the GAO findings before commenting further."

And EADS said it hopes that a renewd competition for the U.S. tanker would come out the same way as four recent international competitions. Though previously Italy and Japan both chose the Boeing 767 tanker, more recently Australia, Saudi Arabia, the United Kingdom and the United Arab Emirates all chose an A330 tanker.

"Though we're disappointed, it's important to recognize that the GAO announcement is an evaluation of the selection process, not the merits of the aircraft," said EADS spokesman Guy Hicks. "We remain confident that the Northrop Grumman KC-45 is the aircraft best suited to meet the Air Force's critical mission requirements, as demonstrated by four previous competitive selections."

The Air Force must formally respond to the GAO recommendations within 60 days.

Northrop/EADS and Airbus have already sent out invitations to a groundbreaking ceremony in Mobile for two proposed tanker production plants at the end of this month.

That ceremony may now be put on hold. The competitive threat to Boeing of Airbus building commercial A330 jets as well as tankers in Alabama has for now been pushed out.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Copyright © 2008 The Seattle Times Company

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